In the Senate of the United States,

December 21, 2005.

Resolved, That the Senate agree to the amendment of

the House of Representatives to the bill (S. 1932) entitled

‘‘An Act to provide for reconciliation pursuant to section

202(a) of the concurrent resolution on the budget for fiscal

year 2006 (H. Con. Res. 95).’’ with the following

SENATE AMENDMENT TO HOUSE AMENDMENT:

In lieu of the matter proposed to be inserted by the

House amendment to the text of the bill, insert:

1 SECTION 1. SHORT TITLE.

2 This Act may be cited as the ‘‘Deficit Reduction Act

3 of 2005’’.

4 SEC. 2. TABLE OF TITLES.

5 The table of titles is as follows:
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TITLE I—AGRICULTURE PROVISIONS

TITLE II—HOUSING AND DEPOSIT INSURANCE PROVISIONS

TITLE III—DIGITAL TELEVISION TRANSITION AND PUBLIC SAFETY

TITLE IV—TRANSPORTATION PROVISIONS

TITLE V—MEDICARE

TITLE VI—MEDICAID AND SCHIP

TITLE VII—HUMAN RESOURCES AND OTHER PROVISIONS

TITLE VIII—EDUCATION AND PENSION BENEFIT PROVISIONS

TITLE IX—LIHEAP PROVISIONS

TITLE X—JUDICIARY RELATED PROVISIONS

1 TITLE I—AGRICULTURE

2 PROVISIONS

3 SECTION 1001. SHORT TITLE.

4 This title may be cited as the ‘‘Agricultural Reconcili5 ation Act of 2005’’.

6 Subtitle A—Commodity Programs

7 SEC. 1101. NATIONAL DAIRY MARKET LOSS PAYMENTS.

8 (a) AMOUNT.—Section 1502(c) of the Farm Security

9 and Rural Investment Act of 2002 (7 U.S.C. 7982(c)) is

10 amended by striking paragraph (3) and inserting the fol11 lowing new paragraph:

12 ‘‘(3)(A) during the period beginning on the first

13 day of the month the producers on a dairy farm enter

14 into a contract under this section and ending on Sep15 tember 30, 2005, 45 percent;
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1 ‘‘(B) during the period beginning on October 1,

2 2005, and ending on August 31, 2007, 34 percent;

3 and

4 ‘‘(C) during the period beginning on September

5 1, 2007, 0 percent.’’.

6 (b) DURATION.—Section 1502 of the Farm Security

7 and Rural Investment Act of 2002 (7 U.S.C. 7982) is

8 amended by striking ‘‘2005’’ each place it appears in sub9 sections (f) and (g)(1) and inserting ‘‘2007’’.

10 (c) CONFORMING AMENDMENTS.—Section 1502 of the

11 Farm Security and Rural Investment Act of 2002 (7 U.S.C.

12 7982) is amended—

13 (1) in subsection (g)(1), by striking ‘‘and sub14 section (h)’’; and

15 (2) by striking subsection (h).

16 SEC. 1102. ADVANCE DIRECT PAYMENTS.

17 (a) COVERED COMMODITIES.—Section 1103(d)(2) of

18 the Farm Security and Rural Investment Act of 2002 (7

19 U.S.C. 7913(d)(2)) is amended in the first sentence by strik20 ing ‘‘2007 crop years’’ and inserting ‘‘2005 crop years, up

21 to 40 percent of the direct payment for a covered commodity

22 for the 2006 crop year, and up to 22 percent of the direct

23 payment for a covered commodity for the 2007 crop year,’’.

24 (b) PEANUTS.—Section 1303(e)(2) of the Farm Secu25 rity and Rural Investment Act of 2002 (7 U.S.C.
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1 7953(e)(2)) is amended in the first sentence by striking

2 ‘‘2007 crop years’’ and inserting ‘‘2005 crop years, up to

3 40 percent of the direct payment for the 2006 crop year,

4 and up to 22 percent of the direct payment for the 2007

5 crop year,’’.

6 SEC. 1103. COTTON COMPETITIVENESS PROVISIONS.

7 (a) REPEAL OF AUTHORITY TO ISSUE COTTON USER

8 MARKETING CERTIFICATES.—Section 1207 of the Farm Se9 curity and Rural Investment Act of 2002 (7 U.S.C. 7937)

10 is amended—

11 (1) by striking subsection (a); and

12 (2) in subsection (b)(1)—

13 (A) in subparagraph (B), by striking ‘‘, ad14 justed for the value of any certificate issued

15 under subsection (a),’’; and

16 (B) in subparagraph (C), by striking ‘‘, for

17 the value of any certificates issued under sub18 section (a)’’.

19 (b) EFFECTIVE DATE.—The amendments made by this

20 section take effect on August 1, 2006.

