II 

109TH CONGRESS 

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. 

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

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 

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

5 ‘‘Affordable Health Care Act’’. 

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

7 this Act is as follows: 

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

•S 16 IS 

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. 
3 

•S 16 IS 

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. 

1 TITLE I—MAKING PRESCRIP2 TION DRUGS MORE SAFE AND 

3 AFFORDABLE 

4 Subtitle A—Access to Prescription 

5 Drugs 

6 SEC. 101. FINDINGS. 

7 Congress finds that— 
4 

•S 16 IS 

1 (1) Americans unjustly pay up to 5 times more 

2 to fill their prescriptions than consumers in other 

3 countries; 

4 (2) the United States is the largest market for 

5 pharmaceuticals in the world, yet American con6 sumers pay the highest prices for brand pharma7 ceuticals in the world; 

8 (3) a prescription drug is neither safe nor effec9 tive to an individual who cannot afford it; 

10 (4) allowing and structuring the importation of 

11 prescription drugs to ensure access to safe and af12 fordable drugs approved by the Food and Drug Ad13 ministration will provide a level of safety to Amer14 ican consumers that they do not currently enjoy; 

15 (5) American seniors alone will spend 

16 $1,800,000,000,000 on pharmaceuticals over the 

17 next 10 years; and 

18 (6) allowing open pharmaceutical markets could 

19 save American consumers at least $38,000,000,000 

20 each year. 

21 SEC. 102. REPEAL OF CERTAIN SECTION REGARDING IM22 PORTATION OF PRESCRIPTION DRUGS. 

23 Chapter VIII of the Federal Food, Drug, and Cos24 metic Act (21 U.S.C. 381 et seq.) is amended by striking 

25 section 804. 
5 

•S 16 IS 

1 SEC. 103. IMPORTATION OF PRESCRIPTION DRUGS; WAIVER 

2 OF CERTAIN IMPORT RESTRICTIONS. 

3 (a) IN GENERAL.—Chapter VIII of the Federal 

4 Food, Drug, and Cosmetic Act (21 U.S.C. 381 et seq.), 

5 as amended by section 102, is further amended by insert6 ing after section 803 the following: 

7 ‘‘SEC. 804. COMMERCIAL AND PERSONAL IMPORTATION OF 

8 PRESCRIPTION DRUGS. 

9 ‘‘(a) IMPORTATION OF PRESCRIPTION DRUGS.— 

10 ‘‘(1) IN GENERAL.—The Secretary shall in ac11 cordance with this section provide by regulation 

12 that, in the case of qualifying drugs imported or of13 fered for import into the United States from reg14 istered exporters or by registered importers— 

15 ‘‘(A) the limitation on importation that is 

16 established in section 801(d)(1) is waived; and 

17 ‘‘(B) the standards referred to in section 

18 801(a) regarding admission of the drugs are 

19 subject to subsection (g) of this section (includ20 ing with respect to qualifying drugs to which 

21 section 801(d)(1) does not apply). 

22 ‘‘(2) IMPORTERS.—A qualifying drug may not 

23 be imported under paragraph (1) unless— 

24 ‘‘(A) the drug is imported by a pharmacy 

25 or a wholesaler that is a registered importer; or 
6 

•S 16 IS 

1 ‘‘(B) the drug is imported by an individual 

2 for personal use or for the use of a family mem3 ber of the individual (not for resale) from a reg4 istered exporter. 

5 ‘‘(3) RULE OF CONSTRUCTION.—This section 

6 shall apply only with respect to a drug that is im7 ported or offered for import into the United 

8 States— 

9 ‘‘(A) by a registered importer; or 

10 ‘‘(B) from a registered exporter to an indi11 vidual. 

12 ‘‘(4) DEFINITIONS.— 

13 ‘‘(A) REGISTERED EXPORTER; REG14 ISTERED IMPORTER.—For purposes of this sec15 tion: 

16 ‘‘(i) The term ‘registered exporter’ 

17 means an exporter for which a registration 

18 under subsection (b) has been approved 

19 and is in effect. 

20 ‘‘(ii) The term ‘registered importer’ 

21 means a pharmacy, group of pharmacies, 

22 or a wholesaler for which a registration 

23 under subsection (b) has been approved 

24 and is in effect. 
7 

•S 16 IS 

1 ‘‘(iii) The term ‘registration condition’ 

2 means a condition that must exist for a 

3 registration under subsection (b) to be ap4 proved. 

5 ‘‘(B) QUALIFYING DRUG.—For purposes of 

6 this section, the term ‘qualifying drug’ means a 

7 prescription drug, other than any of the fol8 lowing: 

9 ‘‘(i) A controlled substance, as defined 

10 in section 102 of the Controlled Sub11 stances Act (21 U.S.C. 802). 

12 ‘‘(ii) A biological product, as defined 

13 in section 351 of the Public Health Service 

14 Act (42 U.S.C. 262). 

15 ‘‘(iii) An infused drug, including a 

16 peritoneal dialysis solution. 

17 ‘‘(iv) An intravenously injected drug. 

18 ‘‘(v) A drug that is inhaled during 

19 surgery. 

20 ‘‘(C) OTHER DEFINITIONS.—For purposes 

21 of this section: 

22 ‘‘(i) The term ‘exporter’ means a per23 son that is in the business of exporting a 

24 drug from Canada to individuals in the 

25 United States or that, pursuant to submit-
8 

•S 16 IS 

1 ting a registration under subsection (b), 

2 seeks to be in such business. 

3 ‘‘(ii) The term ‘importer’ means a 

4 pharmacy, a group of pharmacies, or a 

5 wholesaler that is in the business of im6 porting a drug into the United States or 

7 that, pursuant to submitting a registration 

8 under subsection (b), seeks to be in such 

9 business. 

10 ‘‘(iii) The term ‘pharmacist’ means a 

11 person licensed by a State to practice 

12 pharmacy, including the dispensing and 

13 selling of prescription drugs. 

14 ‘‘(iv) The term ‘pharmacy’ means a 

15 person that— 

16 ‘‘(I) is licensed by a State to en17 gage in the business of selling pre18 scription drugs at retail; and 

19 ‘‘(II) employs 1 or more phar20 macists. 

21 ‘‘(v) The term ‘prescription drug’ 

22 means a drug that is described in section 

23 503(b)(1). 

24 ‘‘(vi) The term ‘wholesaler’— 
9 

•S 16 IS 

1 ‘‘(I) means a person licensed as a 

2 wholesaler or distributor of prescrip3 tion drugs in the United States under 

4 section 503(e)(2)(A); and 

5 ‘‘(II) does not include a person 

6 authorized to import drugs under sec7 tion 801(d)(1). 

8 ‘‘(D) PERMITTED COUNTRY.—The term 

9 ‘permitted country’ means— 

10 ‘‘(i) Australia; 

11 ‘‘(ii) Canada; 

12 ‘‘(iii) a member country of the Euro13 pean Union as of January 1, 2003; 

14 ‘‘(iv) Japan; 

15 ‘‘(v) New Zealand; and 

16 ‘‘(vi) Switzerland. 

17 ‘‘(b) REGISTRATION OF IMPORTERS AND EXPORT18 ERS.— 

19 ‘‘(1) REGISTRATION OF IMPORTERS AND EX20 PORTERS.—A registration condition is that the im21 porter or exporter involved (referred to in this sub22 section as a ‘registrant’) submits to the Secretary a 

23 registration containing the following: 

24 ‘‘(A) The name of the registrant and an 

25 identification of all places of business of the 
10 

•S 16 IS 

1 registrant that relate to qualifying drugs, in2 cluding each warehouse or other facility owned 

3 or controlled by, or operated for, the registrant. 

4 ‘‘(B) Such information as the Secretary 

5 determines to be necessary to demonstrate that 

6 the registrant is in compliance with registration 

7 conditions under— 

8 ‘‘(i) in the case of an importer, sub9 sections (c), (d), (e), (g), and (j) (relating 

10 to the sources of exported drugs; the in11 spection of facilities of the importer; the 

12 payment of fees; compliance with the 

13 standards referred to in section 801(a); 

14 and maintenance of records and samples); 

15 or 

16 ‘‘(ii) in the case of an exporter, sub17 sections (c), (d), (f), (g), (h), (i), and (j) 

18 (relating to the sources of exported drugs; 

19 the inspection of facilities of the exporter 

20 and the marking of compliant shipments; 

21 the payment of fees; and compliance with 

22 the standards referred to in section 801(a); 

23 being licensed as a pharmacist; conditions 

24 for individual importation from Canada; 

25 and maintenance of records and samples). 
11 

•S 16 IS 

1 ‘‘(C) An agreement by the registrant that 

2 the registrant will not under subsection (a) im3 port or export any drug that is not a qualifying 

4 drug. 

5 ‘‘(D) An agreement by the registrant to— 

6 ‘‘(i) notify the Secretary of a recall or 

7 withdrawal of a drug distributed in a per8 mitted country that the registrant has ex9 ported or imported, or intends to export or 

10 import, to the United States under sub11 section (a); 

12 ‘‘(ii) provide for the return to the reg13 istrant of such drug; and 

14 ‘‘(iii) cease, or not begin, the expor15 tation or importation of such drug unless 

16 the Secretary has notified the registrant 

17 that exportation or importation of such 

18 drug may proceed. 

19 ‘‘(E) An agreement by the registrant to 

20 ensure and monitor compliance with each reg21 istration condition, to promptly correct any 

22 noncompliance with such a condition, and to 

23 promptly report to the Secretary any such non24 compliance. 
12 

•S 16 IS 

1 ‘‘(F) A plan describing the manner in 

2 which the registrant will comply with the agree3 ment under subparagraph (E). 

4 ‘‘(G) An agreement by the registrant to 

5 enforce a contract under subsection (c)(3)(B) 

6 against a party in the chain of custody of a 

7 qualifying drug with respect to the authority of 

8 the Secretary under clauses (ii) and (iii) of that 

9 subsection. 

10 ‘‘(H) An agreement by the registrant to 

11 notify the Secretary of— 

12 ‘‘(i) any change that the registrant in13 tends to make regarding information pro14 vided under subparagraph (A) or (B); and 

15 ‘‘(ii) any change that the registrant 

16 intends to make in the compliance plan 

17 under subparagraph (F). 

18 ‘‘(I) In the case of an exporter— 

19 ‘‘(i) An agreement by the exporter 

20 that a qualifying drug will not under sub21 section (a) be exported to any individual 

22 not authorized pursuant to subsection 

23 (a)(2)(B) to be an importer of such drug. 

24 ‘‘(ii) An agreement to post a bond, 

25 payable to the Treasury of the United 
13 

•S 16 IS 

1 States if, after opportunity for an informal 

2 hearing, the Secretary determines that the 

3 exporter has exported a drug to the United 

4 States that is not a qualifying drug or that 

5 is not in compliance with subsections (g) 

6 or (i), that is equal in value to the lesser 

7 of— 

8 ‘‘(I) the value of drugs exported 

9 by the exporter to the United States 

10 in a typical 4-week period over the 

11 course of a year under this section; or 

12 ‘‘(II) $1,000,000. 

13 ‘‘(J) Such other provisions as the Sec14 retary may require to protect the public health 

15 while permitting— 

16 ‘‘(i) the importation by pharmacies, 

17 groups of pharmacies, wholesalers as reg18 istered importers of qualifying drugs under 

19 subsection (a); and 

20 ‘‘(ii) importation by individuals of 

21 qualifying drugs under subsection (a). 

22 ‘‘(2) APPROVAL OR DISAPPROVAL OF REGISTRA23 TION.— 

24 ‘‘(A) IN GENERAL.—Not later than 90 

25 days after the date on which a registrant sub-
14 

•S 16 IS 

1 mits to the Secretary a registration under para2 graph (1), the Secretary shall notify the reg3 istrant whether the registration is approved or 

4 is disapproved. The Secretary shall disapprove 

5 a registration if there is reason to believe that 

6 the registrant is not in compliance with one or 

7 more registration conditions, and shall notify 

8 the registrant of such reason. In the case of a 

9 disapproved registration, the Secretary shall 

10 subsequently notify the registrant that the reg11 istration is approved if the Secretary deter12 mines that the registrant is in compliance with 

13 such conditions. 

14 ‘‘(B) CHANGES IN REGISTRATION INFOR15 MATION.—Not later than 30 days after receiv16 ing a notice under paragraph (1)(G) from a 

17 registrant, the Secretary shall determine wheth18 er the change involved affects the approval of 

19 the registration of the registrant under para20 graph (1), and shall inform the registrant of 

21 the determination. 

22 ‘‘(3) PUBLICATION OF CONTACT INFORMATION

23 FOR REGISTERED EXPORTERS.—Through the Inter24 net website of the Food and Drug Administration, 

25 the Secretary shall make readily available to the 
15 

•S 16 IS 

1 public a list of registered exporters, including con2 tact information for the exporters. Promptly after 

3 the approval of a registration submitted under para4 graph (1), the Secretary shall update the Internet 

5 website accordingly. 

6 ‘‘(4) SUSPENSION AND TERMINATION.— 

7 ‘‘(A) SUSPENSION.—With respect to the 

8 effectiveness of a registration submitted under 

9 paragraph (1): 

10 ‘‘(i) Subject to clause (ii), if the Sec11 retary determines, after notice and oppor12 tunity for a hearing, that the registrant 

13 has failed to maintain substantial compli14 ance with all registration conditions, the 

15 Secretary may suspend the registration. 

16 ‘‘(ii) If the Secretary determines that, 

17 under color of the registration, the ex18 porter has exported a drug or the importer 

19 has imported a drug that is not a quali20 fying drug, or a drug that does not meet 

21 the criteria under subsection (g)(2)(A), or 

22 has exported a qualifying drug to an indi23 vidual in violation of subsection (i)(1)(F), 

24 the Secretary shall immediately suspend 

25 the registration. A suspension under the 
16 

•S 16 IS 

1 preceding sentence is not subject to the 

2 provision by the Secretary of prior notice, 

3 and the Secretary shall provide to the reg4 istrant an opportunity for a hearing not 

5 later than 10 days after the date on which 

6 the registration is suspended. 

7 ‘‘(iii) The Secretary may reinstate the 

8 registration, whether suspended under 

9 clause (i) or (ii), if the Secretary deter10 mines that the registrant has demonstrated 

11 that further violations of registration con12 ditions will not occur. 

13 ‘‘(B) TERMINATION.—The Secretary, after 

14 notice and opportunity for a hearing, may ter15 minate the registration under paragraph (1) of 

16 a registrant if the Secretary determines that 

17 the registrant has engaged in a pattern or prac18 tice of violating 1 or more registration condi19 tions, or if on 1 or more occasions the Secretary 

20 has under subparagraph (A)(ii) suspended the 

21 registration of the registrant. The Secretary 

22 may make the termination permanent, or for a 

23 fixed period of not less than 1 year. During the 

24 period in which the registration is terminated, 

25 any registration submitted under paragraph (1) 
17 

•S 16 IS 

1 by the registrant, or a person that is a partner 

2 in the export or import enterprise, or a principal 

3 officer in such enterprise, and any registration 

4 prepared with the assistance of the registrant or 

5 such a person, has no legal effect under this sec6 tion. 

7 ‘‘(c) SOURCES OF QUALIFYING DRUGS.—A registra8 tion condition is that the exporter or importer involved 

9 agrees that a qualifying drug will under subsection (a) be 

10 exported or imported to the United States only if there 

11 is compliance with the following: 

12 ‘‘(1) The drug was manufactured in an estab13 lishment— 

14 ‘‘(A) required to register under subsection 

15 (h) or (i) of section 510; or 

16 ‘‘(B) inspected by the Secretary as pro17 vided by this section. 

18 ‘‘(2) The establishment is located in the United 

19 States or in any foreign country, and the establish20 ment manufactured the drug for distribution in the 

21 United States or for distribution in 1 or more of the 

22 permitted countries (without regard to whether in 

23 addition the drug was manufactured for distribution 

24 in a foreign country that is not a permitted coun25 try). 
18 

•S 16 IS 

1 ‘‘(3) The exporter or importer obtained the 

2 drug— 

3 ‘‘(A) directly from the establishment; or 

4 ‘‘(B) directly from an entity that, by con5 tract with the exporter or importer— 

6 ‘‘(i) provides to the exporter or im7 porter a statement (in such form and con8 taining such information as the Secretary 

9 may require) that, for the chain of custody 

10 from the establishment, identifies each 

11 prior sale, purchase, or trade of the drug 

12 (including the date of the transaction and 

13 the names and addresses of all parties to 

14 the transaction); 

15 ‘‘(ii) agrees to permit the Secretary to 

16 inspect such statements and related 

17 records to determine their accuracy; 

18 ‘‘(iii) agrees, with respect to the quali19 fying drugs involved, to permit the Sec20 retary to inspect warehouses and other fa21 cilities of the entity for purposes of deter22 mining whether the facilities are in compli23 ance with any standards under this Act 

24 that are applicable to facilities of that type 

25 in the United States; and 
19 

•S 16 IS 

1 ‘‘(iv) has ensured, through such con2 tractual relationships as may be necessary, 

3 that the Secretary has the same authority 

4 regarding other parties in the chain of cus5 tody from the establishment that the Sec6 retary has under clauses (ii) and (iii) re7 garding such entity. 

8 ‘‘(4) The foreign country from which the im9 porter will import the drug is a permitted country. 

10 ‘‘(5) The foreign country from which the ex11 porter will export the drug is Canada. 

12 ‘‘(6) During any period in which the drug was 

13 not in the control of the manufacturer of the drug, 

14 the drug did not enter any country that is not a per15 mitted country. 

16 ‘‘(7) The exporter or importer retains a sample 

17 of each lot of the drug sufficient for testing by the 

18 Secretary. 

19 ‘‘(d) INSPECTION OF FACILITIES; MARKING OF SHIP20 MENTS.— 

21 ‘‘(1) INSPECTION OF FACILITIES.—A registra22 tion condition is that, for the purpose of assisting 

23 the Secretary in determining whether the exporter 

24 involved is in compliance with all other registration 

25 conditions— 
20 

•S 16 IS 

1 ‘‘(A) the exporter agrees to permit the Sec2 retary— 

3 ‘‘(i) to conduct onsite inspections, in4 cluding monitoring on a day-to-day basis, 

5 of places of business of the exporter that 

6 relate to qualifying drugs, including each 

7 warehouse or other facility owned or con8 trolled by, or operated for, the exporter; 

9 ‘‘(ii) to have access, including on a 

10 day-to-day basis, to— 

11 ‘‘(I) records of the exporter that 

12 relate to the export of such drugs, in13 cluding financial records; and 

14 ‘‘(II) samples of such drugs; 

15 ‘‘(iii) to carry out the duties described 

16 in paragraph (3); and 

17 ‘‘(iv) to carry out any other functions 

18 determined by the Secretary to be nec19 essary regarding the compliance of the ex20 porter; and 

21 ‘‘(B) the Secretary has assigned 1 or more 

22 employees of the Secretary to carry out the 

23 functions described in this subsection for the 

24 Secretary not less than every 3 weeks on the 

25 premises of places of businesses referred to in 
21 

•S 16 IS 

1 subparagraph (A)(i), and such an assignment 

2 remains in effect on a continuous basis. 

3 ‘‘(2) MARKING OF COMPLIANT SHIPMENTS.—A 

4 registration condition is that the exporter involved 

5 agrees to affix to each shipping container of quali6 fying drugs exported under subsection (a) such 

7 markings as the Secretary determines to be nec8 essary to identify the shipment as being in compli9 ance with all registration conditions. Markings under 

10 the preceding sentence— 

11 ‘‘(A) shall be designed to prevent affixation 

12 of the markings to any shipping container that 

13 is not authorized to bear the markings; and 

14 ‘‘(B) may include anti-counterfeiting or 

15 track-and-trace technologies. 

16 ‘‘(3) CERTAIN DUTIES RELATING TO EXPORT17 ERS.—Duties of the Secretary with respect to an ex18 porter include the following: 

19 ‘‘(A) Verifying the chain of custody of a 

20 statistically significant sample of qualifying 

21 drugs from the establishment in which the drug 

22 was manufactured to the exporter, which may 

23 be accomplished by the use of anticounterfeiting 

24 or track-and-trace technologies, if available. 
22 

•S 16 IS 

1 ‘‘(B) Randomly reviewing records of ex2 ports to individuals for the purpose of deter3 mining whether the drugs are being imported 

4 by the individuals in accordance with the condi5 tions under subsection (i). Such reviews shall be 

6 conducted in a manner that will result in a sta7 tistically significant determination of compli8 ance with all such conditions. 

9 ‘‘(C) Monitoring the affixing of markings 

10 under paragraph (2). 

11 ‘‘(D) Inspect as the Secretary determines 

12 is necessary the warehouses and other facilities 

13 of other parties in the chain of custody of quali14 fying drugs. 

15 ‘‘(E) Determine whether the exporter is in 

16 compliance with all other registration condi17 tions. 

18 ‘‘(4) CERTAIN DUTIES RELATING TO IMPORT19 ERS.—Duties of the Secretary with respect to an im20 porter include the following: 

21 ‘‘(A) As authorized under section 704, in22 spect not less than every 3 weeks, the places of 

23 business of the importer that relate to the re24 ceipt and distribution of a qualifying drug, in25 cluding each warehouse or other facility owned 
23 

•S 16 IS 

1 or controlled by, or operated for, the importer 

2 at which qualifying drugs are received or from 

3 which they are distributed to pharmacies. 

4 ‘‘(B) During the inspections under sub5 paragraph (A), verify the chain of custody of a 

6 statistically significant sample of qualifying 

7 drugs from the establishment in which the drug 

8 was manufactured to the importer, which may 

9 be accomplished by the use of anticounterfeiting 

10 or track-and-trace technologies, if available. 

11 ‘‘(C) Inspect as the Secretary determines 

12 is necessary the warehouses and other facilities 

13 of other parties in the chain of custody of quali14 fying drugs. 

15 ‘‘(D) Determine whether the importer is in 

16 compliance with all other registration condi17 tions. 

18 ‘‘(e) IMPORTER FEES.— 

19 ‘‘(1) REGISTRATION FEE.—A registration con20 dition is that the importer involved pays to the Sec21 retary a fee of $10,000 due on the date on which 

22 the importer first submits the registration to the 

23 Secretary under subsection (b). 

24 ‘‘(2) INSPECTION FEE.—A registration condi25 tion is that the importer involved pays to the Sec-
24 

•S 16 IS 

1 retary in accordance with this subsection a fee on a 

2 semiannual basis, with the first fee due on the date 

3 that is 6 months after the date on which the reg4 istration of the importer under subsection (b) is first 

5 approved by the Secretary. 

6 ‘‘(3) AMOUNT OF INSPECTION FEE.— 

7 ‘‘(A) AGGREGATE TOTAL OF FEES.—The 

8 Secretary shall ensure that the aggregate total 

9 of fees collected under paragraph (2) for a fis10 cal year from all importers is sufficient, and no 

11 more than necessary, to pay the costs of admin12 istering this section with respect to registered 

13 importers for a fiscal year, including— 

14 ‘‘(i) inspection of the facilities of im15 porters under subsection (d)(4); 

16 ‘‘(ii) reviewing qualifying drugs of17 fered for import to importers; and 

18 ‘‘(iii) determining the compliance of 

19 importers with registration conditions. 

20 ‘‘(B) LIMITATION.—The aggregate total of 

21 fees collected under paragraph (2) shall not ex22 ceed 1 percent of the total price of drugs im23 ported annually to the United States by reg24 istered importers under this section. 
25 

•S 16 IS 

1 ‘‘(C) INDIVIDUAL IMPORTER FEE.—Sub2 ject to the limitation described in subparagraph 

3 (B), a fee under paragraph (2) for an importer 

4 shall be an amount that is a reasonable esti5 mate by the Secretary of the semiannual share 

6 of the importer of the volume of drugs imported 

7 by importers under this section. 

8 ‘‘(D) ADJUSTMENT OF FEE.—The Sec9 retary shall annually adjust the fees under 

10 paragraph (2) to ensure that the fees accurately 

11 reflect the actual costs referred to in subpara12 graph (A) and do not exceed, in the aggregate, 

13 1 percent of the total price of drugs imported 

14 annually to the United States under this sec15 tion. 

16 ‘‘(4) USE OF FEES.—Subject to appropriations 

17 Acts, fees collected by the Secretary under para18 graphs (1) and (2) are available only to the Sec19 retary and are for the sole purpose of paying the 

20 costs referred to in paragraph (3)(A). 

21 ‘‘(f) EXPORTER FEES.— 

22 ‘‘(1) REGISTRATION FEE.—A registration con23 dition is that the exporter involved pays to the Sec24 retary a fee of $10,000 due on the date on which 
26 

•S 16 IS 

1 the exporter first submits that registration to the 

2 Secretary under subsection (b). 

3 ‘‘(2) INSPECTION FEE.—A registration condi4 tion is that the exporter involved pays to the Sec5 retary in accordance with this subsection a fee on a 

6 semiannual basis, with the first fee due on the date 

7 that is 6 months after the date on which the reg8 istration of the exporter under subsection (b) is first 

9 approved by the Secretary. 

10 ‘‘(3) AMOUNT OF INSPECTION FEE.— 

11 ‘‘(A) AGGREGATE TOTAL OF FEES.—The 

12 Secretary shall ensure that the aggregate total 

13 of fees collected under paragraph (2) for a fis14 cal year from all exporters is sufficient, and not 

15 more than necessary, to pay the costs of admin16 istering this section with respect to registered 

17 exporters for a fiscal year, including— 

18 ‘‘(i) monitoring foreign facilities under 

19 subsection (d); 

20 ‘‘(ii) developing, implementing, and 

21 maintaining under such subsection a sys22 tem to mark shipments to indicate compli23 ance with all registration conditions; and 

24 ‘‘(iii) conducting under such sub25 section inspections within the United 
27 

•S 16 IS 

1 States to determine compliance with condi2 tions under subsections (h) and (i). 

3 ‘‘(B) LIMITATION.—The aggregate total of 

4 fees collected under paragraph (2) shall not ex5 ceed 1 percent of the total price of drugs im6 ported annually to the United States by reg7 istered exporters under this section. 

8 ‘‘(C) INDIVIDUAL EXPORTER FEE.—Sub9 ject to the limitation described in subparagraph 

10 (B), a fee under paragraph (2) for an exporter 

11 shall be an amount that is a reasonable esti12 mate by the Secretary of the semiannual share 

13 of the exporter of the volume of drugs exported 

14 by exporters under this section. 

15 ‘‘(D) ADJUSTMENT OF FEE.—The Sec16 retary shall annually adjust the fees under 

17 paragraph (2) to ensure that the fees accurately 

18 reflect the actual costs referred to in subpara19 graph (A) and do not exceed, in the aggregate, 

20 1 percent of the total price of drugs imported 

21 annually to the United States under this sec22 tion. 

23 ‘‘(4) USE OF FEES.—Subject to appropriations 

24 Acts, fees collected by the Secretary under para25 graphs (1) and (2) are only available to the Sec-
28 

•S 16 IS 

1 retary and are for the sole purpose of paying the 

2 costs referred to in paragraph (3)(A). 

3 ‘‘(g) COMPLIANCE WITH SECTION 801(a).— 

4 ‘‘(1) IN GENERAL.—A registration condition is 

5 that each qualifying drug exported under subsection 

6 (a) by the registered exporter involved or imported 

7 under subsection (a) by the registered importer in8 volved is in compliance with the standards referred 

9 to in section 801(a) regarding admission of the drug 

10 into the United States, subject to paragraphs (2), 

11 (3), and (4). 

12 ‘‘(2) SECTION 505; APPROVAL STATUS.— 

13 ‘‘(A) IN GENERAL.—For purposes of ad14 ministrative and judicial procedure, there is a 

15 presumption that a drug proposed for export or 

16 import under subsection (a) is an approved 

17 drug under section 505(b) if the following cri18 teria are met: 

19 ‘‘(i) The drug proposed for export or 

20 import is in compliance with subsection 

21 (c). 

22 ‘‘(ii) The drug proposed for export or 

23 import has the same active ingredient or 

24 ingredients, route of administration, dos25 age form, and strength, according to infor-
29 

•S 16 IS 

1 mation provided by the labeling of the drug 

2 proposed for export or import, as a drug 

3 (referred to in this subsection as a ‘U.S. 

4 label drug’) that— 

5 ‘‘(I) is manufactured by or for 

6 the person that manufactures the 

7 drug proposed for export or import; 

8 and 

9 ‘‘(II) is approved under section 

10 505(b). 

11 ‘‘(B) IMPORTATION.—Subject to subpara12 graphs (D) and (E), a drug meeting the criteria 

13 described in subparagraph (A) may, in accord14 ance with the other subsections of this section, 

15 be imported into the United States. 

16 ‘‘(C) NOTICE BY MANUFACTURER; GEN17 ERAL PROVISIONS.— 

18 ‘‘(i) IN GENERAL.—The person that 

19 manufactures a drug that may be imported 

20 under subsection (a) shall in accordance 

21 with this paragraph submit to the Sec22 retary a notice that— 

23 ‘‘(I) includes each difference in 

24 the drug from a condition established 

25 in the approved application for the 
30 

•S 16 IS 

1 U.S. label drug beyond the variations 

2 provided for in the application, any 

3 difference in labeling, the date on 

4 which the drug with such difference 

5 was, or will be, introduced for com6 mercial distribution in a permitted 

7 country, and such additional informa8 tion as the Secretary may require; or 

9 ‘‘(II) states that there is no dif10 ference in the drug from a condition 

11 established in the approved applica12 tion for the U.S. label drug beyond 

13 the variations provided for in the ap14 plication and differences in labeling. 

15 ‘‘(ii) INFORMATION REGARDING FOR16 EIGN GOVERNMENT.—A notice under 

17 clause (i)(I) shall with respect to the per18 mitted country that approved the drug for 

19 commercial distribution, or with respect to 

20 which such approval is sought, include the 

21 following: 

22 ‘‘(I) Information demonstrating 

23 that the person submitting the notice 

24 has also notified the government of 

25 the permitted country in writing that 
31 

•S 16 IS 

1 the person is submitting to the Sec2 retary a notice under clause (i)(I), 

3 which notice describes the difference 

4 in the drug from a condition estab5 lished in the approved application for 

6 the U.S. label drug. 

7 ‘‘(II) The information that the 

8 person submitted or will submit to the 

9 government of the permitted country 

10 for purposes of obtaining approval for 

11 commercial distribution of the drug in 

12 the country which, if in a language 

13 other than English, shall be accom14 panied by an English translation 

15 verified to be complete and accurate, 

16 with the name, address, and a brief 

17 statement of the qualifications of the 

18 person that made the translation. 

19 ‘‘(iii) CERTIFICATIONS.—The chief ex20 ecutive officer and the chief medical officer 

21 of the manufacturer involved shall each 

22 certify in the notice under clause (i) that— 

23 ‘‘(I) the information provided in 

24 the notice is complete and true; and 
32 

•S 16 IS 

1 ‘‘(II) a copy of the notice has 

2 been provided to the Federal Trade 

3 Commission and to the Assistant At4 torney General in charge of the Anti5 trust Division of the Department of 

6 Justice (referred to in this subsection 

7 as the ‘Assistant Attorney General’). 

8 ‘‘(iv) FEE.—If a notice submitted 

9 under clause (i) includes a difference that 

10 would, under section 506A, require the 

11 submission of a supplemental application if 

12 made as a change to the U.S. label drug, 

13 the person that submits the notice shall 

14 pay to the Secretary a fee in the same 

15 amount as would apply if the person were 

16 paying a fee pursuant to section 

17 736(a)(1)(A)(ii). Subject to appropriations 

18 Acts, fees collected by the Secretary under 

19 the preceding sentence are available only to 

20 the Secretary and are for the sole purpose 

21 of paying the costs of reviewing notices 

22 submitted under clause (i). 

23 ‘‘(v) TIMING OF SUBMISSION OF NO24 TICES.— 
33 

•S 16 IS 

1 ‘‘(I) PRIOR APPROVAL NO2 TICES.—A notice under clause (i) to 

3 which subparagraph (D) applies shall 

4 be submitted to the Secretary not 

5 later than 120 days before the drug 

6 with the difference is introduced for 

7 commercial distribution in a permitted 

8 country, unless the country requires 

9 that distribution of the drug with the 

10 difference begin less than 120 days 

11 after the country requires the dif12 ference. 

13 ‘‘(II) OTHER APPROVAL NO14 TICES.—A notice under clause (i) to 

15 which subparagraph (E) applies shall 

16 be submitted to the Secretary not 

17 later than the day on which the drug 

18 with the difference is introduced for 

19 commercial distribution in a permitted 

20 country. 

21 ‘‘(III) OTHER NOTICES.—A no22 tice under clause (i) to which subpara23 graph (F) applies shall be submitted 

24 to the Secretary on the date that the 

25 drug is first introduced for commer-
34 

•S 16 IS 

1 cial distribution in a permitted coun2 try and annually thereafter. 

3 ‘‘(vi) REVIEW BY SECRETARY.— 

4 ‘‘(I) IN GENERAL.—In this para5 graph, the difference in a drug that 

6 may be imported under subsection (a) 

7 from the U.S. label drug shall be 

8 treated by the Secretary as if it was 

9 a manufacturing change to the U.S. 

10 label drug under section 506A. 

11 ‘‘(II) REVIEW BY THE SEC12 RETARY.—The Secretary shall review 

13 and approve or disapprove the dif14 ference in a notice submitted under 

15 clause (i), if required under section 

16 506A, not later than 120 days after 

17 the date on which the notice is sub18 mitted. 

19 ‘‘(III) ESTABLISHMENT INSPEC20 TION.—If review of such difference 

21 would require an inspection by the 

22 Secretary of the establishment in 

23 which the drug is manufactured, such 

24 inspection shall be authorized by sec25 tion 704. 
35 

•S 16 IS 

1 ‘‘(vii) PUBLICATION OF INFORMATION

2 ON NOTICES.— 

3 ‘‘(I) IN GENERAL.—Through the 

4 Internet website of the Food and 

5 Drug Administration, the Secretary 

6 shall readily make available to the 

7 public a list of notices submitted 

8 under clause (i). 

9 ‘‘(II) CONTENTS.—The list under 

10 subclause (I) shall include the date on 

11 which a notice is submitted and 

12 whether— 

13 ‘‘(aa) a notice is under re14 view; 

15 ‘‘(bb) the Secretary has or16 dered that importation of the 

17 drug from a permitted country 

18 cease; or 

19 ‘‘(cc) the importation of the 

20 drug is permitted under sub21 section (a). 

22 ‘‘(III) UPDATE.—The Secretary 

23 shall promptly update the Internet 

24 website with any changes to the list. 
36 

•S 16 IS 

1 ‘‘(D) NOTICE; DRUG DIFFERENCE REQUIR2 ING PRIOR APPROVAL.—In the case of a notice 

3 under subparagraph (C)(i) that includes a dif4 ference that would, under section 506A(c) or 

5 (d)(3)(B)(i), require the approval of a supple6 mental application before the difference could 

7 be made to the U.S. label drug the following 

8 shall occur: 

9 ‘‘(i) Promptly after the notice is sub10 mitted, the Secretary shall notify reg11 istered exporters, registered importers, the 

12 Federal Trade Commission, and the As13 sistant Attorney General that the notice 

14 has been submitted with respect to the 

15 drug involved. 

16 ‘‘(ii) If the Secretary has not made a 

17 determination whether a supplemental ap18 plication regarding the U.S. label drug 

19 would be approved or disapproved by the 

20 date on which the drug involved is to be in21 troduced for commercial distribution in a 

22 permitted country, the Secretary shall— 

23 ‘‘(I) order that the importation of 

24 the drug involved from the permitted 

25 country cease for the period in which 
37 

•S 16 IS 

1 the Secretary completes review of the 

2 notice; and 

3 ‘‘(II) promptly notify registered 

4 exporters, registered importers, the 

5 Federal Trade Commission, and the 

6 Attorney General of the order. 

7 ‘‘(iii) If the Secretary determines that 

8 such a supplemental application regarding 

9 the U.S. label drug would not be approved, 

10 the Secretary shall— 

11 ‘‘(I) order that the importation of 

12 the drug involved from the permitted 

13 country cease, or provide that an 

14 order under clause (ii), if any, re15 mains in effect; 

16 ‘‘(II) notify the permitted coun17 try that approved the drug for com18 mercial distribution of the determina19 tion; and 

20 ‘‘(III) promptly notify registered 

21 exporters, registered importers, the 

22 Federal Trade Commission, and the 

23 Assistant Attorney General of the de24 termination. 
38 

•S 16 IS 

1 ‘‘(iv) If the Secretary determines that 

2 such a supplemental application regarding 

3 the U.S. label drug would be approved, the 

4 Secretary shall vacate the order under 

5 clause (ii), if any, permit importation of 

6 the drug under subsection (a), and 

7 promptly notify registered exporters, reg8 istered importers, the Federal Trade Com9 mission, and the Assistant Attorney Gen10 eral of the determination. 

11 ‘‘(E) NOTICE; DRUG DIFFERENCE NOT RE12 QUIRING PRIOR APPROVAL.—In the case of a 

13 notice under subparagraph (C)(i) that includes 

14 a difference that would, under section 

15 506A(d)(3)(B)(ii), not require the approval of a 

16 supplemental application before the difference 

17 could be made to the U.S. label drug the fol18 lowing shall occur: 

19 ‘‘(i) During the period in which the 

20 notice is being reviewed by the Secretary, 

21 the authority under this subsection to im22 port the drug involved continues in effect. 

23 ‘‘(ii) If the Secretary determines that 

24 such a supplemental application regarding 

25 the U.S. label drug would not be approved, 
39 

•S 16 IS 

1 the Secretary shall order that the importa2 tion of the drug involved from the per3 mitted country cease, shall notify the per4 mitted country that approved the drug for 

5 commercial distribution of the determina6 tion, and shall promptly notify registered 

7 exporters, registered importers, the Fed8 eral Trade Commission, and the Assistant 

9 Attorney General of the determination. 

10 ‘‘(F) NOTICE; DRUG DIFFERENCE NOT RE11 QUIRING APPROVAL; NO DIFFERENCE.—In the 

12 case of a notice under subparagraph (C)(i) that 

13 includes a difference for which, under section 

14 506A(d)(1)(A), a supplemental application 

15 would not be required for the difference to be 

16 made to the U.S. label drug, or that states that 

17 there is no difference, the Secretary— 

18 ‘‘(i) may not order that the importa19 tion of the drug involved cease; and 

20 ‘‘(ii) shall promptly notify registered 

21 exporters and registered importers. 

22 ‘‘(G) DIFFERENCES IN ACTIVE INGRE23 DIENT, ROUTE OF ADMINISTRATION, DOSAGE

24 FORM, OR STRENGTH.— 
40 

•S 16 IS 

1 ‘‘(i) IN GENERAL.—A person who 

2 manufactures a U.S. label drug shall sub3 mit an application under section 505(b) for 

4 a drug that is manufactured for distribu5 tion in a permitted country by or for the 

6 person that manufactures the U.S. label 

7 drug if— 

8 ‘‘(I) there is no drug for export 

9 from at least half of the permitted 

10 countries with the same active ingre11 dient or ingredients, route of adminis12 tration, dosage form, and strength as 

13 the U.S. label drug; and 

14 ‘‘(II) each active ingredient of 

15 the drug is related to an active ingre16 dient of the U.S. label drug, as de17 fined in clause (v). 

18 ‘‘(ii) APPLICATION UNDER SECTION

19 505(b).—The application under section 

20 505(b) required under clause (i) shall— 

21 ‘‘(I) request approval of the drug 

22 for the indication or indications for 

23 which the U.S. label drug is approved 

24 under section 505; 
41 

•S 16 IS 

1 ‘‘(II) include the information that 

2 the person submitted to the govern3 ment of the permitted country for 

4 purposes of obtaining approval for 

5 commercial distribution of the drug in 

6 that country, which if in a language 

7 other than English, shall be accom8 panied by an English translation 

9 verified to be complete and accurate, 

10 with the name, address, and a brief 

11 statement of the qualifications of the 

12 person that made the translation; 

13 ‘‘(III) include a right of reference 

14 to the application under section 

15 505(b) for the U.S. label drug; and 

16 ‘‘(IV) include such additional in17 formation as the Secretary may re18 quire. 

19 ‘‘(iii) TIMING OF SUBMISSION OF AP20 PLICATION.—An application under section 

21 505(b) required under clause (i) shall be 

22 submitted to the Secretary not later than 

23 the day on which the information referred 

24 to in clause (ii)(II) is submitted to the gov25 ernment of the permitted country. 
42 

•S 16 IS 

1 ‘‘(iv) NOTICE OF DECISION ON APPLI2 CATION.—The Secretary shall promptly no3 tify registered exporters, registered import4 ers, the Federal Trade Commission, and 

5 the Assistant Attorney General of a deter6 mination to approve or to disapprove an 

7 application under section 505(b) required 

8 under clause (i). 

9 ‘‘(v) RELATED ACTIVE INGREDI10 ENTS.—For purposes of clause (i)(II), 2 

11 active ingredients are related if they are— 

12 ‘‘(I) the same; or 

13 ‘‘(II) different salts, esters, or 

14 complexes of the same moiety. 

15 ‘‘(3) SECTION 502; LABELING.— 

16 ‘‘(A) IMPORTATION BY REGISTERED IM17 PORTER.— 

18 ‘‘(i) IN GENERAL.—In the case of a 

19 qualifying drug that is imported or offered 

20 for import by a registered importer, such 

21 drug shall be considered to be in compli22 ance with section 502 if the drug bears— 

23 ‘‘(I) a copy of the labeling ap24 proved for the drug under section 
43 

•S 16 IS 

1 505, without regard to whether the 

2 copy bears the trademark involved; 

3 ‘‘(II) the name of the manufac4 turer and location of the manufac5 turer; 

6 ‘‘(III) the lot number assigned by 

7 the manufacturer; and 

8 ‘‘(IV) the name, location, and 

9 registration number of the importer. 

10 ‘‘(ii) REQUEST FOR COPY OF THE LA11 BELING.—The Secretary shall provide such 

12 copy to the registered importer involved, 

13 upon request of the importer. 

14 ‘‘(B) IMPORTATION BY INDIVIDUAL.—In 

15 the case of a qualifying drug that is imported 

16 or offered for import by a registered exporter to 

17 an individual, such drug shall be considered to 

18 be in compliance with section 502 if the drug 

19 bears a label providing the directions for use by 

20 the consumer, and bears a copy of any special 

21 labeling that would be required by the Secretary 

22 had the drug been dispensed by a pharmacist in 

23 the United States, without regard to whether 

24 the special labeling bears the trademark in25 volved. The Secretary shall provide to the reg-
44 

•S 16 IS 

1 istered exporter involved a copy of the special 

2 labeling, upon request of the exporter. 

3 ‘‘(4) SECTION 501; STANDARDS FOR REFUSING

4 ADMISSION.— 

5 ‘‘(A) IN GENERAL.—For purposes of ad6 ministrative and judicial procedure, there is a 

7 presumption that a drug proposed for export or 

8 import under subsection (a) is in compliance 

9 with section 501 if the drug is in compliance 

10 with subsection (c). 

11 ‘‘(B) STANDARDS FOR REFUSING ADMIS12 SION.—A qualifying drug exported under sub13 section (a) from a registered exporter or im14 ported by a registered importer may be refused 

15 admission into the United States if 1 or more 

16 of the following applies: 

17 ‘‘(i) The shipping container appears 

18 damaged in a way that may affect the 

19 strength, quality, or purity of the drug. 

20 ‘‘(ii) The Secretary becomes aware 

21 that— 

22 ‘‘(I) the drug may be counterfeit; 

23 ‘‘(II) the drug may have been 

24 prepared, packed, or held under in25 sanitary conditions; or 
45 

•S 16 IS 

1 ‘‘(III) the methods used in, or 

2 the facilities or controls used for, the 

3 manufacturing, processing, packing, 

4 or holding of the drug do not conform 

5 to good manufacturing practice. 

6 ‘‘(iii) The Secretary has obtained an 

7 injunction under section 302 that prohibits 

8 the distribution of the drug in interstate 

9 commerce. 

10 ‘‘(iv) The Secretary has under section 

11 505(e) withdrawn approval of the drug. 

12 ‘‘(v) The manufacturer of the drug 

13 has instituted a recall of the drug. 

14 ‘‘(vi) If the qualifying drug is ex15 ported from a registered exporter to an in16 dividual and 1 or more of the following ap17 plies: 

18 ‘‘(I) The shipping container for 

19 such drug does not bear the markings 

20 required under subsection (d)(2). 

21 ‘‘(II) The markings on the ship22 ping container appear to be counter23 feit. 
46 

•S 16 IS 

1 ‘‘(III) The shipping container or 

2 markings appear to have been tam3 pered with. 

4 ‘‘(h) LICENSING AS PHARMACIST.—A registration 

5 condition is that the exporter involved agrees that a quali6 fying drug will be exported to an individual only if the 

7 Secretary has verified that— 

8 ‘‘(1) the exporter is authorized under Canadian 

9 law to dispense prescription drugs; and 

10 ‘‘(2) the exporter employs persons that are li11 censed under Canadian law to dispense prescription 

12 drugs in sufficient number to dispense safely the 

13 qualifying drugs exported by the exporter to individ14 uals, and the exporter assigns to those persons re15 sponsibility for dispensing such qualifying drugs to 

16 individuals. 

17 ‘‘(i) INDIVIDUALS; CONDITIONS FOR IMPORTATION

18 FROM CANADA.— 

19 ‘‘(1) IN GENERAL.—For purposes of subsection 

20 (a)(2)(B), the importation of a qualifying drug by 

21 an individual is in accordance with this subsection if 

22 the following conditions are met: 

23 ‘‘(A) The drug is accompanied by a copy of 

24 a prescription for the drug, which prescrip25 tion— 
47 

•S 16 IS 

1 ‘‘(i) is valid under applicable Federal 

2 and State laws; and 

3 ‘‘(ii) was issued by a practitioner who, 

4 under the law of a State of which the indi5 vidual is a resident, or in which the indi6 vidual receives care from the practitioner 

7 who issues the prescription, is authorized 

8 to administer prescription drugs. 

9 ‘‘(B) The drug is accompanied by a copy 

10 of the documentation that was required under 

11 the law or regulations of Canada as a condition 

12 of dispensing the drug to the individual. 

13 ‘‘(C) The copies referred to in subpara14 graphs (A)(i) and (B) are marked in a manner 

15 sufficient— 

16 ‘‘(i) to indicate that the prescription, 

17 and the equivalent document in Canada, 

18 have been filled; and 

19 ‘‘(ii) to prevent a duplicative filling by 

20 another pharmacist. 

21 ‘‘(D) The individual has provided to the 

22 registered exporter a complete list of all drugs 

23 used by the individual for review by the individ24 uals who dispense the drug. 
48 

•S 16 IS 

1 ‘‘(E) The quantity of the drug does not ex2 ceed a 90-day supply. 

3 ‘‘(F) The drug is not an ineligible subpart 

4 H drug. For purposes of this section, a pre5 scription drug is an ‘ineligible subpart H drug’ 

6 if the drug was approved by the Secretary 

7 under subpart H of part 314 of title 21, Code 

8 of Federal Regulations (relating to accelerated 

9 approval), with restrictions under section 520 of 

10 such part to assure safe use, and the Secretary 

11 has published in the Federal Register a notice 

12 that the Secretary has determined that good 

13 cause exists to prohibit the drug from being im14 ported pursuant to this subsection. 

15 ‘‘(2) NOTICE REGARDING DRUG REFUSED AD16 MISSION.—If a registered exporter ships a drug to 

17 an individual pursuant to subsection (a)(2)(B) and 

18 the drug is refused admission to the United States, 

19 a written notice shall be sent to the individual and 

20 to the exporter that informs the individual and the 

21 exporter of such refusal and the reason for the re22 fusal. 

23 ‘‘(j) MAINTENANCE OF RECORDS AND SAMPLES.—A 

24 registration condition is that the importer or exporter in25 volved shall— 
49 

•S 16 IS 

1 ‘‘(1) maintain records required under this sec2 tion for not less than 2 years; and 

3 ‘‘(2) maintain samples of each lot of a drug re4 quired under this section for not less than 2 years. 

5 ‘‘(k) DRUG RECALLS.— 

6 ‘‘(1) MANUFACTURERS.—A person that manu7 factures a prescription drug imported from a per8 mitted country under this section shall promptly in9 form the Secretary— 

10 ‘‘(A) if the drug is recalled or withdrawn 

11 from the market in a permitted country; 

12 ‘‘(B) how the drug may be identified, in13 cluding lot number; and 

14 ‘‘(C) the reason for the recall or with15 drawal. 

16 ‘‘(2) SECRETARY.—With respect to each per17 mitted country, the Secretary shall— 

18 ‘‘(A) enter into an agreement with the gov19 ernment of the country to receive information 

20 about recalls and withdrawals of prescription 

21 drugs in the country; or 

22 ‘‘(B) monitor recalls and withdrawals of 

23 prescription drugs in the country using any in24 formation that is available to the public in any 

25 media. 
50 

•S 16 IS 

1 ‘‘(3) NOTICE.—The Secretary may notify, as 

2 appropriate, registered exporters, registered import3 ers, wholesalers, pharmacies, or the public of a recall 

4 or withdrawal of a prescription drug in a permitted 

5 country.’’. 

6 (b) PROHIBITED ACTS.—The Federal Food, Drug, 

7 and Cosmetic Act is amended— 

8 (1) in section 301 (21 U.S.C. 331), by striking 

9 paragraph (aa) and inserting the following: 

10 ‘‘(aa)(1) The sale or trade by a pharmacist, or by 

11 a business organization of which the pharmacist is a part, 

12 of a qualifying drug that under section 804(a)(2)(A) was 

13 imported by the pharmacist, other than— 

14 ‘‘(A) a sale at retail made pursuant to dis15 pensing the drug to a customer of the pharmacist or 

16 organization; or 

17 ‘‘(B) a sale or trade of the drug to a pharmacy 

18 or a wholesaler registered to import drugs under sec19 tion 804. 

20 ‘‘(2) The sale or trade by an individual of a qualifying 

21 drug that under section 804(a)(2)(B) was imported by the 

22 individual. 

23 ‘‘(3) The making of a materially false, fictitious, or 

24 fraudulent statement or representation, or a material 

25 omission, in a notice under clause (i) of section 
51 

•S 16 IS 

1 804(g)(2)(C) or in an application required under section 

2 804(g)(2)(G), or the failure to submit such a notice or 

3 application. 

4 ‘‘(4) The importation of a drug in violation of a re5 quirement under section 804.’’; and 

6 (2) in section 303(a) (21 U.S.C. 333(a)), by 

7 striking paragraph (6) and inserting the following: 

8 ‘‘(6) Notwithstanding subsection (a), any person that 

9 knowingly violates section 301(aa) (3) or (4) shall be im10 prisoned not more than 10 years, or fined in accordance 

11 with title 18, United States Code, or both.’’. 

12 (c) IMPLEMENTATION.— 

13 (1) RULEMAKING.— 

14 (A) IN GENERAL.— 

15 (i) PROMULGATION BY SECRETARY.— 

16 Not later than 90 days after the date of 

17 the enactment of this Act, the Secretary of 

18 Health and Human Services shall promul19 gate an interim rule for implementing sec20 tion 804 of the Federal Food, Drug, and 

21 Cosmetic Act, as added by subsection (a) 

22 of this section. Such rule shall be devel23 oped and promulgated by the Secretary 

24 without providing general notice of pro25 posed rulemaking. Not later than 1 year 
52 

•S 16 IS 

1 after the date on which the interim rule is 

2 promulgated, the Secretary shall, in accord3 ance with procedures under section 553 of 

4 title 5, United States Code, promulgate a 

5 final rule for implementing such section 

6 804, which may incorporate by reference 

7 provisions of the interim rule, to the extent 

8 that such provisions are not modified. 