21 Subtitle B—Conservation

22 SEC. 1201. WATERSHED REHABILITATION PROGRAM.

23 The authority to obligate funds previously made avail24 able under section 14(h)(1) of the Watershed Protection and

25 Flood Prevention Act (16 U.S.C. 1012(h)(1)) for a fiscal
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1 year and unobligated as of October 1, 2006, is hereby can2 celled effective on that date.

3 SEC. 1202. CONSERVATION SECURITY PROGRAM.

4 (a) EXTENSION.—Section 1238A(a) of the Food Secu5 rity Act of 1985 (16 U.S.C. 3838a(a)) is amended by strik6 ing ‘‘2007’’ and inserting ‘‘2011’’.

7 (b) FUNDING.—Section 1241(a)(3) of the Food Secu8 rity Act of 1985 (16 U.S.C. 3841(a)(3)) is amended by

9 striking ‘‘not more than $6,037,000,000’’ and all that fol10 lows through ‘‘2014.’’ and inserting the following: ‘‘not more

11 than—

12 ‘‘(A) $1,954,000,000 for the period of fiscal

13 years 2006 through 2010; and

14 ‘‘(B) $5,650,000,000 for the period of fiscal

15 years 2006 through 2015.’’.

16 SEC. 1203. ENVIRONMENTAL QUALITY INCENTIVES PRO17 GRAM.

18 (a) EXTENSION.—Section 1240B(a)(1) of the Food Se19 curity Act of 1985 (16 U.S.C. 3839aa–2(a)(1)) is amended

20 by striking ‘‘2007’’ and inserting ‘‘2010’’.

21 (b) LIMITATION ON PAYMENTS.—Section 1240G of the

22 Food Security Act of 1985 (16 U.S.C. 3839aa–7) is amend23 ed by striking ‘‘the period of fiscal years 2002 through

24 2007’’ and inserting ‘‘any six-year period’’.
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1 (c) FUNDING.—Section 1241(a)(6) of the Food Secu2 rity Act of 1985 (16 U.S.C. 3841(a)(6)) is amended—

3 (1) by striking ‘‘and’’ at the end of subpara4 graph (D); and

5 (2) by striking subparagraph (E) and inserting

6 the following new subparagraphs:

7 ‘‘(E) $1,270,000,000 in each of fiscal years

8 2007 through 2009; and

9 ‘‘(F) $1,300,000,000 in fiscal year 2010.’’.

10 Subtitle C—Energy

11 SEC. 1301. RENEWABLE ENERGY SYSTEMS AND ENERGY EF12 FICIENCY IMPROVEMENTS PROGRAM.

13 Section 9006(f) of the Farm Security and Rural In14 vestment Act of 2002 (7 U.S.C. 8106(f)) is amended by

15 striking ‘‘2007’’ and inserting ‘‘2006 and $3,000,000 for fis16 cal year 2007’’.

17 Subtitle D—Rural Development

18 SEC. 1401. ENHANCED ACCESS TO BROADBAND TELE19 COMMUNICATIONS SERVICES IN RURAL

20 AREAS.

21 The authority to obligate funds previously made avail22 able under section 601(j)(1) of the Rural Electrification Act

23 of 1936 for a fiscal year and unobligated as of October 1,

24 2006, is hereby cancelled effective on that date.
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1 SEC. 1402. VALUE-ADDED AGRICULTURAL PRODUCT MAR2 KET DEVELOPMENT GRANTS.

3 The authority to obligate funds previously made avail4 able under section 231(b)(4) of the Agricultural Risk Pro5 tection Act of 2000 (Pub. L. 106–224; 7 U.S.C. 1621 note)

6 for a fiscal year and unobligated as of October 1, 2006, is

7 hereby cancelled effective on that date.

8 SEC. 1403. RURAL BUSINESS INVESTMENT PROGRAM.

9 (a) TERMINATION OF FISCAL YEAR 2007 AND SUBSE10 QUENT FUNDING.—Subsection (a)(1) of section 384S of the

11 Consolidated Farm and Rural Development Act (7 U.S.C.

12 2009cc–18) is amended by inserting after ‘‘necessary’’ the

13 following: ‘‘through fiscal year 2006’’.

14 (b) CANCELLATION OF UNOBLIGATED PRIOR-YEAR

15 FUNDS.—The authority to obligate funds previously made

16 available under such section and unobligated as of October

17 1, 2006, is hereby cancelled effective on that date.

18 SEC. 1404. RURAL BUSINESS STRATEGIC INVESTMENT

19 GRANTS.

20 The authority to obligate funds previously made avail21 able under section 385E of the Consolidated Farm and

22 Rural Development Act and unobligated as of October 1,

23 2006, is hereby cancelled effective on that date.
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1 SEC. 1405. RURAL FIREFIGHTERS AND EMERGENCY PER2 SONNEL GRANTS.