9 (ii) EFFECT OF RULES.—The rules 

10 promulgated under clause (i) shall permit 

11 the importation of prescription drugs— 

12 (I) from registered exporters by 

13 individuals effective on the date of the 

14 promulgation of the interim rule; 

15 (II) from Canada by registered 

16 importers effective on the date of the 

17 promulgation of the interim rule; and 

18 (III) from Australia, a member 

19 country of the European Union as of 

20 January 1, 2003, Japan, New Zea21 land, or Switzerland by registered im22 porters on the date that is 1 year 

23 after the date of the enactment of this 

24 Act. 
53 

•S 16 IS 

1 (B) CERTAIN EXPORTERS.—The interim 

2 rule under subparagraph (A) shall provide that, 

3 in the review of registrations submitted under 

4 subsection (b) of the section 804 referred to in 

5 such subparagraph, registrations submitted by 

6 entities in Canada that are significant exporters 

7 of prescription drugs to individuals in the 

8 United States as of the date of the enactment 

9 of this Act will have priority during the period 

10 in which the interim rule under subparagraph 

11 (A) is in effect. During such period, the ref12 erence in subsection (b)(2)(A) of such section 

13 804 to 90 days (relating to approval or dis14 approval of registrations) is, as applied to such 

15 entities, deemed to be 30 days. 

16 (C) DRUGS FOR IMPORT FROM CANADA.— 

17 The notices with respect to drugs to be im18 ported from Canada that are required under 

19 subsection (g)(2)(C)(i)(I) of such section 804 

20 and that require approval under subsection 

21 (g)(2)(D) or (E) of such section 804 shall be 

22 submitted to the Secretary not later than 30 

23 days after the date of enactment of this Act. 

24 The notices with respect to drugs to be im25 ported from Canada that are required under 
54 

•S 16 IS 

1 subsection (g)(2)(C)(i) of such section 804 and 

2 that do not require approval under subsection 

3 (g)(2)(D) or (E) of such section 804 shall be 

4 submitted to the Secretary not later than 90 

5 days after the date of enactment of this Act. 

6 (D) DRUGS FOR IMPORT FROM OTHER

7 COUNTRIES.—The notices with respect to drugs 

8 to be imported from Australia, a member coun9 try of the European Union as of January 1, 

10 2003, Japan, New Zealand, or Switzerland that 

11 are required under subsection (g)(2)(C)(i)(I) of 

12 such section 804 and that require approval 

13 under subsection (g)(2)(D) or (E) of such sec14 tion 804 shall be submitted to the Secretary not 

15 later than 180 days after the date of enactment 

16 of this Act. The notices with respect to drugs 

17 to be imported from such countries that are re18 quired under subsection (g)(2)(C)(i)(II) of such 

19 section 804 and that do not require approval 

20 under subsection (g)(2)(D) or (E) of such sec21 tion 804 shall be submitted to the Secretary not 

22 later than 270 days after the date of enactment 

23 of this Act. 

24 (2) PERSONAL IMPORTATION FROM CANADA.— 

25 Until the expiration of the 60-day period beginning 
55 

•S 16 IS 

1 on the date on which the interim rule under para2 graph (1)(A) is promulgated, an individual may im3 port a prescription drug from Canada for personal 

4 use or for the use of a family member of the indi5 vidual (rather than for resale), subject to compliance 

6 with the following conditions: 

7 (A) The drug is not— 

8 (i) a controlled substance, as defined 

9 in section 102 of the Controlled Sub10 stances Act (21 U.S.C. 802); 

11 (ii) a biological product, as defined in 

12 section 351 of the Public Health Service 

13 Act (42 U.S.C. 262); 

14 (iii) an infused drug, including a peri15 toneal dialysis solution; 

16 (iv) an intravenously injected drug; 

17 (v) a drug that is inhaled during sur18 gery; or 

19 (vi) a drug approved by the Secretary 

20 under subpart H of part 314 of title 21, 

21 Code of Federal Regulations (relating to 

22 accelerated approval) with restrictions 

23 under section 520 of such part to assure 

24 safe use. 
56 

•S 16 IS 

1 (B) The drug is dispensed by a person li2 censed in Canada to dispense such drugs. 

3 (C) The drug is accompanied by a copy of 

4 the prescription for the drug, which prescrip5 tion— 

6 (i) is valid under applicable Federal 

7 and State laws; and 

8 (ii) was issued by a practitioner who, 

9 under the law of a State of which the indi10 vidual is a resident, or in which the indi11 vidual receives care from the practitioner 

12 who issues the prescription, is authorized 

13 to administer prescription drugs. 

14 (D) The drug is accompanied by a copy of 

15 the document that was required in Canada as 

16 a condition of dispensing the drug to the indi17 vidual. 

18 (E) The copies referred to in subpara19 graphs (C) and (D) are marked in a manner 

20 sufficient— 

21 (i) to indicate that the prescription, 

22 and the equivalent document in Canada, 

23 have been filled; and 

24 (ii) to prevent a duplicative filling by 

25 another pharmacist. 
57 

•S 16 IS 

1 (F) The quantity of the drug does not ex2 ceed a 90-day supply. 

3 (3) FACILITATION OF CANADIAN IMPORTS.— 

4 Not less than 15 days after the enactment of this 

5 Act and until the expiration of the 60-day period 

6 that begins on the date on which the interim rule 

7 under paragraph (1)(A) is promulgated, the Sec8 retary shall, through the Internet website of the 

9 Food and Drug Administration, make readily avail10 able to the public a list of persons licensed in Can11 ada to dispense prescription drugs who are willing to 

12 export drugs under paragraph (2) to individuals in 

13 the United States. 

14 (4) EFFECT OF PROVISIONS.—The amendments 

15 made in subsection (d), section 6, and section 7 of 

16 this Act shall have no effect with respect to imports 

17 made under paragraph (2). 

18 (d) AMENDMENT OF CERTAIN PROVISION.—Section 

19 801 of the Federal Food, Drug, and Cosmetic Act (21 

20 U.S.C. 381) is amended by striking subsection (g) and in21 serting the following: 

22 ‘‘(g) With respect to a prescription drug that is im23 ported or offered for import into the United States by an 

24 individual who is not in the business of such importation, 

25 that is not shipped by a registered exporter under section 
58 

•S 16 IS 

1 804, and that is refused admission under subsection (a), 

2 the Secretary shall notify the individual that— 

3 ‘‘(1) the drug has been refused admission be4 cause the drug was not a lawful import under sec5 tion 804; 

6 ‘‘(2) the drug is not otherwise subject to a 

7 waiver of the requirements of subsection (a); 

8 ‘‘(3) the individual may under section 804 law9 fully import certain prescription drugs from Cana10 dian exporters registered with the Secretary; and 

11 ‘‘(4) the individual can find information about 

12 such importation, including a list of registered ex13 porters, on the Internet website of the Food and 

14 Drug Administration.’’. 

15 (e) ANTICOMPETITIVE PRACTICES RELATING TO IM16 PORTING AND EXPORTING DRUGS TO THE UNITED

17 STATES.— 

18 (1) IN GENERAL.—The Clayton Act (15 U.S.C. 

19 12 et seq.) is amended by adding at the end the fol20 lowing: 

21 ‘‘SEC. 27. RESTRAINT OF TRADE REGARDING PRESCRIP22 TION DRUGS. 

23 ‘‘(a) IN GENERAL.—It shall be unlawful for any per24 son engaged in commerce, directly or indirectly to— 
59 

•S 16 IS 

1 ‘‘(1) charge a higher price for prescription 

2 drugs sold to a registered exporter or other person 

3 that exports prescription drugs to the United States 

4 under section 804 of the Federal Food, Drug, and 

5 Cosmetic Act than the price that is charged to an6 other person that is in the same country and that 

7 does not export prescription drugs into the United 

8 States under section 804 of such Act; 

9 ‘‘(2) charge a higher price for prescription 

10 drugs sold to a registered importer or other person 

11 that distributes, sells, or uses prescription drugs im12 ported to the United States under section 804 of 

13 such Act than the price that is charged to another 

14 person in the United States that does not import 

15 prescription drugs under section 804 of such Act, or 

16 that does not distribute, sell, or use such drugs; 

17 ‘‘(3) deny supplies of prescription drugs to a 

18 registered exporter or other person that exports pre19 scription drugs to the United States under section 

20 804 of such Act or to a registered importer or other 

21 person that distributes, sells, or uses prescription 

22 drugs imported to the United States under section 

23 804 of such Act; 

24 ‘‘(4) publicly, privately, or otherwise refuse to 

25 do business with a registered exporter or other per-
60 

•S 16 IS 

1 son that exports prescription drugs to the United 

2 States under section 804 of such Act or with a reg3 istered importer or other person that distributes, 

4 sells, or uses prescription drugs imported to the 

5 United States under section 804 of such Act; 

6 ‘‘(5) specifically restrict supplies of prescription 

7 drugs to a registered exporter or other person that 

8 exports prescription drugs to the United States 

9 under section 804 of such Act or to a registered im10 porter or other person that distributes, sells, or uses 

11 prescription drugs imported to the United States 

12 under section 804 of such Act; 

13 ‘‘(6) fail to submit a notice under subsection 

14 (g)(2)(C)(i) of section 804 of such Act, fail to sub15 mit such a notice on or before the date specified in 

16 subsection (g)(2)(C)(v) of section 804 of such Act, 

17 submit such a notice that makes a materially false, 

18 fictitious, or fraudulent statement, or fail to provide 

19 promptly any information requested by the Secretary 

20 of Health and Human Services to review such a no21 tice; 

22 ‘‘(7) fail to submit an application required 

23 under subsection (g)(2)(G) of section 804 of such 

24 Act, fail to submit such an application on or before 

25 the date specified in subsection (g)(2)(G)(ii) of sec-
61 

•S 16 IS 

1 tion 804 of such Act, submit such an application 

2 that makes a materially false, fictitious, or fraudu3 lent statement, or fail to provide promptly any infor4 mation requested by the Secretary of Health and 

5 Human Services to review such an application; 

6 ‘‘(8) cause there to be a difference (including a 

7 difference in active ingredient, route of administra8 tion, dosage form, strength, formulation, manufac9 turing establishment, manufacturing process, or per10 son that manufactures the drug) between a prescrip11 tion drug for distribution in the United States and 

12 a prescription drug for distribution in Australia, 

13 Canada, a member country of the European Union 

14 as of January 1, 2003, Japan, New Zealand, or 

15 Switzerland for the purpose of restricting importa16 tion of the drug to the United States under section 

17 804 of such Act; 

18 ‘‘(9) refuse to allow an inspection authorized 

19 under section 804 of such Act of an establishment 

20 that manufactures a prescription drug that is of21 fered for import under such section; 

22 ‘‘(10) fail to conform to the methods used in, 

23 or the facilities used for, the manufacturing, proc24 essing, packing, or holding of a prescription drug of-
62 

•S 16 IS 

1 fered for import under section 804 to good manufac2 turing practice under such Act; or 

3 ‘‘(11) engage in any other action that the Fed4 eral Trade Commission determines to unfairly re5 strict competition under section 804 of such Act. 

6 ‘‘(b) PRESUMPTION.—A difference (including a dif7 ference in active ingredient, route of administration, dos8 age form, strength, formulation, manufacturing establish9 ment, manufacturing process, or person that manufac10 tures the drug) between a prescription drug for distribu11 tion in the United States and a prescription drug for dis12 tribution in Australia, Canada, a member country of the 

13 European Union as of January 1, 2003, Japan, New Zea14 land, or Switzerland made after January 1, 2004, shall 

15 be presumed to be for the purpose of restricting importa16 tion of the drug to the United States under section 804 

17 of the Federal Food, Drug, and Cosmetic Act unless— 

18 ‘‘(1) the person manufacturing the drug for dis19 tribution in the United States proves that the dif20 ference was required by the country in which the 

21 drug is distributed; 

22 ‘‘(2) the Secretary of Health and Human Serv23 ices, acting through the Commissioner of Food and 

24 Drug, determines that the difference was necessary 

25 to improve the safety or efficacy of the drug; or 
63 

•S 16 IS 

1 ‘‘(3) the person manufacturing the drug for dis2 tribution in the United States has given notice to 

3 the Secretary of Health and Human Services under 

4 subsection (g)(2)(C)(i) of section 804 of such Act 

5 that the drug for distribution in the United States 

6 is not different from a drug for distribution in not 

7 fewer than half of those countries. 

8 ‘‘(c) AFFIRMATIVE DEFENSE.—It shall be an affirm9 ative defense to a charge that a person has violated para10 graph (1), (2), (3), (4), or (5) of subsection (a) that the 

11 higher prices charged for prescription drugs sold to a per12 son, the denial of supplies of prescription drugs to a per13 son, the refusal to do business with a person, or the spe14 cific restriction or delay of supplies to a person is not 

15 based, in whole or in part, on— 

16 ‘‘(1) the person exporting or importing pre17 scription drugs to the United States under section 

18 804 of the Federal Food, Drug, and Cosmetic Act; 

19 or 

20 ‘‘(2) the person distributing, selling, or using 

21 prescription drugs imported to the United States 

22 under section 804 of such Act. 

23 ‘‘(d) DEFINITIONS.—In this section: 

24 ‘‘(1) PRESCRIPTION DRUG.—The term ‘pre25 scription drug’ means a drug that is described in 
64 

•S 16 IS 

1 section 503(b)(1) of the Federal Food, Drug, and 

2 Cosmetic Act (21 U.S.C. 353(b)(1)). 

3 ‘‘(2) REGISTERED IMPORTER.—The term ‘reg4 istered importer’ has the meaning given such term 

5 in section 804 of the Federal Food, Drug, and Cos6 metic Act. 

7 ‘‘(3) REGISTERED EXPORTER.—The term ‘reg8 istered exporter’ has the same meaning as in section 

9 804 of the Federal Food, Drug, and Cosmetic Act.’’. 

10 (2) APPLICABILITY OF AMENDMENTS TO IM11 PORTATION UNDER THE PHARMACEUTICAL MARKET

12 ACCESS AND FAIR TRADE ACT OF 2004.— 

13 (A) PERSONAL IMPORTATION FROM CAN14 ADA.—Paragraphs (1) through (5) and (11) of 

15 subsection (a) of section 27 of the Clayton Act 

16 (15 U.S.C. et seq.) (as amended by paragraph 

17 (1)) shall apply with respect to the importation 

18 of drugs from Canada under subsection (c)(2). 

19 (B) NOTICES RESPECTING DRUG FOR IM20 PORT.—Paragraph (6) of subsection (a) of sec21 tion 27 of the Clayton Act (15 U.S.C. et seq.) 

22 (as amended by paragraph (1)) shall apply with 

23 respect to notices required under section 

24 804(g)(2)(C)(i) of the Federal Food Drug and 

25 Cosmetic Act (21 U.S.C. 384(g)(2)(C)(i)) that 
65 

•S 16 IS 

1 are not submitted by the dates required under 

2 subsections (c)(1)(C) and (D). 

3 (f) EXHAUSTION.— 

4 (1) IN GENERAL.—Section 271 of title 35, 

5 United States Code, is amended— 

6 (A) by redesignating subsections (h) and 

7 (i) as (i) and (j), respectively; and 

8 (B) by inserting after subsection (g) the 

9 following: 

10 ‘‘(h) It shall not be an act of infringement to use, 

11 offer to sell, or sell within the United States or to import 

12 into the United States any patented invention under sec13 tion 804 of the Federal Food, Drug, and Cosmetic Act 

14 that was first sold abroad by or under authority of the 

15 owner or licensee of such patent.’’. 

16 (2) RULE OF CONSTRUCTION.—Nothing in the 

17 amendment made by paragraph (1) shall be con18 strued to affect the ability of a patent owner or li19 censee to enforce their patent, subject to such 

20 amendment. 
66 

•S 16 IS 

1 SEC. 104. ADDITIONAL WAIVERS REGARDING PERSONAL 

2 IMPORTATION; ENFORCEMENT POLICIES OF 

3 SECRETARY. 

4 (a) IN GENERAL.—Section 801 of the Federal Food, 

5 Drug, and Cosmetic Act (21 U.S.C. 381) is amended by 

6 adding at the end the following: 

7 ‘‘(p)(1) Waivers under this subsection are in addition 

8 to, and independent of, the waiver pursuant to section 

9 804(a)(2)(B). 

10 ‘‘(2) With respect to the standards referred to in sub11 section (d)(1), the Secretary shall establish by regulation 

12 a waiver of such standards in the case of the importation 

13 by an individual of a drug into the United States in the 

14 following circumstances: 

15 ‘‘(A) The drug was dispensed to the individual 

16 while the individual was in the United States, the 

17 drug was dispensed by a pharmacist or by a practi18 tioner licensed by law to administer the drug, and 

19 the individual traveled from the United States with 

20 the drug. 

21 ‘‘(B) The individual is entering the United 

22 States and the drug accompanies the individual at 

23 the time of entry. 

24 ‘‘(C) The drug does not appear to the Secretary 

25 to be adulterated. 
67 

•S 16 IS 

1 ‘‘(D) The quantity of the drug does not exceed 

2 a 90-day supply. 

3 ‘‘(E) The drug is accompanied by a statement 

4 that the individual seeks to import the drug into the 

5 United States under a personal importation waiver. 

6 ‘‘(F) Such additional standards as the Sec7 retary determines to be appropriate to protect the 

8 public health. 

9 ‘‘(3) With respect to the standards referred to in sub10 sections (a) and (d)(1), the Secretary shall establish by 

11 regulation a waiver of such standards in the case of the 

12 importation by an individual of a drug into the United 

13 States in the following circumstances: 

14 ‘‘(A) The drug was dispensed to the individual 

15 while the individual was in a foreign country, and 

16 the drug was dispensed in accordance with the laws 

17 and regulations of such country. 

18 ‘‘(B) The individual is entering the United 

19 States and the drug accompanies the individual at 

20 the time of entry. 

21 ‘‘(C) The drug is approved for commercial dis22 tribution in the foreign country in which the drug 

23 was obtained. 

24 ‘‘(D) The drug does not appear to the Secretary 

25 to be adulterated. 
68 

•S 16 IS 

1 ‘‘(E) The quantity of the drug does not ex2 ceed— 

3 ‘‘(i) a 90-day supply if the drug is dis4 pensed in Australia, Canada, a member country 

5 of the European Union as of January 1, 2003, 

6 Japan, New Zealand, or Switzerland; or 

7 ‘‘(ii) a 14-day supply otherwise. 

8 ‘‘(F) The drug is accompanied by a statement 

9 that the individual seeks to import the drug into the 

10 United States under a personal importation waiver. 

11 ‘‘(G) Such additional standards as the Sec12 retary determines to be appropriate to protect the 

13 public health. 

14 ‘‘(q) The Secretary may not administer any enforce15 ment policy that has the effect of permitting the importa16 tion of a prescription drug into the United States in viola17 tion of this Act or section 351 of the Public Health Service 

18 Act.’’. 

19 (b) ADDITIONAL WAIVER.—This Act and the amend20 ments made by this Act shall not be construed as limiting 

21 the authority of the Secretary of Health and Human Serv22 ices to establish a waiver of the standards referred to in 

23 section 801(a) of the Federal Food, Drug, and Cosmetic 

24 Act (21 U.S.C. 381(a)) with respect to the importation 

25 by an individual of a drug into the United States that does 
69 

•S 16 IS 

1 not meet such standards, provided that such waiver is no 

2 more permissive than the guidance, as in effect on Janu3 ary 1, 2004, that is provided in the item numbered 2 (re4 lating to a specific situation, consisting of conditions (a) 

5 through (d)) under the heading ‘‘Drugs, Biologics, and 

6 Devices’’ in chapter 9 of the FDA/ORA Regulatory Proce7 dures Manual (relating to import operations/actions), in 

8 the subchapter relating to coverage of personal importa9 tions. 

10 SEC. 105. DISPOSITION OF CERTAIN DRUGS DENIED ADMIS11 SION INTO UNITED STATES. 

12 (a) IN GENERAL.—Chapter VIII of the Federal 

13 Food, Drug, and Cosmetic Act (21 U.S.C. 381 et seq.), 

14 as amended by section 102, is further amended by adding 

15 at the end the following section: 

16 ‘‘SEC. 805. DISPOSITION OF CERTAIN DRUGS DENIED AD17 MISSION. 

18 ‘‘(a) IN GENERAL.—The Secretary of Homeland Se19 curity shall refuse admission to a shipment of drugs that 

20 is imported or offered for import into the United States 

21 if the shipment has a declared value of less than $10,000 

22 and the drugs are in violation of any standard referred 

23 to in section 801(a) or 801(d)(1), including any drugs im24 ported or offered for import under enforcement policies 

25 prohibited under section 801(q). 
70 

•S 16 IS 

1 ‘‘(b) IMPORTATION UNDER SECTION 804.—In the 

2 case of a drug that under section 804 is imported or of3 fered for import from a registered exporter, the reference 

4 in subsection (a) to standards referred to in section 801(a) 

5 or 801(d)(1) shall be considered a reference to standards 

6 referred to in section 804(g)(4)(B). 

7 ‘‘(c) DESTRUCTION OF VIOLATIVE SHIPMENTS.— 

8 Drugs refused admission under subsection (a) or (b) shall 

9 be destroyed, subject to subsection (e). Section 801(b) 

10 does not authorize the delivery of the drugs pursuant to 

11 the execution of a bond, and the drugs may not be ex12 ported. 

13 ‘‘(d) CERTAIN PROCEDURES.— 

14 ‘‘(1) IN GENERAL.—The refusal of admission 

15 and destruction of drugs under this section may be 

16 carried out without notice to the importer, owner, or 

17 consignee of the drugs except as required by section 

18 801(g) or section 804(i)(2). The issuance of receipts 

19 for the drugs, and recordkeeping activities regarding 

20 the drugs, may be carried out on a summary basis. 

21 ‘‘(2) OBJECTIVE OF PROCEDURES.—Procedures 

22 promulgated under paragraph (1) shall be designed 

23 toward the objective of ensuring that, with respect to 

24 efficiently utilizing Federal resources available for 

25 carrying out this section, a substantial majority of 
71 

•S 16 IS 

1 shipments of drugs subject to subsection (a) or (b) 

2 are identified and refused admission and destroyed. 

3 ‘‘(e) EVIDENCE EXCEPTION.—Drugs may not be de4 stroyed under subsection (c) to the extent that the Attor5 ney General of the United States determines that the 

6 drugs should be preserved as evidence or potential evi7 dence with respect to an offense against the United States. 

8 ‘‘(f) RULE OF CONSTRUCTION.—This section may 

9 not be construed as having any legal effect on applicable 

10 law with respect to a shipment of drugs that is imported 

11 or offered for import into the United States and has a 

12 declared value equal to or greater than $10,000.’’. 

13 (b) PROCEDURES.—Procedures for carrying out sec14 tion 805 of the Federal Food, Drug, and Cosmetic Act, 

15 as added by subsection (a), shall be established not later 

16 than 90 days after the date of the enactment of this Act. 

17 SEC. 106. CIVIL ACTIONS REGARDING PROPERTY. 

18 Section 303 of the Federal Food, Drug, and Cosmetic 

19 Act (21 U.S.C. 333) is amended by adding at the end the 

20 following subsection: 

21 ‘‘(g)(1) If a person is alienating or disposing of prop22 erty, or intends to alienate or dispose of property, that 

23 is obtained as a result of or is traceable to a drug imported 

24 in violation of section 801(a) or 801(d), the Attorney Gen25 eral may commence a civil action in any Federal court— 
72 

•S 16 IS 

1 ‘‘(A) to enjoin such alienation or disposition of 

2 property; or 

3 ‘‘(B) for a restraining order to— 

4 ‘‘(i) prohibit any person from withdrawing, 

5 transferring, removing, dissipating, or disposing 

6 of any such property or property of equivalent 

7 value; and 

8 ‘‘(ii) appoint a temporary receiver to ad9 minister such restraining order. 

10 ‘‘(2) Proceedings under paragraph (1) shall be car11 ried out in the same manner as applies under section 1345 

12 of title 18, United States Code.’’. 

13 SEC. 107. WHOLESALE DISTRIBUTION OF DRUGS; STATE14 MENTS REGARDING PRIOR SALE, PURCHASE, 

15 OR TRADE. 

16 (a) STRIKING OF EXEMPTIONS; APPLICABILITY TO

17 REGISTERED EXPORTERS.—Section 503(e) of the Federal 

18 Food, Drug, and Cosmetic Act (21 U.S.C. 353(e)) is 

19 amended— 

20 (1) in paragraph (1)— 

21 (A) by striking ‘‘and who is not the manu22 facturer or an authorized distributor of record 

23 of such drug’’; 

24 (B) by striking ‘‘to an authorized dis25 tributor of record or’’; and 
73 

•S 16 IS 

1 (C) by striking subparagraph (B) and in2 serting the following: 

3 ‘‘(B) The fact that a drug subject to subsection (b) 

4 is exported from the United States does not with respect 

5 to such drug exempt any person that is engaged in the 

6 business of the wholesale distribution of the drug from 

7 providing the statement described in subparagraph (A) to 

8 the person that receives the drug pursuant to the export 

9 of the drug. 

10 ‘‘(C)(i) The Secretary may by regulation establish re11 quirements that supersede subparagraph (A) (referred to 

12 in this subparagraph as ‘alternative requirements’) to 

13 identify the chain of custody of a drug subject to sub14 section (b) from the manufacturer of the drug throughout 

15 the wholesale distribution of the drug to a pharmacist who 

16 intends to sell the drug at retail if the Secretary deter17 mines that the alternative requirements, which may in18 clude anti-counterfeiting or track-and-trace technologies, 

19 will identify such chain of custody or the identity of the 

20 drug with equal certainty to the requirements of subpara21 graph (A), and that the alternative requirements are eco22 nomically and technically feasible. 

23 ‘‘(ii) If the Secretary promulgates a final rule to es24 tablish such alternative requirements, the final rule in ad25 dition shall, with respect to the registration condition es-
74 

•S 16 IS 

1 tablished in clause (i) of section 804(c)(3)(B), establish 

2 a condition equivalent to the alternative requirements, and 

3 such equivalent condition supersedes such clause (i).’’; 

4 (2) in paragraph (2)(A), by adding at the end 

5 the following: ‘‘The preceding sentence may not be 

6 construed as having any applicability with respect to 

7 a registered exporter under section 804.’’; and 

8 (3) in paragraph (3), by striking ‘‘and sub9 section (d)—’’ in the matter preceding subparagraph 

10 (A) and all that follows through ‘‘the term ‘whole11 sale distribution’ means’’ in subparagraph (B) and 

12 inserting the following: ‘‘and subsection (d), the 

13 term ‘wholesale distribution’ means’’. 

14 (b) CONFORMING AMENDMENT.—Section 503(d) of 

15 the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 

16 353(d)) is amended by adding at the end the following: 

17 ‘‘(4) Each manufacturer of a drug subject to sub18 section (b) shall maintain at its corporate offices a current 

19 list of the authorized distributors of record of such drug. 

20 ‘‘(5) For purposes of this subsection, the term ‘au21 thorized distributors of record’ means those distributors 

22 with whom a manufacturer has established an ongoing re23 lationship to distribute such manufacturer’s products.’’. 
75 

•S 16 IS 

1 SEC. 108. REPEAL OF IMPORTATION EXEMPTION UNDER 

2 CONTROLLED SUBSTANCES IMPORT AND EX3 PORT ACT. 

4 Section 1006 of the Controlled Substances Import 

5 and Export Act (21 U.S.C. 956) is repealed. 

6 SEC. 109. EFFECT ON ADMINISTRATION PRACTICES. 

7 Notwithstanding any provision of this Act (and the 

8 amendments made by this Act), nothing in this Act (or 

9 the amendments made by this Act) shall be construed to 

10 change, limit, or restrict the practices of the Food and 

11 Drug Administration or the Bureau of Customs and Bor12 der Protection in effect on January 1, 2004, with respect 

13 to the importation of prescription drugs into the United 

14 States by an individual, on the person of such individual, 

15 for personal use. 

16 Subtitle B—Ensuring Drug Safety 

17 SEC. 121. DRUG SAFETY. 

18 (a) IN GENERAL.—Chapter V of the Federal Food, 

19 Drug, and Cosmetic Act (21 U.S.C. 351 et seq.) is amend20 ed by inserting after section 506C the following: 

21 ‘‘SEC. 507. DRUG SAFETY. 

22 ‘‘(a) PHASE IV STUDIES.— 

23 ‘‘(1) IN GENERAL.—The Secretary may require 

24 that the sponsor of a drug that is approved or li25 censed under section 505(c) or under section 351 of 

26 the Public Health Service Act conduct one or more 
76 

•S 16 IS 

1 studies, to be completed by a date after approval or 

2 licensing of such drug specified by the Secretary, 

3 that confirms or refutes an empirical or theoretical 

4 hypothesis of a significant safety issue with the 

5 drug, raised with respect to the drug or the class of 

6 the drug, found in— 

7 ‘‘(A) the MedWatch post-market surveil8 lance system; 

9 ‘‘(B) a clinical or epidemiological study; or 

10 ‘‘(C) the scientific literature. 

11 ‘‘(b) SUPPLEMENTS.—The sponsor of a drug that is 

12 approved or licensed under section 505(c) or under section 

13 351 of the Public Health Service Act shall promptly sub14 mit the results of a study required under subsection (a) 

15 as a supplement to the application for the drug. 

16 ‘‘(c) PUBLIC DISCLOSURE.—The Secretary shall, not 

17 less than every quarter, make public each study required 

18 under subsection (a), including a description of, and the 

19 reason for, the study, the required completion date, and 

20 whether the study has been completed, through— 

21 ‘‘(1) a notice in the Federal Register; and 

22 ‘‘(2) a database that shall be readily accessible 

23 to the public through the Internet site of the Food 

24 and Drug Administration. 

25 ‘‘(d) CIVIL PENALTIES.— 
77 

•S 16 IS 

1 ‘‘(1) IN GENERAL.—The Secretary may order 

2 the sponsor of a drug that is approved or licensed 

3 under section 505(c) or under section 351 of the 

4 Public Health Service Act to pay a civil penalty, sub5 ject to paragraph (2), if, after providing an oppor6 tunity for an informal hearing, the Secretary deter7 mines that— 

8 ‘‘(A) the sponsor has failed to complete a 

9 study required under subsection (a) by the date 

10 specified by the Secretary; and 

11 ‘‘(B) there is no legitimate reason for such 

12 failure. 

13 ‘‘(2) AMOUNT OF PENALTIES.—The civil pen14 alty order under paragraph (1) may be assessed for 

15 each day the completion of a required study of a 

16 drug is delayed in an amount that is not more than 

17 3 times the gross revenue received by the sponsor 

18 for the average sales of the drug in a day. 

19 ‘‘(3) RECORDS RELATING TO GROSS REV20 ENUE.—When provided an opportunity for an infor21 mal hearing under paragraph (1), a drug sponsor 

22 shall provide to the Secretary all records relating to 

23 the gross revenues received by the sponsor for aver24 age sales of the drug in a day. 
78 

•S 16 IS 

1 ‘‘(4) PROCEDURE.—The provisions of para2 graphs (3) (other than subparagraph (A)), (4), and 

3 (5) of section 303(f) shall apply to a violation under 

4 subsection (a) in the same manner as such provi5 sions apply to a violation of a requirement of this 

6 Act that relates to devices.’’. 

7 (b) RESOURCES.—In addition to fees that may be 

8 available to the Office of Drug Safety under sections 735 

9 and 736 of the Federal Food, Drug, and Cosmetic Act 

10 (21 U.S.C. 379g and 379h), there is authorized to be ap11 propriated for the Office of Drug Safety within the Center 

12 for Drug Evaluation and Research of the Food and Drug 

13 Administration— 

14 (1) $30,000,000 for fiscal year 2006; 

15 (2) $40,000,0000 for fiscal year 2007; 

16 (3) $50,000,000 for fiscal year 2008; 

17 (4) $60,000,000 for fiscal year 2009; and 

18 (5) $70,00,000 for fiscal year 2010. 

19 SEC. 122. REPORT BY GAO ON DRUG SAFETY. 

20 (a) IN GENERAL.—The Government Accountability 

21 Office shall provide for the conduct of a study concerning 

22 measures to increase the safety of prescription drugs, in23 cluding— 

24 (1) whether Federal funding levels are adequate 

25 to ensure drug safety and whether the uncertainty 
79 

•S 16 IS 

1 associated with the Federal budgetary process ham2 pers planning; 

3 (2) whether the lack of permanent leadership at 

4 the Food and Drug Administration has contributed 

5 to problems in decisionmaking and in transmitting 

6 information to the public concerning the safety of 

7 drugs; 

8 (3) whether prolonged and rampant vacancies 

9 within the Food and Drug Administration have con10 tributed to the ability of the Food and Drug Admin11 istration to properly examine drug safety; 

12 (4) whether conflicts of interest exist that un13 duly bias approvals or later reviews of drug safety; 

14 (5) whether employees of the Food and Drug 

15 Administration have been improperly threatened or 

16 face any barriers to raising concerns about drug 

17 safety; 

18 (6) whether the procedure of the Food and 

19 Drug Administration for notifying the public of pos20 sible drug safety issues is appropriate and complied 

21 with; 

22 (7) whether further measures or authorities are 

23 necessary to ensure the safety of drugs; and 

24 (8) other matters determined appropriate. 
80 

•S 16 IS 

1 (b) REPORT.—Not later than 90 days after the date 

2 of enactment of this Act, the Government Accountability 

3 Office shall prepare and submit to the appropriate com4 mittees of Congress a report concerning the results of the 

5 study conducted under subsection (a). Such report shall 

6 include a proposal (including legislative language) for im7 proving the safety of prescription drugs. 

8 TITLE II—MODERNIZING THE 

9 HEALTH CARE SYSTEM 

10 SEC. 201. AMENDMENT TO THE PUBLIC HEALTH SERVICE 

11 ACT. 

12 The Public Health Service Act (42 U.S.C. 201 et 

13 seq.) is amended by adding at the end thereof the fol14 lowing: 

15 ‘‘TITLE XXIX—HEALTH CARE 

16 INFORMATION TECHNOLOGY 

17 ‘‘SEC. 2901. DEFINITIONS. 

18 ‘‘In this title: 

19 ‘‘(1) COVERAGE AREA.—The term ‘coverage 

20 area’ means the boundaries of a local health infor21 mation infrastructure. 

22 ‘‘(2) DIRECTOR.—The term ‘Director’ means 

23 the Director of the Office of Health Information 

24 Technology. 
81 

•S 16 IS 

1 ‘‘(3) HEALTH CARE PROVIDER.—The term 

2 ‘health care provider’ means a hospital, skilled nurs3 ing facility, home health entity, health care clinic, 

4 community health center, group practice (as defined 

5 in section 1877(h)(4) of the Social Security Act, in6 cluding practices with only 1 physician), and any 

7 other facility or clinician determined appropriate by 

8 the Director. 

9 ‘‘(4) HEALTH INFORMATION TECHNOLOGY.— 

10 The term ‘health information technology’ means a 

11 computerized system that— 

12 ‘‘(A) is consistent with the standards de13 veloped pursuant to section 2903; 

14 ‘‘(B) permits the secure electronic trans15 mission of information to other health care pro16 viders and public health entities; and 

17 ‘‘(C) includes— 

18 ‘‘(i) an electronic health record 

19 (EHR) that provides access in real-time to 

20 the patient’s complete medical record; 

21 ‘‘(ii) a personal health record (PHR) 

22 through which an individual (and anyone 

23 authorized by such individual) can main24 tain and manage their health information; 
82 

•S 16 IS 

1 ‘‘(iii) computerized provider order 

2 entry (CPOE) technology that permits the 

3 electronic ordering of diagnostic and treat4 ment services, including prescription drugs; 

5 ‘‘(iv) decision support to assist physi6 cians in making clinical decisions by pro7 viding electronic alerts and reminders to 

8 improve compliance with best practices, 

9 promote regular screenings and other pre10 ventive practices, and facilitate diagnoses 

11 and treatments; 

12 ‘‘(v) error notification procedures so 

13 that a warning is generated if an order is 

14 entered that is likely to lead to a signifi15 cant adverse outcome for the patient; and 

16 ‘‘(vi) tools to allow for the collection, 

17 analysis, and reporting of data on adverse 

18 events, near misses, and the quality of care 

19 provided to the patient. 

20 ‘‘(5) LOCAL HEALTH INFORMATION INFRA21 STRUCTURES.—The term ‘local health information 

22 infrastructure’ means an independent organization 

23 of health care entities established for the purpose of 

24 linking health information systems to electronically 
83 

•S 16 IS 

1 shared information. A local health information infra2 structure may not be a single business entity. 

3 ‘‘(6) OFFICE.—The term ‘Office’ means the Of4 fice of Health Information Technology established 

5 under section 2902. 

6 ‘‘SEC. 2902. OFFICE OF HEALTH INFORMATION TECH7 NOLOGY. 

8 ‘‘(a) ESTABLISHMENT.—There is established within 

9 the executive office of the President an Office of Health 

10 Information Technology. The Office shall be headed by a 

11 Director to be appointed by the President. The Director 

12 shall report directly to the President. 

13 ‘‘(b) PURPOSE.—It shall be the purpose of the Office 

14 to— 

15 ‘‘(1) improve the quality and increase the effi16 ciency of health care delivery through the use of 

17 health information technology; 

18 ‘‘(2) provide national leadership relating to, and 

19 encourage the adoption of, health information tech20 nology; 

21 ‘‘(3) direct all health information technology ac22 tivities within the Federal Government; and 

23 ‘‘(4) facilitate the interaction between the Fed24 eral Government and the private sector relating to 

25 health information technology development and use. 
84 

•S 16 IS 

1 ‘‘(c) DUTIES AND RESPONSIBILITIES.—The Office 

2 shall be responsible for the following: 

3 ‘‘(1) NATIONAL STRATEGY.—The Office shall 

4 develop a national strategy for improving the quality 

5 and enhancing the efficiency of health care through 

6 the improved use of health information technology 

7 and the creation of a National Health Information 

8 Infrastructure. 

9 ‘‘(2) FEDERAL LEADERSHIP.—The Office 

10 shall— 

11 ‘‘(A) serve as the principle advisor to the 

12 President concerning health information tech13 nology; 

14 ‘‘(B) direct all health information tech15 nology activity within the Federal Government, 

16 including approving or disapproving agency 

17 policies submitted under paragraph (3); 

18 ‘‘(C) work with public and private health 

19 information technology stakeholders to imple20 ment the national strategy described in para21 graph (1); and 

22 ‘‘(D) ensure that health information tech23 nology is utilized as fully as practicable in car24 rying out health surveillance efforts. 

25 ‘‘(3) AGENCY POLICIES.— 
85 

•S 16 IS 

1 ‘‘(A) IN GENERAL.—The Office shall, in 

2 accordance with this paragraph, approve or dis3 approve the policies of Federal departments or 

4 agencies with respect to any policy proposed to 

5 be implemented by such agency or department 

6 that would significantly affect that agency or 

7 department’s use of health information tech8 nology. 

9 ‘‘(B) SUBMISSION OF PROPOSAL.—The 

10 head of any Federal Government agency or de11 partment that desires to implement any policy 

12 with respect to such agency or department that 

13 would significantly affect that agency or depart14 ment’s use of health information technology 

15 shall submit an implementation proposal to the 

16 Office at least 60 days prior to the proposed 

17 date of the implementation of such policy. 

18 ‘‘(C) APPROVAL OR DISAPPROVAL.—Not 

19 later than 60 days after the date on which a 

20 proposal is received under subparagraph (B), 

21 the Office shall determine whether to approve 

22 the implementation of such proposal. In making 

23 such determination, the Office shall consider 

24 whether the proposal is consistent with the na25 tional strategy described in paragraph (1). If 
86 

•S 16 IS 

1 the Office fails to make a determination within 

2 such 60-day period, such proposal shall be 

3 deemed to be approved. 

4 ‘‘(D) FAILURE TO APPROVE.—Except as 

5 otherwise provided for by law, a proposal sub6 mitted under subparagraph (B) may not be im7 plemented unless such proposal is approved or 

8 deemed to be approved under subparagraph 

9 (C). 

10 ‘‘(4) COORDINATION.—The Office shall— 

11 ‘‘(A) encourage the development and adop12 tion of clinical, messaging, and decision support 

13 health information data standards, pursuant to 

14 the requirements of section 2903; 

15 ‘‘(B) ensure the maintenance and imple16 mentation of the data standards described in 

17 subparagraph (A); 

18 ‘‘(C) oversee and coordinate the health in19 formation technology efforts of the Federal 

20 Government; 

21 ‘‘(D) ensure the compliance of the Federal 

22 Government with Federally adopted health in23 formation technology data standards; 

24 ‘‘(E) ensure that the Federal Government 

25 consults and collaborates on decision making 
87 

•S 16 IS 

1 with respect to health information technology 

2 with the private sector and other interested par3 ties; and 

4 ‘‘(F) in consultation with private sector, 

5 adopt certification and testing criteria to deter6 mine if electronic health information systems 

7 interoperate. 

8 ‘‘(5) COMMUNICATION.—The Office shall— 

9 ‘‘(A) act as the point of contact for the 

10 private sector with respect to the use of health 

11 information technology; and 

12 ‘‘(B) work with the private sector to collect 

13 and disseminate best health information tech14 nology practices. 

15 ‘‘(6) EVALUATION AND DISSEMINATION.—The 

16 Office shall coordinate with the Agency for Health 

17 Research and Quality and other Federal agencies 

18 to— 

19 ‘‘(A) evaluate and disseminate information 

20 relating to evidence of the costs and benefits of 

21 health information technology and to whom 

22 those costs and benefits accrue; 

23 ‘‘(B) evaluate and disseminate information 

24 on the impact of health information technology 
88 

•S 16 IS 

1 on the quality and efficiency of patient care; 

2 and 

3 ‘‘(C) review Federal payment structures 

4 and differentials for health care providers that 

5 utilize health information technology systems. 

6 ‘‘(7) TECHNICAL ASSISTANCE.—The Office 

7 shall utilize existing private sector quality improve8 ment organizations to— 

9 ‘‘(A) promote the adoption of health infor10 mation technology among healthcare providers; 

11 and 

12 ‘‘(B) provide technical assistance con13 cerning the implementation of health informa14 tion technology to healthcare providers. 

15 ‘‘(8) FEDERAL REIMBURSEMENT.— 

16 ‘‘(A) IN GENERAL.—Not later than 6 

17 months after the date of enactment of this title, 

18 the Office shall make recommendations to the 

19 President and the Secretary of Health and 

20 Human Services on changes to Federal reim21 bursement and payment structures that would 

22 encourage the adoption of information tech23 nology (IT) to improve health care quality and 

24 safety. 
89 

•S 16 IS 

1 ‘‘(B) PLAN.—Not later than 90 days after 

2 receiving recommendations under subparagraph 

3 (A), the Secretary shall provide to the relevant 

4 Committees of Congress a report that provides, 

5 with respect to each recommendation, a plan for 

6 the implementation, or an explanation as to 

7 why implementation is inadvisable, of such rec8 ommendations. The Office shall continue to 

9 monitor federally funded and supported infor10 mation technology and quality initiatives (includ11 ing the initiatives authorized in this title), and 

12 periodically update recommendations to the 

13 President and the Secretary. 

14 ‘‘(d) RESOURCES.—The President shall make avail15 able to the Office, the resources, both financial and other16 wise, necessary to enable the Director to carry out the pur17 poses of, and perform the duties and responsibilities of 

18 the Office under, this section. 

19 ‘‘(e) DETAIL OF FEDERAL EMPLOYEES.—Upon the 

20 request of the Director, the head of any Federal agency 

21 is authorized to detail, without reimbursement from the 

22 Office, any of the personnel of such agency to the Office 

23 to assist it in carrying out its duties under this section. 

24 Any such detail shall not interrupt or otherwise affect the 

25 civil service status or privileges of the Federal employee. 
90 

•S 16 IS 

1 ‘‘SEC. 2903. PROMOTING THE INTEROPERABILITY OF 

2 HEALTH CARE INFORMATION TECHNOLOGY 

3 SYSTEMS. 

4 ‘‘(a) DEVELOPMENT, AND FEDERAL GOVERNMENT

5 ADOPTION, OF STANDARDS.— 

6 ‘‘(1) ADOPTION.— 

7 ‘‘(A) IN GENERAL.—Not later than 2 years 

8 after the date of the enactment of this title, the 

9 Director, in collaboration with the Consolidated 

10 Health Informatics Initiative (or a successor or11 ganization to such Initiative), shall provide for 

12 the adoption by the Federal Government of na13 tional data and communication health informa14 tion technology standards that promote the effi15 cient exchange of data between varieties of pro16 vider health information technology systems. In 

17 carrying out the preceding sentence, the Direc18 tor may adopt existing standards. Except as 

19 otherwise provided for in this title, standards 

20 adopted under this section shall be voluntary 

21 for private sector entities. 

22 ‘‘(B) GRANTS OR CONTRACTS.—The Direc23 tor may utilize grants or contracts to provide 

24 for the private sector development of standards 

25 for adoption by the Federal Government under 

26 subparagraph (A). 
91 

•S 16 IS 

1 ‘‘(C) DEFINITION.—In this paragraph, the 

2 term ‘provide for’ means that the Director shall 

3 promulgate, and each Federal agency or depart4 ment shall adopt, regulations to ensure that 

5 each such agency or department complies with 

6 the requirements of subsection (b). 

7 ‘‘(2) REQUIREMENTS.—The standards devel8 oped and adopted under paragraph (1) shall be de9 signed to— 

10 ‘‘(A) enable health information technology 

11 to be used for the collection and use of clinically 

12 specific data; 

13 ‘‘(B) promote the interoperability of health 

14 care information across health care settings; 

15 ‘‘(C) facilitate clinical decision support 

16 through the use of health information tech17 nology; and 

18 ‘‘(D) ensure the privacy and confidentiality 

19 of medical records. 

20 ‘‘(3) PUBLIC PRIVATE PARTNERSHIP.—Con21 sistent with activities being carried out on the date 

22 of enactment of this title, including the Consolidated 

23 Health Informatics Initiative (or a successor organi24 zation to such Initiative), health information tech25 nology standards shall be adopted by the Director 
92 

•S 16 IS 

1 under paragraph (1) at the conclusion of a collabo2 rative process that includes consultation between the 

3 Federal Government and private sector health care 

4 and information technology stakeholders. 

5 ‘‘(4) PRIVACY AND SECURITY.—The regulations 

6 promulgated by the Secretary under part C of title 

7 XI of the Social Security Act (42 U.S.C. 1320d et 

8 seq.) and sections 261, 262, 263, and 264 of the 

9 Health Insurance Portability and Accountability Act 

10 of 1996 (42 U.S.C. 1320d–2 note) with respect to 

11 the privacy, confidentiality, and security of health 

12 information shall apply to the implementation of 

13 programs and activities under this title. 

14 ‘‘(5) PILOT TESTS.—To the extent practical, 

15 the Director shall pilot test the health information 

16 technology data standards developed under para17 graph (1) prior to their implementation under this 

18 section. 

19 ‘‘(6) DISSEMINATION.— 

20 ‘‘(A) IN GENERAL.—The Director shall en21 sure that the standards adopted under para22 graph (1) are widely disseminated to interested 

23 stakeholders. 

24 ‘‘(B) LICENSING.—To facilitate the dis25 semination and implementation of the stand-
93 

•S 16 IS 

1 ards developed and adopted under paragraph 

2 (1), the Director may license such standards, or 

3 utilize other means, to ensure the widespread 

4 use of such standards. 

5 ‘‘(b) IMPLEMENTATION OF STANDARDS.— 

6 ‘‘(1) PURCHASE OF SYSTEMS BY THE SEC7 RETARY.—Effective beginning on the date that is 1 

8 year after the adoption of the technology standards 

9 pursuant to subsection (a), the Secretary shall not 

10 purchase any health care information technology 

11 system unless such system is in compliance with the 

12 standards adopted under subsection (a), nor shall 

13 the Director approve any proposal pursuant to sec14 tion 2902(c)(3) unless such proposal utilizes systems 

15 that are in compliance with the standards adopted 

16 under subsection (a). 

17 ‘‘(2) RECIPIENTS OF FEDERAL FUNDS.—Effec18 tive on the date described in paragraph (1), no ap19 propriated funds may be used to purchase a health 

20 care information technology system unless such sys21 tem is in compliance with applicable standards 

22 adopted under subsection (a). 

23 ‘‘(c) MODIFICATION OF STANDARDS.—The Director 

24 shall provide for ongoing oversight of the health informa-
94 

•S 16 IS 

1 tion technology standards developed under subsection (a) 

2 to— 

3 ‘‘(1) identify gaps or other shortcomings in 

4 such standards; and 

5 ‘‘(2) modify such standards when determined 

6 appropriate or develop additional standards, in col7 laboration with standard setting organizations. 

8 ‘‘SEC. 2904. LOAN GUARANTEES FOR THE ADOPTION OF 

9 HEALTH INFORMATION TECHNOLOGY. 

10 ‘‘(a) IN GENERAL.—The Director shall guarantee 

11 payment of the principal of and the interest on loans made 

12 to eligible entities to enable such entities— 

13 ‘‘(1) to implement local health information in14 frastructures to facilitate the development of inter15 operability across health care settings to improve 

16 quality and efficiency; or 

17 ‘‘(2) to facilitate the purchase and adoption of 

18 health information technology to improve quality and 

19 efficiency. 

20 ‘‘(b) ELIGIBILITY.—To be eligible to receive a loan 

21 guarantee under subsection (a) an entity shall— 

22 ‘‘(1) with respect to an entity desiring a loan 

23 guarantee— 

24 ‘‘(A) under subsection (a)(1), be a coalition 

25 of entities that represent an independent con-
95 

•S 16 IS 

1 sortium of health care stakeholders within a 

2 community that— 

3 ‘‘(i) includes— 

4 ‘‘(I) physicians (as defined in 

5 section 1881(r)(1) of the Social Secu6 rity Act); 

7 ‘‘(II) hospitals; and 

8 ‘‘(III) group health plans or 

9 other health insurance issuers (as 

10 such terms are defined in section 

11 2791); and 

12 ‘‘(ii) may include any other health 

13 care providers; or 

14 ‘‘(B) under subsection (a)(2) be a health 

15 care provider; 

16 ‘‘(2) to the extent practicable, adopt the na17 tional health information technology standards 

18 adopted under section 2903; 

19 ‘‘(3) provide assurances that the entity shall 

20 submit to the Director regular reports on the activi21 ties carried out under the loan guarantee, includ22 ing— 

23 ‘‘(A) a description of the financial costs 

24 and benefits of the project involved and of the 

25 entities to which such costs and benefits accrue; 
96 

•S 16 IS 

1 ‘‘(B) a description of the impact of the 

2 project on health care quality and safety; and 

3 ‘‘(C) a description of any reduction in du4 plicative or unnecessary care as a result of the 

5 project involved; 

6 ‘‘(4) provide assurances that not later than 30 

7 days after the development of the standard quality 

8 measures pursuant to section 2906, the entity shall 

9 submit to the Director regular reports on such meas10 ures, including provider level data and analysis of 

11 the impact of information technology on such meas12 ures; 

13 ‘‘(5) prepare and submit to the Director an ap14 plication at such time, in such manner, and con15 taining such information as the Director may re16 quire. 