3 (a) TERMINATION OF FISCAL YEAR 2007 FUNDING.—

4 Subsection (c) of section 6405 of the Farm Security and

5 Rural Investment Act of 2002 (7 U.S.C. 2655) is amended

6 by striking ‘‘2007’’ and inserting ‘‘2006’’.

7 (b) CANCELLATION OF UNOBLIGATED PRIOR-YEAR

8 FUNDS.—The authority to obligate funds previously made

9 available under such section for a fiscal year and unobli10 gated as of October 1, 2006, is hereby cancelled effective on

11 that date.

12 Subtitle E—Research

13 SEC. 1501. INITIATIVE FOR FUTURE FOOD AND AGRI14 CULTURE SYSTEMS.

15 (a) TERMINATION OF FISCAL YEAR 2007, 2008, AND

16 2009 TRANSFERS.—Subsection (b)(3)(D) of section 401 of

17 the Agricultural Research, Extension, and Education Re18 form Act of 1998 (7 U.S.C. 7621) is amended by striking

19 ‘‘2006’’ and inserting ‘‘2009’’.

20 (b) TERMINATION OF MULTI-YEAR AVAILABILITY OF

21 FISCAL YEAR 2006 FUNDS.—Paragraph (6) of subsection

22 (f) of such section is amended to read as follows:

23 ‘‘(6) AVAILABILITY OF FUNDS.—

24 ‘‘(A) TWO-YEAR AVAILABILITY.—Except as

25 provided in subparagraph (B), funds for grants

26 under this section shall be available to the Sec-
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1 retary for obligation for a 2-year period begin2 ning on the date of the transfer of the funds

3 under subsection (b).

4 ‘‘(B) EXCEPTION FOR FISCAL YEAR 2006

5 TRANSFER.—In the case of the funds required to

6 be transferred by subsection (b)(3)(C), the funds

7 shall be available to the Secretary for obligation

8 for the 1-year period beginning on October 1,

9 2005.’’

10 TITLE II—HOUSING AND DE11 POSIT INSURANCE PROVI12 SIONS

13 Subtitle A—FHA Asset Disposition

14 SEC. 2001. DEFINITIONS.

15 For purposes of this subtitle, the following definitions

16 shall apply:

17 (1) The term ‘‘affordability requirements’’ means

18 any requirements or restrictions imposed by the Sec19 retary, at the time of sale, on a multifamily real

20 property or a multifamily loan, such as use restric21 tions, rent restrictions, and rehabilitation require22 ments.

23 (2) The term ‘‘discount sale’’ means the sale of

24 a multifamily real property in a transaction, such as

25 a negotiated sale, in which the sale price is lower
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1 than the property market value and is set outside of

2 a competitive bidding process that has no afford3 ability requirements.

4 (3) The term ‘‘discount loan sale’’ means the sale

5 of a multifamily loan in a transaction, such as a ne6 gotiated sale, in which the sale price is lower than the

7 loan market value and is set outside of a competitive

8 bidding process that has no affordability require9 ments.

10 (4) The term ‘‘loan market value’’ means the

11 value of a multifamily loan, without taking into ac12 count any affordability requirements.

13 (5) The term ‘‘multifamily real property’’ means

14 any rental or cooperative housing project of 5 or more

15 units owned by the Secretary that prior to acquisition

16 by the Secretary was security for a loan or loans in17 sured under title II of the National Housing Act.

18 (6) The term ‘‘multifamily loan’’ means a loan

19 held by the Secretary and secured by a multifamily

20 rental or cooperative housing project of 5 or more

21 units that was formerly insured under title II of the

22 National Housing Act.

23 (7) The term ‘‘property market value’’ means the

24 value of a multifamily real property for its current
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1 use, without taking into account any affordability re2 quirements.

3 (8) The term ‘‘Secretary’’ means the Secretary of

4 Housing and Urban Development.

5 SEC. 2002. APPROPRIATED FUNDS REQUIREMENT FOR

6 BELOW-MARKET SALES.

7 (a) DISCOUNT SALES.—Notwithstanding any other

8 provision of law, except for affordability requirements for

9 the elderly and disabled required by statute, disposition by

10 the Secretary of a multifamily real property during fiscal

11 years 2006 through 2010 through a discount sale under sec12 tions 207(l) or 246 of the National Housing Act (12 U.S.C.

13 1713(l), 1715z–11), section 203 of the Housing and Com14 munity Development Amendments of 1978 (12 U.S.C.