17 ‘‘(c) USE OF FUNDS.—Amounts received under a 

18 loan guarantee under subsection (a) shall be used— 

19 ‘‘(1) with respect to a loan guarantee described 

20 in subsection (a)(1)— 

21 ‘‘(A) to develop a plan for the implementa22 tion of a local health information infrastructure 

23 under this section; 

24 ‘‘(B) to establish systems for the sharing 

25 of data in accordance with the national health 
97 

•S 16 IS 

1 information technology standards developed 

2 under section 2903; 

3 ‘‘(C) to purchase directly related inte4 grated hardware and software to establish an 

5 interoperable health information technology sys6 tem that is capable of linking to a local health 

7 care information infrastructure; and 

8 ‘‘(D) to train staff, maintain health infor9 mation technology systems, and maintain ade10 quate security and privacy protocols; 

11 ‘‘(2) with respect to a loan guarantee described 

12 in subsection (a)(2)— 

13 ‘‘(A) to develop a plan for the purchase 

14 and installation of health information tech15 nology; 

16 ‘‘(B) to purchase directly related inte17 grated hardware and software to establish an 

18 interoperable health information technology sys19 tem that is capable of linking to a national or 

20 local health care information infrastructure; 

21 and 

22 ‘‘(C) to train staff, maintain health infor23 mation technology systems, and maintain ade24 quate security and privacy protocols; and 
98 

•S 16 IS 

1 ‘‘(3) to carry out any other activities deter2 mined appropriate by the Director. 

3 ‘‘(d) SPECIAL CONSIDERATIONS FOR CERTAIN ENTI4 TIES.—In awarding loan guarantees under this section, 

5 the Director shall give special consideration to eligible en6 tities that— 

7 ‘‘(1) provide service to low-income and under8 served populations; and 

9 ‘‘(2) agree to electronically submit the informa10 tion described in paragraphs (3) and (4) of sub11 section (b) on a daily basis. 

12 ‘‘(e) SPECIAL CONSIDERATIONS FOR LOCAL HEALTH

13 INFORMATION INFRASTRUCTURES.—In awarding loan 

14 guarantees under this section to local health information 

15 infrastructures, the Director shall give special consider16 ation to eligible entities that— 

17 ‘‘(1) include at least 50 percent of the patients 

18 living in the designated coverage area; 

19 ‘‘(2) incorporate public health surveillance and 

20 reporting into the overall architecture of the pro21 posed infrastructure; and 

22 ‘‘(3) link local health information infrastruc23 tures. 
99 

•S 16 IS 

1 ‘‘(f) AREAS OF SPECIFIC INTEREST.—In awarding 

2 loan guarantees under this section, the Director shall in3 clude— 

4 ‘‘(1) entities with a coverage area that includes 

5 an entire State; and 

6 ‘‘(2) entities with a multi-state coverage area. 

7 ‘‘(g) ADMINISTRATIVE PROVISIONS.— 

8 ‘‘(1) AGGREGATE AMOUNT.— 

9 ‘‘(A) IN GENERAL.—Except as provided in 

10 subparagraph (B), the aggregate amount of 

11 principal of loans guaranteed under subsection 

12 (a) with respect to an eligible entity may not 

13 exceed $5,000,000. In any 12-month period the 

14 amount disbursed to an eligible entity under 

15 this section (by a lender under a guaranteed 

16 loan) may not exceed $5,000,000. 

17 ‘‘(B) EXCEPTION.—The cumulative total 

18 of the principal of the loans outstanding at any 

19 time to which guarantees have been issued 

20 under subsection (a) may not exceed such limi21 tations as may be specified in appropriation 

22 Acts. 

23 ‘‘(2) PROTECTION OF FEDERAL GOVERN24 MENT.— 
100 

•S 16 IS 

1 ‘‘(A) IN GENERAL.—The Director may not 

2 approve an application for a loan guarantee 

3 under this section unless the Director deter4 mines that— 

5 ‘‘(i) the terms, conditions, security (if 

6 any), and schedule and amount of repay7 ments with respect to the loan are suffi8 cient to protect the financial interests of 

9 the United States and are otherwise rea10 sonable, including a determination that the 

11 rate of interest does not exceed such per12 cent per annum on the principal obligation 

13 outstanding as the Director determines to 

14 be reasonable, taking into account the 

15 range of interest rates prevailing in the 

16 private market for loans with similar ma17 turities, terms, conditions, and security 

18 and the risks assumed by the United 

19 States; and 

20 ‘‘(ii) the loan would not be available 

21 on reasonable terms and conditions with22 out the enactment of this section. 

23 ‘‘(B) RECOVERY.— 

24 ‘‘(i) IN GENERAL.—The United States 

25 shall be entitled to recover from the appli-
101 

•S 16 IS 

1 cant for a loan guarantee under this sec2 tion the amount of any payment made pur3 suant to such loan guarantee, unless the 

4 Director for good cause waives such right 

5 of recovery, and, upon making any such 

6 payment, the United States shall be sub7 rogated to all of the rights of the recipient 

8 of the payments with respect to which the 

9 loan was made. 

10 ‘‘(ii) MODIFICATION OF TERMS.—Any 

11 terms and conditions applicable to a loan 

12 guarantee under this section may be modi13 fied by the Director to the extent the Di14 rector determines it to be consistent with 

15 the financial interest of the United States. 

16 ‘‘(3) DEFAULTS.—The Director may take such 

17 action as the Director deems appropriate to protect 

18 the interest of the United States in the event of a 

19 default on a loan guaranteed under this section, in20 cluding taking possession of, holding, and using real 

21 property pledged as security for such a loan guar22 antee. 

23 ‘‘(h) AUTHORIZATION OF APPROPRIATIONS.— 

24 ‘‘(1) IN GENERAL.—There is authorized to be 

25 appropriated to carry out this section, such sums as 
102 

•S 16 IS 

1 may be necessary for each of fiscal years 2006 

2 through 2011. 

3 ‘‘(2) AVAILABILITY.—Amounts appropriated 

4 under subparagraph (A) shall remain available for 

5 obligation until expended. 

6 ‘‘SEC. 2905. GRANTS FOR THE PURCHASE OF HEALTH IN7 FORMATION TECHNOLOGY. 

8 ‘‘(a) IN GENERAL.—The Director may award com9 petitive grants to eligible entities— 

10 ‘‘(1) to implement local health information in11 frastructures to facilitate the development of inter12 operability across health care settings; or 

13 ‘‘(2) to facilitate the purchase and adoption of 

14 health information technology. 

15 ‘‘(b) ELIGIBILITY.—To be eligible to receive a grant 

16 under subsection (a) an entity shall— 

17 ‘‘(1) demonstrate financial need to the Director; 

18 ‘‘(2) with respect to an entity desiring a 

19 grant— 

20 ‘‘(A) under subsection (a)(1), represent an 

21 independent consortium of health care stake22 holders within a community that— 

23 ‘‘(i) includes— 
103 

•S 16 IS 

1 ‘‘(I) physicians (as defined in 

2 section 1881(r)(1) of the Social Secu3 rity Act); 

4 ‘‘(II) hospitals; and 

5 ‘‘(III) group health plans or 

6 other health insurance issuers (as 

7 such terms are defined in section 

8 2791); and 

9 ‘‘(ii) may include any other health 

10 care providers; or 

11 ‘‘(B) under subsection (a)(2) be a health 

12 care provider that provides health care services 

13 to low-income and underserved populations; 

14 ‘‘(3) adopt the national health information tech15 nology standards developed under section 2903; 

16 ‘‘(4) provide assurances that the entity shall 

17 submit to the Director regular reports on the activi18 ties carried out under the loan guarantee, includ19 ing— 

20 ‘‘(A) a description of the financial costs 

21 and benefits of the project involved and of the 

22 entities to which such costs and benefits accrue; 

23 ‘‘(B) a description of the impact of the 

24 project on health care quality and safety; and 
104 

•S 16 IS 

1 ‘‘(C) a description of any reduction in du2 plicative or unnecessary care as a result of the 

3 project involved; 

4 ‘‘(5) provide assurances that not later than 30 

5 days after the development of the standard quality 

6 measures pursuant to section 2906, the entity shall 

7 submit to the Director regular reports on such meas8 ures, including provider level data and analysis of 

9 the impact of information technology on such meas10 ures; 

11 ‘‘(6) prepare and submit to the Director an ap12 plication at such time, in such manner, and con13 taining such information as the Director may re14 quire; and 

15 ‘‘(7) agree to provide matching funds in accord16 ance with subsection (g). 

17 ‘‘(c) USE OF FUNDS.—Amounts received under a 

18 grant under subsection (a) shall be used to— 

19 ‘‘(1) with respect to a grant described in sub20 section (a)(1)— 

21 ‘‘(A) to develop a plan for the implementa22 tion of a local health information infrastructure 

23 under this section; 

24 ‘‘(B) to establish systems for the sharing 

25 of data in accordance with the national health 
105 

•S 16 IS 

1 information technology standards developed 

2 under section 2903; 

3 ‘‘(C) to implement, enhance, or upgrade a 

4 comprehensive, electronic health information 

5 technology system; and 

6 ‘‘(D) to maintain adequate security and 

7 privacy protocols; 

8 ‘‘(2) with respect to a grant described in sub9 section (a)(2)— 

10 ‘‘(A) to develop a plan for the purchase 

11 and installation of health information tech12 nology; 

13 ‘‘(B) to purchase directly related inte14 grated hardware and software to establish an 

15 interoperable health information technology sys16 tem that is capable of linking to a national or 

17 local health care information infrastructure; 

18 and 

19 ‘‘(C) to train staff, maintain health infor20 mation technology systems, and maintain ade21 quate security and privacy protocols; 

22 ‘‘(3) maintain adequate security and privacy 

23 protocols; and 

24 ‘‘(4) carry out any other activities determined 

25 appropriate by the Director. 
106 

•S 16 IS 

1 ‘‘(d) SPECIAL CONSIDERATIONS FOR CERTAIN ENTI2 TIES.—In awarding grants under this section, the Direc3 tor shall give special consideration to eligible entities 

4 that— 

5 ‘‘(1) provide service to low-income and under6 served populations; and 

7 ‘‘(2) agree to electronically submit the informa8 tion described in paragraphs (4) and (5) of sub9 section (b). 

10 ‘‘(e) SPECIAL CONSIDERATIONS FOR LOCAL HEALTH

11 INFORMATION INFRASTRUCTURES.—In awarding grants 

12 under this section to local health information infrastruc13 tures, the Director shall give special consideration to eligi14 ble entities that— 

15 ‘‘(1) include at least 50 percent of the patients 

16 living in the designated coverage area; 

17 ‘‘(2) incorporate public health surveillance and 

18 reporting into the overall architecture of the pro19 posed infrastructure; and 

20 ‘‘(3) link local health information infrastruc21 tures; 

22 ‘‘(f) AREAS OF SPECIFIC INTEREST.—In awarding 

23 grants under this section, the Director shall include— 

24 ‘‘(1) entities with a coverage area that includes 

25 an entire State; and 
107 

•S 16 IS 

1 ‘‘(2) entities with a multi-state coverage area. 

2 ‘‘(g) MATCHING REQUIREMENT.— 

3 ‘‘(1) IN GENERAL.—The Director may not 

4 make a grant under this section to an entity unless 

5 the entity agrees that, with respect to the costs to 

6 be incurred by the entity in carrying out the infra7 structure program for which the grant was awarded, 

8 the entity will make available (directly or through 

9 donations from public or private entities) non-Fed10 eral contributions toward such costs in an amount 

11 equal to not less than 20 percent of such costs ($1 

12 for each $5 of Federal funds provided under the 

13 grant). 

14 ‘‘(2) DETERMINATION OF AMOUNT CONTRIB15 UTED.—Non-Federal contributions required under 

16 paragraph (1) may be in cash or in kind, fairly eval17 uated, including equipment, technology, or services. 

18 Amounts provided by the Federal Government, or 

19 services assisted or subsidized to any significant ex20 tent by the Federal Government, may not be in21 cluded in determining the amount of such non-Fed22 eral contributions. 

23 ‘‘(h) AUTHORIZATION OF APPROPRIATIONS.— 

24 ‘‘(1) IN GENERAL.—There is authorized to be 

25 appropriated to carry out this section, such sums as 
108 

•S 16 IS 

1 may be necessary for each of fiscal years 2006 

2 through 2011. 

3 ‘‘(2) AVAILABILITY.—Amounts appropriated 

4 under paragraph (1) shall remain available for obli5 gation until expended.’’. 

6 SEC. 202. STANDARDIZED MEASURES OF QUALITY HEALTH 

7 CARE AND DATA COLLECTION. 

8 Title XXIX of the Public Health Service Act, as 

9 added by section 201, is amended by adding at the end 

10 the following: 

11 ‘‘SEC. 2906. STANDARDIZED MEASURES OF QUALITY 

12 HEALTH CARE. 

13 ‘‘(a) IN GENERAL.— 

14 ‘‘(1) COLLABORATION.—The Secretary of 

15 Health and Human Services, the Secretary of De16 fense, and the Secretary of Veterans Affairs (re17 ferred to in this section as the ‘Secretaries’), in con18 sultation with the Quality Interagency Coordination 

19 Taskforce (as established by Executive Order on 

20 March 13, 1998), the Institute of Medicine, the 

21 Joint Commission on Accreditation of Healthcare 

22 Organizations, the National Committee for Quality 

23 Assurance, the American Health Quality Associa24 tion, the National Quality Forum, the Medicare Pay25 ment Advisory Committee, and other individuals and 
109 

•S 16 IS 

1 organizations determined appropriate by the Secre2 taries, shall establish uniform health care quality 

3 measures to assess the effectiveness, timeliness, pa4 tient-centeredness, efficiency, equity, and safety of 

5 care delivered across all federally supported health 

6 delivery programs. 

7 ‘‘(2) DEVELOPMENT OF MEASURES.—Not later 

8 than 18 months after the date of enactment of this 

9 title, the Secretaries shall develop standardized sets 

10 of quality measures for each of the 20 priority areas 

11 for improvement in health care quality as identified 

12 by the Institute of Medicine in their report entitled 

13 ‘Priority Areas for National Action’ in 2003, or 

14 other such areas as identified by the Secretaries in 

15 order to assist beneficiaries in making informed 

16 choices about health plans or care delivery systems. 

17 The selection of appropriate quality indicators under 

18 this subsection shall include the evaluation criteria 

19 formulated by clinical professionals, consumers, and 

20 data collection experts. 

21 ‘‘(3) PILOT TESTING.—Each federally sup22 ported health delivery program may conduct a pilot 

23 test of the quality measures developed under para24 graph (2) that shall include a collection of patient- 
110 

•S 16 IS 

1 level data and a public release of comparative per2 formance reports. 

3 ‘‘(b) PUBLIC REPORTING REQUIREMENTS.—The 

4 Secretaries, working collaboratively, shall establish public 

5 reporting requirements for clinicians, institutional pro6 viders, and health plans in each of the federally supported 

7 health delivery program described in subsection (a). Such 

8 requirements shall provide that the entities described in 

9 the preceding sentence shall report to the appropriate Sec10 retary on the measures developed under subsection (a). 

11 ‘‘(c) FULL IMPLEMENTATION.—The Secretaries, 

12 working collaboratively, shall implement all sets of quality 

13 measures and reporting systems developed under sub14 sections (a) and (b) by not later than the date that is 1 

15 year after the date on which the measures are developed 

16 under subsection (a)(2). 

17 ‘‘(d) REPORTS.—Not later than 1 year after the date 

18 of enactment of this title, and annually thereafter, the Sec19 retary shall— 

20 ‘‘(1) submit to Congress a report that details 

21 the collaborative efforts carried out under subsection 

22 (a), the progress made on standardizing quality indi23 cators throughout the Federal Government, and the 

24 state of quality measurement for priority areas that 
111 

•S 16 IS 

1 links data to the report submitted under paragraph 

2 (2) for the year involved; and 

3 ‘‘(2) submit to Congress a report that details 

4 areas of clinical care requiring further research nec5 essary to establish effective clinical treatments that 

6 will serve as a basis for additional quality indicators. 

7 ‘‘(e) COMPARATIVE QUALITY REPORTS.—Beginning 

8 not later than 3 years after the date of enactment of this 

9 title, in order to make comparative quality information 

10 available to health care consumers, including members of 

11 health disparity populations, health professionals, public 

12 health officials, researchers, and other appropriate individ13 uals and entities, the Secretaries shall provide for the pool14 ing, analysis, and dissemination of quality measures col15 lected under this section. Nothing in this section shall be 

16 construed as modifying the privacy standards under the 

17 Health Insurance Portability and Accountability Act of 

18 1996 (Public Law 104–191). 

19 ‘‘(f) ONGOING EVALUATION OF USE.—The Secretary 

20 of Health and Human Services shall ensure the ongoing 

21 evaluation of the use of the health care quality measures 

22 established under this section. 

23 ‘‘(g) EVALUATION AND REGULATIONS.— 

24 ‘‘(1) EVALUATION.— 
112 

•S 16 IS 

1 ‘‘(A) IN GENERAL.—The Secretary shall, 

2 directly or indirectly through a contract with 

3 another entity, conduct an evaluation of the col4 laborative efforts of the Secretaries to establish 

5 uniform health care quality measures and re6 porting requirements for federally supported 

7 health care delivery programs as required under 

8 this section. 

9 ‘‘(B) REPORT.—Not later than 1 year 

10 after the date of enactment of this title, the 

11 Secretary of Health and Human Services shall 

12 submit a report to the appropriate committees 

13 of Congress concerning the results of the eval14 uation under subparagraph (A). 

15 ‘‘(2) REGULATIONS.— 

16 ‘‘(A) PROPOSED.—Not later than 6 

17 months after the date on which the report is 

18 submitted under paragraph (1)(B), the Sec19 retary shall publish proposed regulations re20 garding the application of the uniform health 

21 care quality measures and reporting require22 ments described in this section to federally sup23 ported health delivery programs. 

24 ‘‘(B) FINAL REGULATIONS.—Not later 

25 than 1 year after the date on which the report 
113 

•S 16 IS 

1 is submitted under paragraph (1)(B), the Sec2 retary shall publish final regulations regarding 

3 the uniform health care quality measures and 

4 reporting requirements described in this section. 

5 ‘‘(h) DEFINITIONS.—In this section, the term ‘feder6 ally supported health delivery program’ means a program 

7 that is funded by the Federal Government under which 

8 health care items or services are delivered directly to pa9 tients.’’. 

10 TITLE III—MAKING HEALTH 

11 CARE MORE AFFORDABLE 

12 FOR CHILDREN AND PREG13 NANT WOMEN 

14 Subtitle A—Covering all Children 

15 SEC. 300. FINDINGS. 

16 Congress makes the following findings: 

17 (1) NEED FOR UNIVERSAL COVERAGE.— 

18 (A) Currently, there are 9,000,000 chil19 dren under the age of 19 that are uninsured. 

20 One out of every 8 children are uninsured while 

21 1 in 5 Hispanic children and 1 in 7 African 

22 American children are uninsured. Three-quar23 ters, approximately 6,800,000, of these children 

24 are eligible but not enrolled in the medicaid 

25 program or the State children’s health insur-
114 

•S 16 IS 

1 ance program (SCHIP). Long-range studies 

2 found that 1 in 3 children went without health 

3 insurance for all or part of 2002 and 2003. 

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

5 likely as children in higher income families to 

6 be uninsured. It is estimated that 65 percent of 

7 uninsured children have at least 1 parent work8 ing full time over the course of the year. 

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

10 legal immigrant children in families with in11 come that is less than 200 percent of the Fed12 eral poverty line are uninsured. In States with13 out programs to cover immigrant children, 57 

14 percent of non-citizen children are uninsured. 

15 (D) Children in the Southern and Western 

16 parts of the United States were nearly 1.7 

17 times more likely to be uninsured than children 

18 in the Northeast. In the Northeast, 9.4 percent 

19 of children are uninsured while in the Midwest, 

20 8.3 percent are uninsured. The South’s rate of 

21 uninsured children is 14.3 percent while the 

22 West has an uninsured rate of 13 percent. 

23 (E) Children’s health care needs are ne24 glected in the United States. One-quarter of 

25 young children in the United States are not 
115 

•S 16 IS 

1 fully up to date on their basic immunizations. 

2 One-third of children with chronic asthma do 

3 not get a prescription for the necessary medica4 tions to manage the disease. 

5 (F) According to the Centers for Disease 

Control and Prevention, nearly 1 6 ⁄2 of all unin7 sured children have not had a well-child visit in 

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

9 problems accessing needed care, and 1 out of 

10 every 4 children do not receive annual dental 

11 exams. One in 6 uninsured children had a de12 layed or unmet medical need in the past year. 

13 Minority children are less likely to receive prov14 en treatments such as prescription medications 

15 to treat chronic disease. 

16 (G) There are 7,600,000 young adults be17 tween the ages of 19 and 20. In the United 

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

19 individuals, of this group are uninsured. 

20 (H) Chronic illness and disability among 

21 children are on the rise. Children most at risk 

22 for chronic illness and disability are children 

23 who are most likely to be poor and uninsured. 

24 (2) ROLE OF THE MEDICAID AND STATE CHIL25 DREN’S HEALTH INSURANCE PROGRAMS.— 
116 

•S 16 IS 

1 (A) The medicaid program and SCHIP 

2 serve as a crucial health safety net for 

3 30,000,000 children. During the recent eco4 nomic downturn and the highest number of un5 insured individuals ever recorded in the United 

6 States, the medicaid program and SCHIP off7 set losses in employer-sponsored coverage. 

8 While the number of children living in low-in9 come families increased by 2,000,000 between 

10 2000 and 2003, the number of uninsured chil11 dren fell due to the medicaid program and 

12 SCHIP. 

13 (B) In 2003, 25,000,000 children were en14 rolled in the medicaid program, accounting for 

1 15 ⁄2 of all enrollees and only 19 percent of total 

16 program costs. 

17 (C) The medicaid program and SCHIP do 

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

19 coverage have reduced the percentage of low-income uninsured by a 1 20 ⁄3 from 1997 to 2003. In 

21 addition, a recent study found that publicly-in22 sured children are more likely to obtain medical 

23 care, preventive care and dental care than simi24 lar low-income privately-insured children. 
117 

•S 16 IS 

1 (D) Publicly funded programs such as the 

2 medicaid program and SCHIP actually improve 

3 children’s health. Children who are currently in4 sured by public programs are in better health 

5 than they were a year ago. Expansion of cov6 erage for children and pregnant women under 

7 the medicaid program and SCHIP reduces 

8 rates of avoidable hospitalizations by 22 per9 cent. 

10 (E) Studies have found that children en11 rolled in public insurance programs experienced 

12 a 68 percent improvement in measures of 

13 school performance. 

14 (F) Despite the success of expansions in 

15 general under the medicaid program and 

16 SCHIP, due to current budget constraints, 

17 many States have stopped doing aggressive out18 reach and have raised premiums and cost-shar19 ing requirements on families under these pro20 grams. In addition, 8 States stopped enrollment 

21 in SCHIP for a period of time between April 

22 2003 and July 2004. As a result, SCHIP en23 rollment fell by 200,000 children for the first 

24 time in the program’s history. 
118 

•S 16 IS 

1 (G) It is estimated that nearly 50 percent 

2 of children covered through SCHIP do not re3 main in the program due to reenrollment bar4 riers. A recent study found that between 10 and 

5 40 percent of these children are ‘‘lost’’ in the 

6 system. Difficult renewal policies and reenroll7 ment barriers make seamless coverage in 

8 SCHIP unattainable. Studies indicate that as 

9 many as 67 percent of children who were eligi10 ble but not enrolled for SCHIP had applied for 

11 coverage but were denied due to procedural 

12 issues. 

13 (H) While the medicaid program and 

14 SCHIP expansions to date have done much to 

15 offset what otherwise would have been a signifi16 cant loss of coverage among children because of 

17 declining access to employer coverage, the 

18 shortcomings of previous expansions, such as 

19 the failure to enroll all eligible children and 

20 caps on enrollment in SCHIP because of under21 funding, also are clear. 
119 

•S 16 IS 

1 CHAPTER 1—EXPANDED COVERAGE OF 

2 CHILDREN UNDER MEDICAID AND SCHIP 

3 SEC. 301. STATE OPTION TO RECEIVE 100 PERCENT FMAP 

4 FOR MEDICAL ASSISTANCE FOR CHILDREN 

5 IN POVERTY IN EXCHANGE FOR EXPANDED 

6 COVERAGE OF CHILDREN IN WORKING POOR 

7 FAMILIES UNDER TITLE XXI. 

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

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

10 section 1936 as section 1937, and by inserting after sec11 tion 1935 the following: 

12 ‘‘STATE OPTION FOR INCREASED FMAP FOR MEDICAL AS13 SISTANCE FOR CHILDREN IN POVERTY IN EXCHANGE

14 FOR EXPANDED COVERAGE OF CHILDREN IN WORK15 ING POOR FAMILIES UNDER TITLE XXI

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

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

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

19 through an amendment to each of its State plans 

20 under this title and title XXI (or to a waiver of ei21 ther such plan), agrees to satisfy the conditions de22 scribed in subsections (b), (c), and (d) the Federal 

23 medical assistance percentage shall be 100 percent 

24 with respect to the total amount expended by the 

25 State for providing medical assistance under this 

26 title for each fiscal year quarter beginning on or 
120 

•S 16 IS 

1 after the date described in subsection (e) for chil2 dren whose family income does not exceed 100 per3 cent of the poverty line. 

4 ‘‘(2) LIMITATION ON SCOPE OF APPLICATION

5 OF INCREASE.—The increase in the Federal medical 

6 assistance percentage for a State under this section 

7 shall apply only with respect to the total amount ex8 pended for providing medical assistance under this 

9 title for a fiscal year quarter for children described 

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

11 to— 

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

13 title, including disproportionate share hospital 

14 payments described in section 1923; 

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

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

17 or title XXI that are based on the enhanced 

18 FMAP described in section 2105(b). 

19 ‘‘(b) ELIGIBILITY EXPANSIONS.—The condition de20 scribed in this subsection is that the State agrees to do 

21 the following: 

22 ‘‘(1) COVERAGE UNDER MEDICAID OR SCHIP

23 FOR CHILDREN IN FAMILIES WHOSE INCOME DOES

24 NOT EXCEED 300 PERCENT OF THE POVERTY

25 LINE.— 
121 

•S 16 IS 

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

2 provide medical assistance under this title or 

3 child health assistance under title XXI to chil4 dren whose family income exceeds the medicaid 

5 applicable income level (as defined in section 

6 2110(b)(4) but by substituting ‘January 1, 

7 2005’ for ‘March 31, 1997’), but does not ex8 ceed 300 percent of the poverty line. 

9 ‘‘(B) STATE OPTION TO EXPAND COV10 ERAGE THROUGH SUBSIDIZED PURCHASE OF

11 FAMILY COVERAGE.—A State may elect to carry 

12 out subparagraph (A) through the provision of 

13 assistance for the purchase of dependent cov14 erage under a group health plan or health in15 surance coverage if— 

16 ‘‘(i) the dependent coverage is con17 sistent with the benefit standards under 

18 this title or title XXI, as approved by the 

19 Secretary; and 

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

21 coverage under this title or title XXI. 

22 ‘‘(C) DEEMED SATISFACTION FOR CERTAIN

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

24 provides medical assistance under this title or 

25 child health assistance under title XXI to chil-
122 

•S 16 IS 

1 dren whose family income is 300 percent of the 

2 poverty line shall be deemed to satisfy this 

3 paragraph. 

4 ‘‘(2) COVERAGE FOR CHILDREN UNDER AGE

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

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

7 not attained 21 years of age. 

8 ‘‘(3) OPPORTUNITY FOR HIGHER INCOME CHIL9 DREN TO PURCHASE SCHIP COVERAGE.—The State 

10 agrees to permit any child whose family income ex11 ceeds 300 percent of the poverty line to purchase 

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

13 full cost of providing such coverage, as determined 

14 by the State. 

15 ‘‘(4) COVERAGE FOR LEGAL IMMIGRANT CHIL16 DREN.—The State agrees to— 

17 ‘‘(A) provide medical assistance under this 

18 title and child health assistance under title XXI 

19 for alien children who are lawfully residing in 

20 the United States (including battered aliens de21 scribed in section 431(c) of the Personal Re22 sponsibility and Work Opportunity Reconcili23 ation Act of 1996) and who are otherwise eligi24 ble for such assistance in accordance with sec25 tion 1903(v)(4) and 2107(e)(1)(E); and 
123 

•S 16 IS 

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

2 deter applications by such aliens, including 

3 through the application of the removal of the 

4 barriers described in subsection (c). 

5 ‘‘(c) REMOVAL OF ENROLLMENT AND ACCESS BAR6 RIERS.—The condition described in this subsection is that 

7 the State agrees to do the following: 

8 ‘‘(1) PRESUMPTIVE ELIGIBILITY FOR CHIL9 DREN.—The State agrees to— 

10 ‘‘(A) provide presumptive eligibility for 

11 children under this title and title XXI in ac12 cordance with section 1920A; 

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

14 provided to an uncovered child (as defined in 

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

16 for medical assistance under this title as child 

17 health assistance for purposes of paying a pro18 vider of such items or services, so long as such 

19 items or services would be considered child 

20 health assistance for a targeted low-income 

21 child under title XXI. 

22 ‘‘(2) ADOPTION OF 12-MONTH CONTINUOUS EN23 ROLLMENT.—The State agrees to provide that eligi24 bility for assistance under this title and title XXI 
124 

•S 16 IS 

1 shall not be regularly redetermined more often than 

2 once every year for children. 

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

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

5 a child applying for medical assistance under this 

6 title or child health assistance under title XXI to de7 clare and certify by signature under penalty of per8 jury family income for purposes of collecting finan9 cial eligibility information. 

10 ‘‘(4) ADOPTION OF ACCEPTANCE OF ELIGI11 BILITY DETERMINATIONS FOR OTHER ASSISTANCE

12 PROGRAMS.—The State agrees to accept determina13 tions (made within a reasonable period, as found by 

14 the State, before its use for this purpose) of an indi15 vidual’s family or household income made by a Fed16 eral or State agency (or a public or private entity 

17 making such determination on behalf of such agen18 cy), including the agencies administering the Food 

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

20 School Lunch Act, and the Child Nutrition Act of 

21 1966, notwithstanding any differences in budget 

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

23 only if— 
125 

•S 16 IS 

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

2 responsibilities affected or potentially affected 

3 by such determinations; and 

4 ‘‘(B) any information furnished by such 

5 agency pursuant to this subparagraph is used 

6 solely for purposes of determining eligibility for 

7 medical assistance under this title or for child 

8 health assistance under title XXI. 

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

10 not (or demonstrates that it does not) apply any as11 sets or resources test for eligibility under this title 

12 or title XXI with respect to children. 

13 ‘‘(6) ELIGIBILITY DETERMINATIONS AND RE14 DETERMINATIONS.— 

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

16 purposes of initial eligibility determinations and 

17 redeterminations of children under this title and 

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

19 and to permit applications and renewals by 

20 mail, telephone, and the Internet. 

21 ‘‘(B) NONDUPLICATION OF INFORMA22 TION.— 

23 ‘‘(i) IN GENERAL.—For purposes of 

24 redeterminations of eligibility for currently 

25 or previously enrolled children under this 
126 

•S 16 IS 

1 title and title XXI, the State agrees to use 

2 all information in its possession (including 

3 information available to the State under 

4 other Federal or State programs) to deter5 mine eligibility or redetermine continued 

6 eligibility before seeking similar informa7 tion from parents. 

8 ‘‘(ii) RULE OF CONSTRUCTION.— 

9 Nothing in clause (i) shall be construed as 

10 limiting any obligation of a State to pro11 vide notice and a fair hearing before deny12 ing, terminating, or reducing a child’s cov13 erage based on such information in the 

14 possession of the State. 

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

16 SCHIP.—The State agrees to not impose any numer17 ical limitation, waiting list, waiting period, or similar 

18 limitation on the eligibility of children for child 

19 health assistance under title XXI or to establish or 

20 enforce other barriers to the enrollment of eligible 

21 children based on the date of their application for 

22 coverage. 

23 ‘‘(8) ADEQUATE PROVIDER PAYMENT RATES.— 

24 The State agrees to— 
127 

•S 16 IS 

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

2 health care providers under this title that are 

3 no less than the average of payment rates for 

4 similar services for such providers provided 

5 under the benchmark benefit packages de6 scribed in section 2103(b); 

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

8 are sufficient to ensure that children enrolled 

9 under this title or title XXI have adequate ac10 cess to comprehensive care, in accordance with 

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

12 and 

13 ‘‘(C) include provisions in its contracts 

14 with providers under this title guaranteeing 

15 compliance with these requirements. 

16 ‘‘(d) MAINTENANCE OF MEDICAID ELIGIBILITY LEV17 ELS FOR CHILDREN.— 

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

19 this subsection is that the State agrees to maintain 

20 eligibility income, resources, and methodologies ap21 plied under this title (including under a waiver of 

22 such title or under section 1115) with respect to 

23 children that are no more restrictive than the eligi24 bility income, resources, and methodologies applied 
128 

•S 16 IS 

1 with respect to children under this title (including 

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

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

4 this section shall be construed as implying that a 

5 State does not have to comply with the minimum in6 come levels required for children under section 

7 1902(l)(2). 

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

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

10 a plan amendment that satisfies the requirements of sub11 sections (b), (c), and (d) is approved by the Secretary. 

12 ‘‘(f) DEFINITION OF POVERTY LINE.—In this sec13 tion, the term ‘poverty line’ has the meaning given that 

14 term in section 2110(c)(5).’’. 

15 (b) CONFORMING AMENDMENTS.— 

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

17 Social Security Act (42 U.S.C. 1396d(b)) is amend18 ed by inserting before the period the following: ‘‘, 

19 and with respect to amounts expended for medical 

20 assistance for children on or after the date described 

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

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

23 approved plan amendment under this title and title 

24 XXI’’. 
129 

•S 16 IS 

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

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

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

4 after ‘‘section 1611(b)(1),’’; and 

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

6 the following: 

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

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

11 SEC. 302. ELIMINATION OF CAP ON SCHIP FUNDING FOR 

12 STATES THAT EXPAND ELIGIBILITY FOR 

13 CHILDREN. 

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

16 end the following: 

17 ‘‘(h) GUARANTEED FUNDING FOR CHILD HEALTH

18 ASSISTANCE FOR COVERAGE EXPANSION STATES.— 

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

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

22 XIX, any payment cap that would otherwise apply to 

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

25 the State with respect to a fiscal year shall not apply 
130 

•S 16 IS 

1 with respect to amounts expended by the State on 

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

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

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

6 purpose of paying a State described in paragraph 

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

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

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

11 (b) CONFORMING AMENDMENTS.—Section 2104 of 

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

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

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

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

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

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

19 CHAPTER 2—STATE OPTIONS FOR INCRE20 MENTAL CHILD COVERAGE EXPAN21 SIONS 

22 SEC. 311. STATE OPTION TO ENROLL LOW-INCOME CHIL23 DREN OF STATE EMPLOYEES IN SCHIP. 

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

25 U.S.C. 1397jj(b)(2)) is amended— 
131 

•S 16 IS 

1 (1) by redesignating subparagraphs (A) and 

2 (B) as clauses (i) and (ii), respectively and realign3 ing the left margins of such clauses appropriately; 

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

5 following: 

6 ‘‘(A) IN GENERAL.—Such term’’; and 

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

8 ‘‘(B) STATE OPTION TO ENROLL LOW-IN9 COME CHILDREN OF STATE EMPLOYEES.—At 

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

11 not apply to any low-income child who would 

12 otherwise be eligible for child health assistance 

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

14 SEC. 312. STATE OPTION FOR PASSIVE RENEWAL OF ELIGI15 BILITY FOR CHILDREN UNDER MEDICAID 

16 AND SCHIP. 

17 (a) IN GENERAL.—Section 1902(l) of the Social Se18 curity Act (42 U.S.C. 1396a(l)) is amended by adding at 

19 the end the following: 

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

21 a State may provide that an individual who has not at22 tained 21 years of age who has been determined eligible 

23 for medical assistance under this title shall remain eligible 

24 for medical assistance until such time as the State has 
132 

•S 16 IS 

1 information demonstrating that the individual is no longer 

2 so eligible.’’. 

3 (b) APPLICATION UNDER TITLE XXI.—Section 

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

5 1397gg(e)) is amended— 

6 (1) by redesignating subparagraphs (B) 

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

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

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

13 CHAPTER 3—TAX INCENTIVES FOR 

14 HEALTH INSURANCE COVERAGE OF 

15 CHILDREN 

16 SEC. 321. REFUNDABLE CREDIT FOR HEALTH INSURANCE 

17 COVERAGE OF CHILDREN. 

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

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

22 section 35 the following new section: 

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

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

25 there shall be allowed as a credit against the tax imposed 
133 

•S 16 IS 

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

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

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

5 of the adjusted gross income of such taxpayer for such 

6 taxable year. 

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

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

11 taxable year of the taxpayer begins and with respect to 

12 whom a deduction under section 151 is allowable to the 

13 taxpayer. 

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

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

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

19 the Social Security Act, which constitutes medical 

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

21 to— 

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

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

24 as relates to qualified long-term care insurance 

25 contracts. 
134 

•S 16 IS 

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

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

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

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

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

9 223 to the taxpayer for a payment for the taxable 

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

12 applied by treating such payment as a payment for 

13 qualified health insurance for such individual. 

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

16 that portion of the payments otherwise allowable as 

17 a deduction under section 220 or 223 for the taxable 

18 year which is equal to the amount of credit allowed 

19 for such taxable year by reason of this subsection. 

20 ‘‘(e) SPECIAL RULES.— 

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

22 The Secretary shall provide rules for the allocation 

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

25 under such insurance. 
135 

•S 16 IS 

1 ‘‘(2) COORDINATION WITH DEDUCTION FOR

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

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

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

8 ‘‘(3) COORDINATION WITH MEDICAL EXPENSE

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

11 paragraph) be taken into account by the taxpayer 

12 under section 213 or 224 for the taxable year shall 

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

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

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

20 such individual’s taxable year begins. 

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

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

23 under section 35 is allowed and no credit shall be al24 lowed under 35 if a credit is allowed under this sec25 tion. 
136 

•S 16 IS 

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

2 section shall not apply to a taxpayer for any taxable 

3 year if such taxpayer elects to have this section not 

4 apply for such taxable year.’’. 

5 (b) INFORMATION REPORTING.— 

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

7 subchapter A of chapter 61 of the Internal Revenue 

8 Code of 1986 (relating to information concerning 

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

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

13 QUALIFIED HEALTH INSURANCE. 

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

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

19 under creditable health insurance, shall make the return 

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

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

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

24 is described in this subsection if such return— 
137 

•S 16 IS 

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

3 ‘‘(2) contains— 

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

5 individual from whom payments described in 

6 subsection (a) were received, 

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

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

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

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

16 means qualified health insurance (as defined in section 

17 36(c)). 

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

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

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

23 such return a written statement showing— 
138 

•S 16 IS 

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

3 of the information contact for such person, 

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

7 whom the statement is required to be furnished, and 

8 ‘‘(3) the information required under subsection 

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

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

12 year following the calendar year for which the return 

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

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

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

16 provided in regulations prescribed by the Secretary, in the 

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

18 another person, only the person first receiving such 

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

21 (2) ASSESSABLE PENALTIES.— 

22 (A) Subparagraph (B) of section 

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

25 through (xviii) as clauses (xiv) through (xix), 
139 

•S 16 IS 

1 respectively, and by inserting after clause (xii) 

2 the following new clause: 

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

5 health insurance),’’. 

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

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

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

11 the end the following new subparagraph: 

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

14 insurance).’’. 

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

17 chapter 61 of such Code is amended by inserting 

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

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

insurance.’’. 

20 (c) CONFORMING AMENDMENTS.— 

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

22 31, United States Code, is amended by inserting be23 fore the period ‘‘, or from section 36 of such Code’’. 
140 

•S 16 IS 

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

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

4 item and inserting the following new items: 

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

‘‘Sec. 37. Overpayments of tax.’’. 

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

6 this section shall apply to taxable years beginning after 

7 December 31, 2004. 

8 SEC. 322. FORFEITURE OF PERSONAL EXEMPTION FOR ANY 

9 CHILD NOT COVERED BY HEALTH INSUR10 ANCE. 

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

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

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

15 ‘‘(5) REDUCTION OF EXEMPTION AMOUNT FOR

16 ANY CHILD NOT COVERED BY HEALTH INSUR17 ANCE.— 

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

19 provided in this paragraph, the exemption 

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

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

24 of such taxable year during which such depend-
141 

•S 16 IS 

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

3 ‘‘(B) FULL REDUCTION IF NO PROOF OF

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

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

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

10 shall be deemed to be 100 percent. 

11 ‘‘(C) NONAPPLICATION OF PARAGRAPH TO

12 TAXPAYERS IN LOWEST TAX BRACKET.—This 

13 paragraph shall not apply to any taxpayer 

14 whose taxable income for the taxable year does 

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

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

18 this section shall apply to taxable years beginning after 

19 December 31, 2004. 

20 CHAPTER 4—MISCELLANEOUS 

21 SEC. 331. REQUIREMENT FOR GROUP MARKET HEALTH IN22 SURERS TO OFFER DEPENDENT COVERAGE 

23 OPTION FOR WORKERS WITH CHILDREN. 

24 (a) ERISA.— 
142 

•S 16 IS 

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

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

4 amended by adding at the end the following: 

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

6 DEPENDENT COVERAGE FOR CHILDREN. 

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

8 health plan, and a health insurance issuer providing health 

9 insurance coverage in connection with a group health plan, 

10 shall offer an individual who is enrolled in such coverage 

11 the option to purchase dependent coverage for a child of 

12 the individual. 

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

14 employer shall not be required to contribute to the cost 

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

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

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

19 years of age.’’. 

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

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

‘‘Sec. 714. Requirement to offer option to purchase dependent coverage for children.’’. 
143 

•S 16 IS 

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

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

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

4 end the following: 

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

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

9 health plan, and a health insurance issuer providing health 

10 insurance coverage in connection with a group health plan, 

11 shall offer an individual who is enrolled in such coverage 

12 the option to purchase dependent coverage for a child of 

13 the individual. 

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

15 employer shall not be required to contribute to the cost 

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

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

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

20 years of age.’’. 

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

22 this section shall apply with respect to plan years begin23 ning on or after January 1, 2006. 
144 

•S 16 IS 

1 SEC. 332. EFFECTIVE DATE. 

2 Unless otherwise provided, the amendments made by 

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

4 apply to child health assistance and medical assistance 

5 provided on or after that date without regard to whether 

6 or not final regulations to carry out such amendments 

7 have been promulgated by such date. 

8 Subtitle B—Covering Pregnant 

9 Women 

10 SEC. 351. STATE OPTION TO EXPAND OR ADD COVERAGE 

11 OF PREGNANT WOMEN UNDER THE MED12 ICAID PROGRAM AND STATE CHILDREN’S 

13 HEALTH INSURANCE PROGRAM. 

14 (a) MEDICAID.— 

15 (1) AUTHORITY TO EXPAND COVERAGE.—Sec16 tion 1902(l)(2)(A)(i) of the Social Security Act (42 

17 U.S.C. 1396a(l)(2)(A)(i)) is amended by inserting 

18 ‘‘(or such higher percentage as the State may elect 

19 for purposes of expenditures for medical assistance 

20 for pregnant women described in section 

21 1905(u)(4)(A))’’ after ‘‘185 percent’’. 

22 (2) ENHANCED MATCHING FUNDS AVAILABLE

23 IF CERTAIN CONDITIONS MET.—Section 1905 of the 

24 Social Security Act (42 U.S.C. 1396d), as amended 

25 by section 311(b)(2), is amended— 
145 

•S 16 IS 

1 (A) in the fourth sentence of subsection 

2 (b), by striking ‘‘or (u)(4)’’ and inserting ‘‘, 

3 (u)(4), or (u)(5)’’; and 

4 (B) in subsection (u)— 

5 (i) by redesignating paragraph (5) as 

6 paragraph (6); and 

7 (ii) by inserting after paragraph (4) 

8 the following new paragraph: 

9 ‘‘(5) For purposes of the fourth sentence of sub10 section (b) and section 2105(a), the expenditures de11 scribed in this paragraph are the following: 

12 ‘‘(A) CERTAIN PREGNANT WOMEN.—If the con13 ditions described in subparagraph (B) are met, ex14 penditures for medical assistance for pregnant 

15 women described in subsection (n) or under section 

16 1902(l)(1)(A) in a family the income of which ex17 ceeds 185 percent of the poverty line, but does not 

18 exceed the income eligibility level established under 

19 title XXI for a targeted low-income child. 

20 ‘‘(B) CONDITIONS.—The conditions described 

21 in this subparagraph are the following: 

22 ‘‘(i) The State plans under this title and 

23 title XXI do not provide coverage for pregnant 

24 women described in subparagraph (A) with 
146 

•S 16 IS 

1 higher family income without covering such 

2 pregnant women with a lower family income. 

3 ‘‘(ii) The State does not apply an effective 

4 income level for pregnant women that is lower 

5 than the effective income level (expressed as a 

6 percent of the poverty line and considering ap7 plicable income disregards) that has been speci8 fied under the State plan under subsection 

9 (a)(10)(A)(i)(III) or (l)(2)(A) of section 1902, 

10 as of January 1, 2005, to be eligible for medical 

11 assistance as a pregnant woman. 

12 ‘‘(C) DEFINITION OF POVERTY LINE.—In this 

13 subsection, the term ‘poverty line’ has the meaning 

14 given such term in section 2110(c)(5).’’. 

15 (3) PAYMENT FROM TITLE XXI ALLOTMENT

16 FOR MEDICAID EXPANSION COSTS; ELIMINATION OF

17 COUNTING MEDICAID CHILD PRESUMPTIVE ELIGI18 BILITY COSTS AGAINST TITLE XXI ALLOTMENT.— 

19 Section 2105(a)(1) of the Social Security Act (42 

20 U.S.C. 1397ee(a)(1)) is amended— 

21 (A) in the matter preceding subparagraph 

22 (A), by striking ‘‘(or, in the case of expendi23 tures described in subparagraph (B), the Fed24 eral medical assistance percentage (as defined 

25 in the first sentence of section 1905(b)))’’; and 
147 

•S 16 IS 

1 (B) by striking subparagraph (B) and in2 serting the following new subparagraph: 

3 ‘‘(B) for the provision of medical assist4 ance that is attributable to expenditures de5 scribed in section 1905(u)(5)(A);’’. 

6 (b) SCHIP.— 

7 (1) COVERAGE.—Title XXI of the Social Secu8 rity Act (42 U.S.C. 1397aa et seq.) is amended by 

9 adding at the end the following new section: 

10 ‘‘SEC. 2111. OPTIONAL COVERAGE OF TARGETED LOW-IN11 COME PREGNANT WOMEN. 

12 ‘‘(a) OPTIONAL COVERAGE.—Notwithstanding any 

13 other provision of this title, a State may provide for cov14 erage, through an amendment to its State child health 

15 plan under section 2102, of pregnancy-related assistance 

16 for targeted low-income pregnant women in accordance 

17 with this section, but only if— 

18 ‘‘(1) the State has established an income eligi19 bility level for pregnant women under subsection 

20 (a)(10)(A)(i)(III) or (l)(2)(A) of section 1902 that is 

21 at least 185 percent of the income official poverty 

22 line; and 

23 ‘‘(2) the State meets the conditions described in 

24 section 1905(u)(5)(B). 

25 ‘‘(b) DEFINITIONS.—For purposes of this title: 
148 

•S 16 IS 

1 ‘‘(1) PREGNANCY-RELATED ASSISTANCE.—The 

2 term ‘pregnancy-related assistance’ has the meaning 

3 given the term child health assistance in section 

4 2110(a) as if any reference to targeted low-income 

5 children were a reference to targeted low-income 

6 pregnant women, except that the assistance shall be 

7 limited to services related to pregnancy (which in8 clude prenatal, delivery, and postpartum services 

9 and services described in section 1905(a)(4)(C)) and 

10 to other conditions that may complicate pregnancy. 

11 ‘‘(2) TARGETED LOW-INCOME PREGNANT

12 WOMAN.—The term ‘targeted low-income pregnant 

13 woman’ means a woman— 

14 ‘‘(A) during pregnancy and through the 

15 end of the month in which the 60-day period 

16 (beginning on the last day of her pregnancy) 

17 ends; 

18 ‘‘(B) whose family income exceeds the ef19 fective income level (expressed as a percent of 

20 the poverty line and considering applicable in21 come disregards) that has been specified under 

22 subsection (a)(10)(A)(i)(III) or (l)(2)(A) of sec23 tion 1902, as of January 1, 2005, to be eligible 

24 for medical assistance as a pregnant woman 

25 under title XIX but does not exceed the income 
149 

•S 16 IS 

1 eligibility level established under the State child 

2 health plan under this title for a targeted low3 income child; and 

4 ‘‘(C) who satisfies the requirements of 

5 paragraphs (1)(A), (1)(C), (2), and (3) of sec6 tion 2110(b). 

7 ‘‘(c) REFERENCES TO TERMS AND SPECIAL

8 RULES.—In the case of, and with respect to, a State pro9 viding for coverage of pregnancy-related assistance to tar10 geted low-income pregnant women under subsection (a), 

11 the following special rules apply: 

12 ‘‘(1) Any reference in this title (other than in 

13 subsection (b)) to a targeted low-income child is 

14 deemed to include a reference to a targeted low-in15 come pregnant woman. 

16 ‘‘(2) Any such reference to child health assist17 ance with respect to such women is deemed a ref18 erence to pregnancy-related assistance. 

19 ‘‘(3) Any such reference to a child is deemed a 

20 reference to a woman during pregnancy and the pe21 riod described in subsection (b)(2)(A). 

22 ‘‘(4) In applying section 2102(b)(3)(B), any 

23 reference to children found through screening to be 

24 eligible for medical assistance under the State med-
150 

•S 16 IS 

1 icaid plan under title XIX is deemed a reference to 

2 pregnant women. 

3 ‘‘(5) There shall be no exclusion of benefits for 

4 services described in subsection (b)(1) based on any 

5 preexisting condition and no waiting period (includ6 ing any waiting period imposed to carry out section 

7 2102(b)(3)(C)) shall apply. 

8 ‘‘(6) Subsection (a) of section 2103 (relating to 

9 required scope of health insurance coverage) shall 

10 not apply insofar as a State limits coverage to serv11 ices described in subsection (b)(1) and the reference 

12 to such section in section 2105(a)(1)(C) is deemed 

13 not to require, in such case, compliance with the re14 quirements of section 2103(a). 

15 ‘‘(7) In applying section 2103(e)(3)(B) in the 

16 case of a pregnant woman provided coverage under 

17 this section, the limitation on total annual aggregate 

18 cost-sharing shall be applied to such pregnant 

19 woman. 

20 ‘‘(8) The reference in section 2107(e)(1)(D) to 

21 section 1920A (relating to presumptive eligibility for 

22 children) is deemed a reference to section 1920 (re23 lating to presumptive eligibility for pregnant 

24 women). 
151 

•S 16 IS 

1 ‘‘(d) AUTOMATIC ENROLLMENT FOR CHILDREN

2 BORN TO WOMEN RECEIVING PREGNANCY-RELATED AS3 SISTANCE.—If a child is born to a targeted low-income 

4 pregnant woman who was receiving pregnancy-related as5 sistance under this section on the date of the child’s birth, 

6 the child shall be deemed to have applied for child health 

7 assistance under the State child health plan and to have 

8 been found eligible for such assistance under such plan 

9 or to have applied for medical assistance under title XIX 

10 and to have been found eligible for such assistance under 

11 such title, as appropriate, on the date of such birth and 

12 to remain eligible for such assistance until the child at13 tains 1 year of age. During the period in which a child 

14 is deemed under the preceding sentence to be eligible for 

15 child health or medical assistance, the child health or med16 ical assistance eligibility identification number of the 

17 mother shall also serve as the identification number of the 

18 child, and all claims shall be submitted and paid under 

19 such number (unless the State issues a separate identifica20 tion number for the child before such period expires).’’. 

21 (2) ADDITIONAL ALLOTMENTS FOR PROVIDING

22 COVERAGE OF PREGNANT WOMEN.— 

23 (A) IN GENERAL.—Section 2104 of the So24 cial Security Act (42 U.S.C. 1397dd) is amend-
152 

•S 16 IS 

1 ed by inserting after subsection (c) the fol2 lowing new subsection: 

3 ‘‘(d) ADDITIONAL ALLOTMENTS FOR PROVIDING

4 COVERAGE OF PREGNANT WOMEN.— 

5 ‘‘(1) APPROPRIATION; TOTAL ALLOTMENT.— 

6 For the purpose of providing additional allotments 

7 to States under this title, there is appropriated, out 

8 of any money in the Treasury not otherwise appro9 priated, for each of fiscal years 2006 through 2009, 

10 $200,000,000. 

11 ‘‘(2) STATE AND TERRITORIAL ALLOTMENTS.— 

12 In addition to the allotments provided under sub13 sections (b) and (c), subject to paragraphs (3) and 

14 (4), of the amount available for the additional allot15 ments under paragraph (1) for a fiscal year, the 

16 Secretary shall allot to each State with a State child 

17 health plan approved under this title— 

18 ‘‘(A) in the case of such a State other than 

19 a commonwealth or territory described in sub20 paragraph (B), the same proportion as the pro21 portion of the State’s allotment under sub22 section (b) (determined without regard to sub23 section (f)) to the total amount of the allot24 ments under subsection (b) for such States eli-
153 

•S 16 IS 

1 gible for an allotment under this paragraph for 

2 such fiscal year; and 

3 ‘‘(B) in the case of a commonwealth or ter4 ritory described in subsection (c)(3), the same 

5 proportion as the proportion of the common6 wealth’s or territory’s allotment under sub7 section (c) (determined without regard to sub8 section (f)) to the total amount of the allot9 ments under subsection (c) for commonwealths 

10 and territories eligible for an allotment under 

11 this paragraph for such fiscal year. 

12 ‘‘(3) USE OF ADDITIONAL ALLOTMENT.—Addi13 tional allotments provided under this subsection are 

14 not available for amounts expended before October 

15 1, 2005. Such amounts are available for amounts ex16 pended on or after such date for child health assist17 ance for targeted low-income children, as well as for 

18 pregnancy-related assistance for targeted low-income 

19 pregnant women. 

20 ‘‘(4) NO PAYMENTS UNLESS ELECTION TO EX21 PAND COVERAGE OF PREGNANT WOMEN.—No pay22 ments may be made to a State under this title from 

23 an allotment provided under this subsection unless 

24 the State provides pregnancy-related assistance for 

25 targeted low-income pregnant women under this 
154 

•S 16 IS 

1 title, or provides medical assistance for pregnant 

2 women under title XIX, whose family income ex3 ceeds the effective income level applicable under sub4 section (a)(10)(A)(i)(III) or (l)(2)(A) of section 

5 1902 to a family of the size involved as of January 

6 1, 2005.’’. 

7 (B) CONFORMING AMENDMENTS.—Section 

8 2104 of the Social Security Act (42 U.S.C. 

9 1397dd), as amended by section 302(b), is 

10 amended— 

11 (i) in subsection (a), in the matter 

12 preceding paragraph (1), by inserting 

13 ‘‘subsection (d) and’’ before ‘‘section 

14 2105(h)’’; 

15 (ii) in subsection (b)(1), by inserting 

16 ‘‘, subsection (d),’’ after ‘‘Subject to para17 graph (4)’’; and 

18 (iii) in subsection (c)(1), by inserting 

19 ‘‘subsection (d) and’’ after ‘‘section 

20 2105(h)’’. 

21 (3) ADDITIONAL CONFORMING AMENDMENTS.— 

22 (A) NO COST-SHARING FOR PREGNANCY23 RELATED BENEFITS.—Section 2103(e)(2) of 

24 the Social Security Act (42 U.S.C. 

25 1397cc(e)(2)) is amended— 
155 

•S 16 IS 

1 (i) in the heading, by inserting ‘‘OR

2 PREGNANCY-RELATED SERVICES’’ after 

3 ‘‘PREVENTIVE SERVICES’’; and 

4 (ii) by inserting before the period at 

5 the end the following: ‘‘or for pregnancy6 related services’’. 

7 (B) NO WAITING PERIOD.—Section 

8 2102(b)(1)(B) (42 U.S.C. 1397bb(b)(1)(B)) is 

9 amended— 

10 (i) in clause (i), by striking ‘‘, and’’ at 

11 the end and inserting a semicolon; 

12 (ii) in clause (ii), by striking the pe13 riod at the end and inserting ‘‘; and’’; and 

14 (iii) by adding at the end the fol15 lowing new clause: 

16 ‘‘(iii) may not apply a waiting period 

17 (including a waiting period to carry out 

18 paragraph (3)(C)) in the case of a targeted 

19 low-income pregnant woman.’’. 

20 (c) AUTHORITY FOR STATES THAT PROVIDE MED21 ICAID OR SCHIP COVERAGE FOR PREGNANT WOMEN

22 WITH INCOME ABOVE 185 PERCENT OF THE POVERTY

23 LINE TO USE PORTION OF SCHIP FUNDS FOR MEDICAID

24 EXPENDITURES.—Section 2105(g) of the Social Security 

25 Act (42 U.S.C. 1397ee(g)) is amended— 
156 

•S 16 IS 

1 (1) in the subsection heading, by inserting 

2 ‘‘AND CERTAIN PREGNANCY COVERAGE EXPANSION

3 STATES’’ after ‘‘QUALIFYING STATES’’; 

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

5 ‘‘(4) SPECIAL AUTHORITY FOR CERTAIN PREG6 NANCY COVERAGE EXPANSION STATES.— 

7 ‘‘(A) IN GENERAL.—In the case of a State 

8 that, as of the date of enactment of the Afford9 able Health Care Act of 2005, has an income 

10 eligibility standard under title XIX or this title 

11 (under section 1902(a)(10)(A) or under a state12 wide waiver in effect under section 1115 with 

13 respect to title XIX or this title) that is at least 

14 185 percent of the poverty line with respect to 

15 pregnant women, the State may elect to use not 

16 more than 20 percent of any allotment under 

17 section 2104 for any fiscal year (insofar as it 

18 is available under subsections (e) and (g) of 

19 such section) for payments under title XIX in 

20 accordance with subparagraph (B), instead of 

21 for expenditures under this title. 

22 ‘‘(B) PAYMENTS TO STATES.— 

23 ‘‘(i) IN GENERAL.—In the case of a 

24 State described in subparagraph (A) that 

25 has elected the option described in that 
157 

•S 16 IS 

1 subparagraph, subject to the availability of 

2 funds under such subparagraph and, if ap3 plicable, paragraph (1)(A), with respect to 

4 the State, the Secretary shall pay the State 

5 an amount each quarter equal to the addi6 tional amount that would have been paid 

7 to the State under title XIX with respect 

8 to expenditures described in clause (ii) if 

9 the enhanced FMAP (as determined under 

10 subsection (b)) had been substituted for 

11 the Federal medical assistance percentage 

12 (as defined in section 1905(b)). 

13 ‘‘(ii) EXPENDITURES DESCRIBED.— 

14 For purposes of this subparagraph, the ex15 penditures described in this clause are ex16 penditures, made after the date of the en17 actment of this paragraph and during the 

18 period in which funds are available to the 

19 State for use under subparagraph (A), for 

20 medical assistance under title XIX for 

21 pregnant women whose family income is at 

22 least 185 percent of the poverty line. 

23 ‘‘(iii) NO IMPACT ON DETERMINATION

24 OF BUDGET NEUTRALITY FOR WAIVERS.— 

25 In the case of a State described in sub-
158 

•S 16 IS 

1 paragraph (A) that uses amounts paid 

2 under this paragraph for expenditures de3 scribed in clause (ii) that are incurred 

4 under a waiver approved for the State, any 

5 budget neutrality determinations with re6 spect to such waiver shall be determined 

7 without regard to such amounts paid.’’; 

8 and 

9 (3) in paragraph (3), by striking ‘‘and (2)’’ and 

10 inserting ‘‘(2), and (4)’’. 

11 (d) OTHER AMENDMENTS TO MEDICAID.— 

12 (1) ELIGIBILITY OF A NEWBORN.—Section 

13 1902(e)(4) of the Social Security Act (42 U.S.C. 

14 1396a(e)(4)) is amended in the first sentence by 

15 striking ‘‘so long as the child is a member of the 

16 woman’s household and the woman remains (or 

17 would remain if pregnant) eligible for such assist18 ance’’. 

19 (2) APPLICATION OF QUALIFIED ENTITIES TO

20 PRESUMPTIVE ELIGIBILITY FOR PREGNANT WOMEN

21 UNDER MEDICAID.—Section 1920(b) of the Social 

22 Security Act (42 U.S.C. 1396r–1(b)) is amended by 

23 adding after paragraph (2) the following flush sen24 tence: 
159 

•S 16 IS 

1 ‘‘The term ‘qualified provider’ includes a qualified entity 

2 as defined in section 1920A(b)(3).’’. 

3 (e) EFFECTIVE DATE.—The amendments made by 

4 this section apply to items and services furnished on or 

5 after October 1, 2005, without regard to whether regula6 tions implementing such amendments have been promul7 gated. 

8 SEC. 352. OPTIONAL COVERAGE OF LEGAL IMMIGRANTS 

9 UNDER THE MEDICAID PROGRAM AND SCHIP. 

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

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

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

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

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

15 paragraph: 

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

17 under this title) to provide medical assistance under this 

18 title for aliens who are lawfully residing in the United 

19 States (including battered aliens described in section 

20 431(c) of the Personal Responsibility and Work Oppor21 tunity Reconciliation Act of 1996) and who are otherwise 

22 eligible for such assistance, within any of the following eli23 gibility categories: 
160 

•S 16 IS 

1 ‘‘(i) PREGNANT WOMEN.—Women during preg2 nancy (and during the 60-day period beginning on 

3 the last day of the pregnancy). 

4 ‘‘(ii) CHILDREN.—Children (as defined under 

5 such plan), including optional targeted low-income 

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

7 ‘‘(B)(i) In the case of a State that has elected to pro8 vide medical assistance to a category of aliens under sub9 paragraph (A), no debt shall accrue under an affidavit of 

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

11 of provision of assistance to such category and the cost 

12 of such assistance shall not be considered as an unreim13 bursed cost. 

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

15 and 421 of the Personal Responsibility and Work Oppor16 tunity Reconciliation Act of 1996 shall not apply to a 

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

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

19 Security Act (42 U.S.C. 1397gg(e)(1)) is amended by add20 ing at the end the following new subparagraph: 

21 ‘‘(E) Section 1903(v)(4) (relating to op22 tional coverage of permanent resident alien 

23 pregnant women and children), but only with 

24 respect to an eligibility category under this title, 
161 

•S 16 IS 

1 if the same eligibility category has been elected 

2 under such section for purposes of title XIX.’’. 

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

4 this section take effect on October 1, 2005, and apply to 

5 medical assistance and child health assistance furnished 

6 on or after such date. 

7 SEC. 353. PROMOTING CESSATION OF TOBACCO USE 

8 UNDER THE MEDICAID PROGRAM. 

9 (a) DROPPING EXCEPTION FROM MEDICAID PRE10 SCRIPTION DRUG COVERAGE FOR TOBACCO CESSATION

11 MEDICATIONS.—Section 1927(d)(2) of the Social Security 

12 Act (42 U.S.C. 1396r–8(d)(2)) is amended— 

13 (1) by striking subparagraph (E); 

14 (2) by redesignating subparagraphs (F) 

15 through (J) as subparagraphs (E) through (I), re16 spectively; and 

17 (3) in subparagraph (F) (as redesignated by 

18 paragraph (2)), by inserting before the period at the 

19 end the following: ‘‘, except agents approved by the 

20 Food and Drug Administration for purposes of pro21 moting, and when used to promote, tobacco ces22 sation’’. 

23 (b) REQUIRING COVERAGE OF TOBACCO CESSATION

24 COUNSELING SERVICES FOR PREGNANT WOMEN.—Sec-
162 

•S 16 IS 

1 tion 1905 of the Social Security Act (42 U.S.C. 

2 1396d(a)(4)) is amended— 

3 (1) in subsection (a)(4)— 

4 (A) by striking ‘‘and’’ before ‘‘(C)’’; and 

5 (B) by inserting before the semicolon at 

6 the end the following new subparagraph: ‘‘; and 

7 (D) counseling for cessation of tobacco use (as 

8 defined in subsection (x)) for pregnant women’’; 

9 and 

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

11 ‘‘(y)(1) For purposes of this title, the term ‘coun12 seling for cessation of tobacco use’ means therapy and 

13 counseling for cessation of tobacco use for pregnant 

14 women who use tobacco products or who are being treated 

15 for tobacco use that is furnished— 

16 ‘‘(A) by or under the supervision of a physician; 

17 or 

18 ‘‘(B) by any other health care professional 

19 who— 

20 ‘‘(i) is legally authorized to furnish such 

21 services under State law (or the State regu22 latory mechanism provided by State law) of the 

23 State in which the services are furnished; and 
163 

•S 16 IS 

1 ‘‘(ii) is authorized to receive payment for 

2 other services under this title or is designated 

3 by the Secretary for this purpose. 

4 ‘‘(2) Subject to paragraph (3), such term is limited 

5 to— 

6 ‘‘(A) therapy and counseling services rec7 ommended in ‘Treating Tobacco Use and Depend8 ence: A Clinical Practice Guideline’, published by the 

9 Public Health Service in June 2000, or any subse10 quent modification of such Guideline; and 

11 ‘‘(B) such other therapy and counseling services 

12 that the Secretary recognizes to be effective. 

13 ‘‘(3) Such term shall not include coverage for drugs 

14 or biologicals that are not otherwise covered under this 

15 title.’’. 

16 (c) REMOVAL OF COST-SHARING FOR TOBACCO CES17 SATION COUNSELING SERVICES FOR PREGNANT

18 WOMEN.—Section 1916 of the Social Security Act (42 

19 U.S.C. 1396o) is amended in each of subsections (a)(2)(B) 

20 and (b)(2)(B) by inserting ‘‘, and counseling for cessation 

21 of tobacco use (as defined in section 1905(x))’’ after ‘‘com22 plicate the pregnancy’’. 

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

24 this section shall apply to services furnished on or after 
164 

•S 16 IS 

1 the date that is 1 year after the date of enactment of this 

2 Act. 

3 SEC. 354. PROMOTING CESSATION OF TOBACCO USE 

4 UNDER THE MATERNAL AND CHILD HEALTH 

5 SERVICES BLOCK GRANT PROGRAM. 

6 (a) QUALITY MATERNAL AND CHILD HEALTH SERV7 ICES INCLUDES TOBACCO CESSATION COUNSELING AND

8 MEDICATIONS.— 

9 (1) IN GENERAL.—Section 501 of the Social 

10 Security Act (42 U.S.C. 701) is amended by adding 

11 at the end the following new subsection: 

12 ‘‘(c) For purposes of this title, counseling for ces13 sation of tobacco use (as defined in section 1905(y)), 

14 drugs and biologicals used to promote smoking cessation, 

15 and the inclusion of antitobacco messages in health pro16 motion counseling shall be considered to be part of quality 

17 maternal and child health services.’’. 

18 (2) EFFECTIVE DATE.—The amendment made 

19 by paragraph (1) shall take effect on the date that 

20 is 1 year after the date of enactment of this Act. 

21 (b) EVALUATION OF NATIONAL CORE PERFORMANCE

22 MEASURES.— 

23 (1) IN GENERAL.—The Administrator of the 

24 Health Resources and Services Administration shall 

25 assess the current national core performance meas-
165 

•S 16 IS 

1 ures and national core outcome measures utilized 

2 under the Maternal and Child Health Block Grant 

3 under title V of the Social Security Act (42 U.S.C. 

4 701 et seq.) for purposes of expanding such meas5 ures to include some of the known causes of low 

6 birthweight and prematurity, including the percent7 age of infants born to pregnant women who smoked 

8 during pregnancy. 

9 (2) REPORT.—Not later than 1 year after the 

10 date of enactment of this Act, the Administrator of 

11 the Health Resources and Services Administration 

12 shall submit to the appropriate committees of Con13 gress a report concerning the results of the evalua14 tion conducted under paragraph (1). 

15 SEC. 355. STATE OPTION TO PROVIDE FAMILY PLANNING 

16 SERVICES AND SUPPLIES TO INDIVIDUALS 

17 WITH INCOMES THAT DO NOT EXCEED A 

18 STATE’S INCOME ELIGIBILITY LEVEL FOR 

19 MEDICAL ASSISTANCE. 

20 (a) IN GENERAL.—Title XIX of the Social Security 

21 Act (42 U.S.C. 1396 et seq.), as amended by section 

22 301(a), is amended— 

23 (1) by redesignating section 1937 as section 

24 1938; and 
166 

•S 16 IS 

1 (2) by inserting after section 1936 the following 

2 new section: 

3 ‘‘STATE OPTION TO PROVIDE FAMILY PLANNING

4 SERVICES AND SUPPLIES

5 ‘‘SEC. 1937. (a) IN GENERAL.—Subject to sub6 sections (b) and (c), a State may elect (through a State 

7 plan amendment) to make medical assistance described in 

8 section 1905(a)(4)(C) available to any individual whose 

9 family income does not exceed the greater of— 

10 ‘‘(1) 185 percent of the income official poverty 

11 line (as defined by the Office of Management and 

12 Budget, and revised annually in accordance with sec13 tion 673(2) of the Omnibus Budget Reconciliation 

14 Act of 1981) applicable to a family of the size in15 volved; or 

16 ‘‘(2) the eligibility income level (expressed as a 

17 percentage of such poverty line) that has been speci18 fied under a waiver authorized by the Secretary or 

19 under section 1902(r)(2)), as of January 1, 2005, 

20 for an individual to be eligible for medical assistance 

21 under the State plan. 

22 ‘‘(b) COMPARABILITY.—Medical assistance described 

23 in section 1905(a)(4)(C) that is made available under a 

24 State plan amendment under subsection (a) shall— 

25 ‘‘(1) not be less in amount, duration, or scope 

26 than the medical assistance described in that section 
167 

•S 16 IS 

1 that is made available to any other individual under 

2 the State plan; and 

3 ‘‘(2) be provided in accordance with the restric4 tions on deductions, cost sharing, or similar charges 

5 imposed under section 1916(a)(2)(D). 

6 ‘‘(c) OPTION TO EXTEND COVERAGE DURING A

7 POST-ELIGIBILITY PERIOD.— 

8 ‘‘(1) INITIAL PERIOD.—A State plan amend9 ment made under subsection (a) may provide that 

10 any individual who was receiving medical assistance 

11 described in section 1905(a)(4)(C) as a result of 

12 such amendment, and who becomes ineligible for 

13 such assistance because of hours of, or income from, 

14 employment, may remain eligible for such medical 

15 assistance through the end of the 6-month period 

16 that begins on the first day the individual becomes 

17 so ineligible. 

18 ‘‘(2) ADDITIONAL EXTENSION.—A State plan 

19 amendment made under subsection (a) may provide 

20 that any individual who has received medical assist21 ance described in section 1905(a)(4)(C) during the 

22 entire 6-month period described in paragraph (1) 

23 may be extended coverage for such assistance for a 

24 succeeding 6-month period.’’. 
168 

•S 16 IS 

1 (b) EFFECTIVE DATE.—The amendments made by 

2 subsection (a) apply to medical assistance provided on and 

3 after October 1, 2005. 

4 SEC. 356. STATE OPTION TO EXTEND THE POSTPARTUM PE5 RIOD FOR PROVISION OF FAMILY PLANNING 

6 SERVICES AND SUPPLIES. 

7 (a) IN GENERAL.—Section 1902(e)(5) of the Social 

8 Security Act (42 U.S.C. 1396a(e)(5)) is amended— 

9 (1) by striking ‘‘eligible under the plan, as 

10 though’’ and inserting ‘‘eligible under the plan— 

11 ‘‘(A) as though’’; 

12 (2) by striking the period and inserting ‘‘; 

13 and’’; and 

14 (3) by adding at the end the following new sub15 paragraph: 

16 ‘‘(B) for medical assistance described in section 

17 1905(a)(4)(C) for so long as the family income of 

18 such woman does not exceed the maximum income 

19 level established by the State for the woman to be 

20 eligible for medical assistance under the State plan 

21 (as a result of pregnancy or otherwise).’’. 

22 (b) EFFECTIVE DATE.—The amendments made by 

23 subsection (a) apply to medical assistance provided on and 

24 after October 1, 2005. 
169 

•S 16 IS 

1 SEC. 357. STATE OPTION TO PROVIDE WRAP-AROUND 

2 SCHIP COVERAGE TO CHILDREN WHO HAVE 

3 OTHER HEALTH COVERAGE. 

4 (a) IN GENERAL.— 

5 (1) SCHIP.— 

6 (A) STATE OPTION TO PROVIDE WRAP7 AROUND COVERAGE.—Section 2110(b) of the 

8 Social Security Act (42 U.S.C. 1397jj(b)) is 

9 amended— 

10 (i) in paragraph (1)(C), by inserting 

11 ‘‘, subject to paragraph (5),’’ after ‘‘under 

12 title XIX or’’; and 

13 (ii) by adding at the end the fol14 lowing: 

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

16 COVERAGE.—A State may waive the requirement of 

17 paragraph (1)(C) that a targeted low-income child 

18 may not be covered under a group health plan or 

19 under health insurance coverage, if the State satis20 fies the conditions described in subsection (c)(8). 

21 The State may waive such requirement in order to 

22 provide— 

23 ‘‘(A) services for a child with special health 

24 care needs; or 

25 ‘‘(B) all services. 
170 

•S 16 IS 

1 In waiving such requirement, a State may limit the 

2 application of the waiver to children whose family in3 come does not exceed a level specified by the State, 

4 so long as the level so specified does not exceed the 

5 maximum income level otherwise established for 

6 other children under the State child health plan.’’. 

7 (B) CONDITIONS DESCRIBED.—Section 

8 2105(c) of the Social Security Act (42 U.S.C. 

9 1397ee(c)) is amended by adding at the end the 

10 following: 

11 ‘‘(8) CONDITIONS FOR PROVISION OF WRAP12 AROUND COVERAGE.—For purposes of section 

13 2110(b)(5), the conditions described in this para14 graph are the following: 

15 ‘‘(A) INCOME ELIGIBILITY.—The State 

16 child health plan (whether implemented under 

17 title XIX or this XXI)— 

18 ‘‘(i) has the highest income eligibility 

19 standard permitted under this title as of 

20 January 1, 2005; 

21 ‘‘(ii) subject to subparagraph (B), 

22 does not limit the acceptance of applica23 tions for children; and 
171 

•S 16 IS 

1 ‘‘(iii) provides benefits to all children 

2 in the State who apply for and meet eligi3 bility standards. 

4 ‘‘(B) NO WAITING LIST IMPOSED.—With 

5 respect to children whose family income is at or 

6 below 200 percent of the poverty line, the State 

7 does not impose any numerical limitation, wait8 ing list, or similar limitation on the eligibility of 

9 such children for child health assistance under 

10 such State plan. 

11 ‘‘(C) NO MORE FAVORABLE TREATMENT.— 

12 The State child health plan may not provide 

13 more favorable coverage of dental services to 

14 the children covered under section 2110(b)(5) 

15 than to children otherwise covered under this 

16 title.’’. 

17 (C) STATE OPTION TO WAIVE WAITING PE18 RIOD.—Section 2102(b)(1)(B) of the Social Se19 curity Act (42 U.S.C. 1397bb(b)(1)(B)), as 

20 amended by section 2(b)(3)(B), is amended— 

21 (i) in clause (ii), by striking ‘‘, and’’ 

22 at the end and inserting a semicolon; 

23 (ii) in clause (iii), by striking the pe24 riod at the end and inserting ‘‘; and’’; and 
172 

•S 16 IS 

1 (iii) by adding at the end the fol2 lowing new clause: 

3 ‘‘(iv) at State option, may not apply a 

4 waiting period in the case of a child de5 scribed in section 2110(b)(5), if the State 

6 satisfies the requirements of section 

7 2105(c)(8).’’. 

8 (2) APPLICATION OF ENHANCED MATCH UNDER

9 MEDICAID.—Section 1905 of the Social Security Act 

10 (42 U.S.C. 1396d), as amended by section 2(a)(2), 

11 is amended— 

12 (A) in subsection (b), in the fourth sen13 tence, by striking ‘‘or (u)(4)’’ and inserting 

14 ‘‘(u)(4), or (u)(5)’’; and 

15 (B) in subsection (u)— 

16 (i) by redesignating paragraph (5) as 

17 paragraph (6); and 

18 (ii) by inserting after paragraph (4) 

19 the following: 

20 ‘‘(5) For purposes of subsection (b), the ex21 penditures described in this paragraph are expendi22 tures for items and services for children described in 

23 section 2110(b)(5), but only in the case of a State 

24 that satisfies the requirements of section 

25 2105(c)(8).’’. 
173 

•S 16 IS 

1 (3) APPLICATION OF SECONDARY PAYOR PROVI2 SIONS.—Section 2107(e)(1) of the Social Security 

3 Act (42 U.S.C. 1397gg(e)(1)), as amended by sec4 tion 3(b), is amended by adding at the end the fol5 lowing: 

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

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

10 (b) EFFECTIVE DATE.—The amendments made by 

11 subsection (a) shall take effect on January 1, 2005, and 

12 shall apply to child health assistance and medical assist13 ance provided on or after that date. 

14 SEC. 358. INNOVATIVE OUTREACH PROGRAMS. 

15 Title XXI of the Social Security Act (42 U.S.C. 

16 1397aa et seq.), as amended by section 351(b), is amend17 ed by adding at the end the following: 

18 ‘‘SEC. 2112. EXPANDED OUTREACH ACTIVITIES. 

19 ‘‘(a) IN GENERAL.—Funds made available under 

20 subsection (f) for expenditure under this section for a fis21 cal year shall be used by the Secretary to award grants 

22 to eligible entities to conduct innovative outreach and en23 rollment efforts that are designed to increase the enroll24 ment and participation of eligible children under this title 

25 and title XIX. 
174 

•S 16 IS 

1 ‘‘(b) PRIORITY FOR GRANTS IN CERTAIN AREAS.— 

2 In making grants under subsection (a), the Secretary shall 

3 give priority to eligible entities that propose to target geo4 graphic areas with high rates of— 

5 ‘‘(1) eligible but unenrolled children, including 

6 such children who reside in rural areas; 

7 ‘‘(2) families for whom English is not their pri8 mary language; or 

9 ‘‘(3) racial and ethnic minorities and health dis10 parity populations 

11 ‘‘(c) APPLICATION.—An eligible entity that desires to 

12 receive a grant under this section shall submit an applica13 tion to the Secretary in such form and manner, and con14 taining such information, as the Secretary may decide. 

15 Such application shall include— 

16 ‘‘(1) quality and outcomes performance meas17 ures to evaluate the effectiveness of activities funded 

18 by a grant under this paragraph to ensure that the 

19 activities are meeting their goals; and 

20 ‘‘(2) an assurance that the entity will— 

21 ‘‘(A) collect and report enrollment data; 

22 and 

23 ‘‘(B) disseminate findings from evaluations 

24 of the activities funded under the grant. 
175 

•S 16 IS 

1 ‘‘(d) REPORT.—The Secretary shall report to Con2 gress on an annual basis the results of the outreach efforts 

3 under grants awarded under this section. 

4 ‘‘(e) DEFINITION OF ELIGIBLE ENTITY.—In this sec5 tion, the term ‘eligible entity’ means any of the following: 

6 ‘‘(1) A State. 

7 ‘‘(2) A national, local, or community-based pub8 lic or nonprofit private organization. 

9 ‘‘(f) APPROPRIATION.—For the purpose of awarding 

10 grants to eligible entities under this section, there is ap11 propriated, out of any money in the Treasury not other12 wise appropriated, $50,000,000 for each of fiscal years 

13 2006 and 2007.’’. 

14 Subtitle C—Affirming the 

15 Importance of Medicaid 

16 SEC. 361. SENSE OF THE SENATE. 

17 (a) FINDINGS.—The Senate makes the following 

18 findings: 

19 (1) The Medicaid program under title XIX of 

20 the Social Security Act (42 U.S.C. 1396 et seq.) 

21 provides essential health care and long-term care 

22 coverage to more than 50,000,000 low-income chil23 dren, pregnant women and families, individuals with 

24 disabilities, and senior citizens. It is a Federal guar-
176 

•S 16 IS 

1 antee that even the most vulnerable will have access 

2 to needed medical services. 

3 (2) Medicaid provides health insurance for more 

than 1 4 ⁄4 of America’s children and is the largest purchaser of maternity care, paying for more than 1 5 ⁄3

6 of all the births in the United States each year. 

7 (3) Medicaid provides critical help for the elder8 ly and individuals living with disabilities. Medicaid is 

9 America’s single largest purchaser of nursing home 

10 services and other long-term care, covering the ma11 jority of nursing home residents. 

12 (4) Medicaid pays for personal care and other 

13 supportive services, which are typically not provided 

14 by private health insurance, even if individuals could 

15 obtain it. These services are necessary to enable in16 dividuals with spinal cord injuries, developmental 

17 disabilities, neurological degenerative diseases, seri18 ous and persistent mental illnesses, HIV/AIDS, and 

19 other chronic conditions to remain in the commu20 nity, to work, and to maintain independence. 

21 (5) Medicaid is an essential supplement to the 

22 Medicare program under title XVIII of the Social 

23 Security Act (42 U.S.C. 1395 et seq.) for more than 

24 6,000,000 Medicare beneficiaries who are low-income 

25 elderly or disabled, assisting them with their Medi-
177 

•S 16 IS 

1 care premiums and co-insurance, wrap-around bene2 fits, and, in most States, the costs of nursing home 

3 care that Medicare does not cover. 

4 (6) About 42 percent of all Medicaid spending 

5 is for those who are elderly or are living with disabil6 ities and are dually eligible for Medicare and Med7 icaid. 

8 (7) Medicaid faces an ever growing burden as 

9 a result of Medicare’s gaps. The Medicaid program 

10 spent nearly $40,000,000,000 on uncovered Medi11 care services in 2002. Medicaid payments for low-in12 come Medicare beneficiary cost-sharing are the larg13 est and fastest growing share of Medicaid spending. 

14 (8) The Medicare drug benefit imposes addi15 tional costs on States, which will add to the already 

16 significant long-term care cost burden. Medicaid 

17 spending on Medicare beneficiaries’ long-term care 

18 costs is expected to double from $25,000,000,000 in 

19 2002 to $51,000,000,000 in 2012. 

20 (9) Medicaid helps ensure access to care for all 

21 Americans. Medicaid is the single largest source of 

22 revenue for the Nation’s safety net hospitals and 

23 health centers and is critical to the ability of those 

24 providers to serve Medicaid enrollees and uninsured 

25 Americans. 
178 

•S 16 IS 

1 (10) Medicaid serves a major role in ensuring 

2 that the number of Americans without health insur3 ance, approximately 45,000,000 in 2003, is not sub4 stantially higher. Medicaid helps buffer the drop in 

5 private coverage during recessions. More than 

6 4,800,000 Americans lost employer sponsored cov7 erage between 2000 and 2003. Medicaid covered an 

8 additional 5,800,000 Americans during this period, 

9 preventing even greater numbers of uninsured. 

10 (11) Medicaid matters to women in America. 

11 More than 16,000,000 women depend on Medicaid 

12 for their health care. Women comprise the majority 

13 of seniors (71 percent) on Medicaid. Half of non14 elderly women with permanent mental or physical 

15 disabilities have health coverage through Medicaid. 

16 Medicaid provides treatment for low-income women 

17 diagnosed with breast or cervical cancer in every 

18 State. 

19 (12) Medicaid is critical for children with dis20 abilities. Medicaid covers 78 percent of poor children 

21 with disabilities who are under 5 years of age and 

22 70 percent of poor children with disabilities who are 

23 between the ages of 5 and 17. Similarly, Medicaid 

24 covers a substantial portion of children with disabil25 ities who are near poor, covering 40 percent of chil-
179 

•S 16 IS 

1 dren with disabilities who are under 5 years of age 

2 and 25 percent of children with disabilities who are 

3 between the ages of 5 and 17. 

4 (13) Medicaid is the Nation’s largest source of 

5 payment for mental health services, HIV/AIDS care, 

6 and care for children with special needs. Much of 

7 this care is either not covered by private insurance 

8 or limited in scope or duration. Medicaid is also a 

9 critical source of funding for health care for children 

10 in foster care and for health services in schools. 

11 (14) The need for Medicaid is greater than ever 

12 today, because the number of Americans living in 

13 poverty has increased by 8,000,000 over the last 4 

14 years and the number of the uninsured has in15 creased by 5,000,000. 

16 (15) The system of Federal matching for State 

17 Medicaid expenditures ensures that Federal funds 

18 will grow as State spending increases in response to 

19 unmet needs. 

20 (16) Despite the varied population served by 

21 the Medicaid program, including those with signifi22 cant health care needs, Medicaid per capita growth 

23 has been consistently about half the rate of growth 

24 in private insurance premiums and Medicaid has far 

25 lower administrative costs. Medicaid costs less per 
180 

•S 16 IS 

1 person than private coverage for people who have 

2 similar health status. 

3 (b) SENSE OF THE SENATE.—It is the sense of the 

4 Senate that— 

5 (1) the Medicaid program under title XIX of 

6 the Social Security Act (42 U.S.C. 1396 et seq.) is 

7 a critical component of the health care system of the 

8 United States; 

9 (2) Federal support for the Medicaid program 

10 must be adequate to support State spending meeting 

11 the essential health needs of the low-income elderly, 

12 low-income individuals with disabilities, and low-in13 come children and families, and should not be cut or 

14 capped; and 

15 (3) any retreat from the Federal commitment 

16 to Medicaid would threaten not only the health care 

17 safety net of the United States but the entire health 

18 care system 
181 

•S 16 IS 

1 TITLE IV—REDUCING HEALTH 

2 CARE COSTS FOR SMALL EM3 PLOYERS 

4 Subtitle A—Tax Relief 

5 SEC. 401. REFUNDABLE CREDIT FOR SMALL BUSINESS EM6 PLOYEE HEALTH INSURANCE EXPENSES. 

7 (a) IN GENERAL.—Subpart C of part IV of sub8 chapter A of chapter 1 of the Internal Revenue Code of 

9 1986 (relating to refundable credits) is amended by redes10 ignating section 36 as section 37 and inserting after sec11 tion 35 the following new section: 

12 ‘‘SEC. 36. SMALL BUSINESS EMPLOYEE HEALTH INSURANCE 

13 EXPENSES. 

14 ‘‘(a) DETERMINATION OF AMOUNT.—In the case of 

15 a qualified small employer, there shall be allowed as a 

16 credit against the tax imposed by this subtitle for the tax17 able year an amount equal to the expense amount de18 scribed in subsection (b) paid by the taxpayer during the 

19 taxable year. 

20 ‘‘(b) EXPENSE AMOUNT.—For purposes of this sec21 tion— 

22 ‘‘(1) IN GENERAL.—The expense amount de23 scribed in this subsection is the applicable percent24 age of the amount of qualified employee health in25 surance expenses of each qualified employee. 
182 

•S 16 IS 

1 ‘‘(2) APPLICABLE PERCENTAGE.—For purposes 

2 of paragraph (1), the applicable percentage is equal 

3 to— 

4 ‘‘(A) for any qualified small employer de5 scribed in subparagraph (A) of paragraph (4), 

6 50 percent, 

7 ‘‘(B) for any qualified small employer de8 scribed in subparagraph (B) of paragraph (4), 

9 35 percent, and 

10 ‘‘(C) for any qualified small employer de11 scribed in subparagraph (C) of paragraph (4), 

12 25 percent. 

13 ‘‘(3) PER EMPLOYEE DOLLAR LIMITATION.— 

14 The amount of qualified employee health insurance 

15 expenses taken into account under paragraph (1) 

16 with respect to any qualified employee for any tax17 able year shall not exceed— 

18 ‘‘(A) $1,500 in the case of self-only cov19 erage; and 

20 ‘‘(B) $3,500 in the case of family coverage. 

21 ‘‘(4) QUALIFIED SMALL EMPLOYERS DE22 SCRIBED.—A qualified small employer is described 

23 in— 
183 

•S 16 IS 

1 ‘‘(A) this subparagraph if such employer 

2 employed an average of 9 or fewer employees 

3 (as determined under subsection (c)(1)(A)(ii)), 

4 ‘‘(B) this subparagraph if such employer 

5 employed an average of more than 9 but less 

6 than 25 employees (as so determined), and 

7 ‘‘(C) this subparagraph if such employer 

8 employed an average of more than 24 but not 

9 more than 50 employees (as so determined). 

10 ‘‘(c) DEFINITIONS.—For purposes of this section— 

11 ‘‘(1) QUALIFIED SMALL EMPLOYER.— 

12 ‘‘(A) IN GENERAL.—The term ‘qualified 

13 small employer’ means, with respect to any cal14 endar year, any employer if— 

15 ‘‘(i) such employer pays or incurs at 

16 least 75 percent of the qualified employee 

17 health insurance expenses of each qualified 

18 employee (determined without regard to 

19 subsection (b)(3)), and 

20 ‘‘(ii) such employer employed an aver21 age of 50 or fewer employees on business 

22 days during either of the 2 preceding cal23 endar years. 

24 For purposes of clause (ii), a preceding cal25 endar year may be taken into account only if 
184 

•S 16 IS 

1 the employer was in existence throughout such 

2 year. 

3 ‘‘(B) EMPLOYERS NOT IN EXISTENCE IN

4 PRECEDING YEAR.—In the case of an employer 

5 which was not in existence throughout the 1st 

6 preceding calendar year, the determination 

7 under subparagraph (A)(ii) shall be based on 

8 the average number of employees that it is rea9 sonably expected such employer will employ on 

10 business days in the current calendar year. 

11 ‘‘(2) QUALIFIED EMPLOYEE HEALTH INSUR12 ANCE EXPENSES.— 

13 ‘‘(A) IN GENERAL.—The term ‘qualified 

14 employee health insurance expenses’ means any 

15 amount paid by an employer for health insur16 ance coverage (as defined in section 9832(b)(1)) 

17 to the extent such amount is attributable to 

18 coverage provided to any employee while such 

19 employee is a qualified employee. 

20 ‘‘(B) EXCEPTION FOR AMOUNTS PAID

21 UNDER SALARY REDUCTION ARRANGEMENTS.— 

22 No amount paid or incurred for health insur23 ance coverage pursuant to a salary reduction 

24 arrangement shall be taken into account under 

25 subparagraph (A). 
185 

•S 16 IS 

1 ‘‘(3) QUALIFIED EMPLOYEE.— 

2 ‘‘(A) IN GENERAL.—The term ‘qualified 

3 employee’ means, with respect to any period, an 

4 employee of an employer if— 

5 ‘‘(i) the annual amount of hours in 

6 the employ of such employer by such em7 ployee is at least 400 hours, 

8 ‘‘(ii) the total amount of wages paid 

9 or incurred by such employer to such em10 ployee at an annual rate during the taxable 

11 year is at least $5,000, and 

12 ‘‘(iii) such employee is not eligible 

13 for— 

14 ‘‘(I) any benefits under title 

15 XVIII, XIX, or XXI of the Social Se16 curity Act, or 

17 ‘‘(II) any other publicly-spon18 sored health insurance program. 

19 ‘‘(B) TREATMENT OF CERTAIN EMPLOY20 EES.—For purposes of subparagraph (A), the 

21 term ‘employee’— 

22 ‘‘(i) shall not include an employee 

23 within the meaning of section 401(c)(1), 

24 and 
186 

•S 16 IS 

1 ‘‘(ii) shall include a leased employee 

2 within the meaning of section 414(n). 

3 ‘‘(C) WAGES.—The term ‘wages’ has the 

4 meaning given such term by section 3121(a) 

5 (determined without regard to any dollar limita6 tion contained in such section). 

7 ‘‘(d) CERTAIN RULES MADE APPLICABLE.—For pur8 poses of this section, rules similar to the rules of section 

9 52 shall apply. 

10 ‘‘(e) COORDINATION WITH DEDUCTION FOR HEALTH

11 INSURANCE COSTS OF SELF-EMPLOYED INDIVIDUALS.— 

12 In the case of a taxpayer who is eligible to deduct any 

13 amount under section 162(l) for the taxable year, this sec14 tion shall apply only if the taxpayer elects not to claim 

15 any amount as a deduction under such section for such 

16 year.’’. 

17 (b) CONFORMING AMENDMENTS.— 

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

19 31, United States Code, is amended by inserting be20 fore the period ‘‘, or from section 36 of such Code’’. 

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

22 IV of subchapter A of chapter 1 of the Internal Rev23 enue Code of 1986 is amended by striking the last 

24 item and inserting the following new items: 

‘‘Sec. 36. Small business employee health insurance expenses. 

‘‘Sec. 37. Overpayments of tax.’’. 
187 

•S 16 IS 

1 (e) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply to amounts paid or incurred in tax3 able years beginning after December 31, 2005. 

4 Subtitle B—Three-Share Program 

5 SEC. 421. THREE-SHARE PROGRAMS. 

6 The Social Security Act (42 U.S.C. 301 et seq.) is 

7 amended by adding at the end the following: 

8 ‘‘TITLE XXII—PROVIDING FOR 

9 THE UNINSURED 

10 ‘‘SEC. 2201. THREE-SHARE PROGRAMS. 

11 ‘‘(a) PILOT PROGRAMS.—The Secretary, acting 

12 through the Administrator, shall award grants under this 

13 section for the startup and operation of 25 eligible three14 share pilot programs for a 5-year period. 

15 ‘‘(b) GRANTS FOR THREE-SHARE PROGRAMS.— 

16 ‘‘(1) ESTABLISHMENT.—The Administrator 

17 may award grants to eligible entities— 

18 ‘‘(A) to establish three-share programs; 

19 ‘‘(B) to provide for contributions to the 

20 premiums assessed for coverage under a three21 share program as provided for in subsection 

22 (c)(2)(B)(iii); and 

23 ‘‘(C) to establish risk pools. 

24 ‘‘(2) THREE-SHARE PROGRAM PLAN.—Each en25 tity desiring a grant under this subsection shall de-
188 

•S 16 IS 

1 velop a plan for the establishment and operation of 

2 a three-share program that meets the requirements 

3 of paragraphs (2) and (3) of subsection (c). 

4 ‘‘(3) APPLICATION.—Each entity desiring a 

5 grant under this subsection shall submit an applica6 tion to the Administrator at such time, in such man7 ner and containing such information as the Adminis8 trator may require, including— 

9 ‘‘(A) the three-share program plan de10 scribed in paragraph (2); and 

11 ‘‘(B) an assurance that the eligible entity 

12 will— 

13 ‘‘(i) determine a benefit package; 

14 ‘‘(ii) recruit businesses and employees 

15 for the three-share program; 

16 ‘‘(iii) build and manage a network of 

17 health providers or contract with an exist18 ing network or licensed insurance provider; 

19 ‘‘(iv) manage all administrative needs; 

20 and 

21 ‘‘(v) establish relationships among 

22 community, business, and provider inter23 ests. 
189 

•S 16 IS 

1 ‘‘(4) PRIORITY.—In awarding grants under this 

2 section the Secretary shall give priority to an appli3 cant— 

4 ‘‘(A) that is an existing three-share pro5 gram; 

6 ‘‘(B) that is an eligible three-share pro7 gram that has demonstrated community sup8 port; or 

9 ‘‘(C) that is located in a State with insur10 ance laws and regulations that permit three11 share program expansion. 

12 ‘‘(c) GRANT ELIGIBILITY.— 

13 ‘‘(1) IN GENERAL.—The Secretary, acting 

14 through the Administrator, shall promulgate regula15 tions providing for the eligibility of three-share pro16 grams for participation in the pilot program under 

17 this section. 

18 ‘‘(2) THREE-SHARE PROGRAM REQUIRE19 MENTS.— 

20 ‘‘(A) IN GENERAL.—To be determined to 

21 be an eligible three-share program for purposes 

22 of participation in the pilot program under this 

23 section a three-share program shall— 

24 ‘‘(i) be either a non-profit or local 

25 governmental entity; 
190 

•S 16 IS 

1 ‘‘(ii) define the region in which such 

2 program will provide services; 

3 ‘‘(iii) have the capacity to carry out 

4 administrative functions of managing 

5 health plans, including monthly billings, 

6 verification/enrollment of eligible employers 

7 and employees, maintenance of member8 ship rosters, development of member mate9 rials (such as handbooks and identification 

10 cards), customer service, and claims proc11 essing; and 

12 ‘‘(iv) have demonstrated community 

13 involvement. 

14 ‘‘(B) PAYMENT.—To be eligible under 

15 paragraph (1), a three-share program shall pay 

16 the costs of services provided under subpara17 graph (A)(ii) by charging a monthly premium 

18 for each covered individual to be divided as fol19 lows: 

20 ‘‘(i) Not more than 30 percent of such 

21 premium shall be paid by a qualified em22 ployee desiring coverage under the three23 share program. 
191 

•S 16 IS 

1 ‘‘(ii) Not more than 30 percent of 

2 such premium shall be paid by the quali3 fied employer of such a qualified employee. 

4 ‘‘(iii) At least 40 percent of such pre5 mium shall be paid from amounts provided 

6 under a grant under this section. 

7 ‘‘(iv) Any remaining amount shall be 

8 paid by the three-share program from 

9 other public, private, or charitable sources. 

10 ‘‘(C) PROGRAM FLEXIBILITY.—A three11 share program may set an income eligibility 

12 guideline for enrollment purposes. 

13 ‘‘(3) COVERAGE.— 

14 ‘‘(A) IN GENERAL.—To be an eligible 

15 three-share program under this section, the 

16 three-share program shall provide at least the 

17 following benefits: 

18 ‘‘(i) Physicians services. 

19 ‘‘(ii) In-patient hospital services. 

20 ‘‘(iii) Out-patient services. 

21 ‘‘(iv) Emergency room visits. 

22 ‘‘(v) Emergency ambulance services. 

23 ‘‘(vi) Diagnostic lab fees and x-rays. 

24 ‘‘(vii) Prescription drug benefits. 
192 

•S 16 IS 

1 ‘‘(B) LIMITATION.—Nothing in subpara2 graph (A) shall be construed to require that a 

3 three-share program provide coverage for serv4 ices performed outside the region described in 

5 paragraph (2)(A)(i). 

6 ‘‘(C) PREEXISTING CONDITIONS.—A pro7 gram described in subparagraph (A) shall not 

8 be an eligible three-share program under para9 graph (1) if any individual can be excluded 

10 from coverage under such program because of 

11 a preexisting health condition. 

12 ‘‘(d) GRANTS FOR EXISTING THREE-SHARE PRO13 GRAMS TO MEET CERTIFICATION REQUIREMENTS.— 

14 ‘‘(1) IN GENERAL.—The Administrator may 

15 award grants to three-share programs that are oper16 ating on the date of enactment of this section. 

17 ‘‘(2) APPLICATION.—Each eligible entity desir18 ing a grant under this subsection shall submit an 

19 application to the Administrator at such time, in 

20 such manner, and containing such information as 

21 the Administrator may require. 

22 ‘‘(e) APPLICATION OF STATE LAWS.—Nothing in this 

23 section shall be construed to preempt State law. 

24 ‘‘(f) DISTRESSED BUSINESS FORMULA.— 
193 

•S 16 IS 

1 ‘‘(1) IN GENERAL.—Not later than 60 days 

2 after the date of enactment of this section, the Ad3 ministrator of the Health Resources and Services 

4 Administration shall develop a formula to determine 

5 which businesses qualify as distressed businesses for 

6 purposes of this section. 

7 ‘‘(2) EFFECT ON INSURANCE MARKET.—Grant8 ing eligibility to a distressed business using the for9 mula under paragraph (1) shall not interfere with 

10 the insurance market. Any business found to have 

11 reduced benefits to qualify as a distressed business 

12 under the formula under paragraph (1) shall not be 

13 eligible to be a three-share program for purposes of 

14 this section. 

15 ‘‘(g) DEFINITIONS.—In this section: 

16 ‘‘(1) ADMINISTRATOR.—The term ‘Adminis17 trator’ means the Administrator of the Health Re18 sources and Services Administration. 

19 ‘‘(2) COVERED INDIVIDUAL.—The term ‘cov20 ered individual’ means— 

21 ‘‘(A) a qualified employee; or 

22 ‘‘(B) a child under the age of 23 or a 

23 spouse of such qualified employee who— 
194 

•S 16 IS 

1 ‘‘(i) lacks access to health care cov2 erage through their employment or em3 ployer; 

4 ‘‘(ii) lacks access to health coverage 

5 through a family member; 

6 ‘‘(iii) is not eligible for coverage under 

7 the medicare program under title XVIII or 

8 the medicaid program under title XIX; and 

9 ‘‘(iv) does not qualify for benefits 

10 under the State Children’s Health Insur11 ance Program under title XXI. 

12 ‘‘(3) DISTRESSED BUSINESS.—The term ‘dis13 tressed business’ means a business that— 

14 ‘‘(A) in light of economic hardship and ris15 ing health care premiums may be forced to dis16 continue or scale back its health care coverage; 

17 and 

18 ‘‘(B) qualifies as a distressed business ac19 cording to the formula under subsection (g). 

20 ‘‘(4) ELIGIBLE ENTITY.—The term ‘eligible en21 tity’ means an entity that meets the requirements of 

22 subsection (a)(2)(A). 

23 ‘‘(5) QUALIFIED EMPLOYEE.—The term ‘quali24 fied employee’ means any individual employed by a 
195 

•S 16 IS 

1 qualified employer who meets certain criteria includ2 ing— 

3 ‘‘(A) lacking access to health coverage 

4 through a family member or common law part5 ner; 

6 ‘‘(B) not being eligible for coverage under 

7 the medicare program under title XVIII or the 

8 medicaid program under title XIX; and 

9 ‘‘(C) agreeing that the share of fees de10 scribed in subsection (a)(2)(B)(i) shall be paid 

11 in the form of payroll deductions from the 

12 wages of such individual. 

13 ‘‘(6) QUALIFIED EMPLOYER.—The term ‘quali14 fied employer’ means an employer as defined in sec15 tion 3(d) of the Fair Labor Standards Act of 1938 

16 (29 U.S.C. 203(d)) who— 

17 ‘‘(A) is a small business concern as defined 

18 in section 3(a) of the Small Business Act (15 

19 U.S.C. 632); 

20 ‘‘(B) is located in the region described in 

21 subsection (a)(2)(A)(i); and 

22 ‘‘(C) has not contributed to the health care 

23 benefits of its employees for at least 12 months 

24 consecutively or currently provides insurance 

25 but is classified as a distressed business. 
196 

•S 16 IS 

1 ‘‘(h) EVALUATION.—Not later than 90 days after the 

2 end of the 5-year period during which grants are available 

3 under this section, the Government Accountability Office 

4 shall submit to the Secretary and the appropriate commit5 tees of Congress a report concerning— 

6 ‘‘(1) the effectiveness of the programs estab7 lished under this section; 

8 ‘‘(2) the number of individuals covered under 

9 such programs; 

10 ‘‘(3) any resulting best practices; and 

11 ‘‘(4) the level of community involvement. 

12 ‘‘(i) AUTHORIZATION OF APPROPRIATIONS.—There 

13 are authorized to be appropriated to carry out this section, 

14 such sums as may be necessary for each of fiscal years 

15 2006 through 2011.’’. 

Æ