15 1701z–11), or section 204 of the Departments of Veterans

16 Affairs and Housing and Urban Development, and Inde17 pendent Agencies Appropriations Act, 1997 (12 U.S.C.

18 1715z–11a), shall be subject to the availability of appro19 priations to the extent that the property market value ex20 ceeds the sale proceeds. If the multifamily real property is

21 sold, during such fiscal years, for an amount equal to or

22 greater than the property market value then the transaction

23 is not subject to the availability of appropriations.

24 (b) DISCOUNT LOAN SALES.—Notwithstanding any

25 other provision of law and in accordance with the Federal
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1 Credit Reform Act of 1990 (2 U.S.C. 661 et seq.), a discount

2 loan sale during fiscal years 2006 through 2010 under sec3 tion 207(k) of the National Housing Act (12 U.S.C.

4 1713(k)), section 203(k) of the Housing and Community

5 Development Amendments of 1978 (12 U.S.C. 1701z–11(k)),

6 or section 204(a) of the Departments of Veterans Affairs

7 and Housing and Urban Development, and Independent

8 Agencies Appropriations Act, 1997 (12 U.S.C. 1715z–

9 11a(a)), shall be subject to the availability of appropria10 tions to the extent that the loan market value exceeds the

11 sale proceeds. If the multifamily loan is sold, during such

12 fiscal years, for an amount equal to or greater than the

13 loan market value then the transaction is not subject to the

14 availability of appropriations.

15 (c) APPLICABILITY.—This section shall not apply to

16 any transaction that formally commences within one year

17 prior to the enactment of this section.

18 SEC. 2003. UP-FRONT GRANTS.

19 (a) 1997 ACT.—Section 204(a) of the Departments of

20 Veterans Affairs and Housing and Urban Development, and

21 Independent Agencies Appropriations Act, 1997 (12 U.S.C.

22 1715z–11a(a)) is amended by adding at the end the fol23 lowing new sentence: ‘‘A grant provided under this sub24 section during fiscal years 2006 through 2010 shall be

25 available only to the extent that appropriations are made
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1 in advance for such purposes and shall not be derived from

2 the General Insurance Fund.’’.

3 (b) 1978 ACT.—Section 203(f)(4) of the Housing and

4 Community Development Amendments of 1978 (12 U.S.C.

5 1701z–11(f)(4)) is amended by adding at the end the fol6 lowing new sentence: ‘‘This paragraph shall be effective dur7 ing fiscal years 2006 through 2010 only to the extent that

8 such budget authority is made available for use under this

9 paragraph in advance in appropriation acts.’’.

10 (c) APPLICABILITY.—The amendments made by this

11 section shall not apply to any transaction that formally

12 commences within one year prior to the enactment of this

13 section.

14 Subtitle B—Deposit Insurance

15 SEC. 2101. SHORT TITLE.

16 This subtitle may be cited as the ‘‘Federal Deposit In17 surance Reform Act of 2005’’.

18 SEC. 2102. MERGING THE BIF AND SAIF.

19 (a) IN GENERAL.—

20 (1) MERGER.—The Bank Insurance Fund and

21 the Savings Association Insurance Fund shall be

22 merged into the Deposit Insurance Fund.

23 (2) DISPOSITION OF ASSETS AND LIABILITIES.—

24 All assets and liabilities of the Bank Insurance Fund
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1 and the Savings Association Insurance Fund shall be

2 transferred to the Deposit Insurance Fund.

3 (3) NO SEPARATE EXISTENCE.—The separate ex4 istence of the Bank Insurance Fund and the Savings

5 Association Insurance Fund shall cease on the effec6 tive date of the merger thereof under this section.

7 (b) REPEAL OF OUTDATED MERGER PROVISION.—Sec8 tion 2704 of the Deposit Insurance Funds Act of 1996 (12

9 U.S.C. 1821 note) is repealed.

10 (c) EFFECTIVE DATE.—This section shall take effect

11 no later than the first day of the first calendar quarter that

12 begins after the end of the 90-day period beginning on the

13 date of the enactment of this Act.

14 SEC. 2103. INCREASE IN DEPOSIT INSURANCE COVERAGE.

15 (a) IN GENERAL.—Section 11(a)(1) of the Federal De16 posit Insurance Act (12 U.S.C. 1821(a)(1)) is amended—

17 (1) by striking subparagraph (B) and inserting

18 the following new subparagraph:

19 ‘‘(B) NET AMOUNT OF INSURED DEPOSIT.—

20 The net amount due to any depositor at an in21 sured depository institution shall not exceed the

22 standard maximum deposit insurance amount as

23 determined in accordance with subparagraphs

24 (C), (D), (E) and (F) and paragraph (3).’’; and
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1 (2) by adding at the end the following new sub2 paragraphs:

3 ‘‘(E) STANDARD MAXIMUM DEPOSIT INSUR4 ANCE AMOUNT DEFINED.—For purposes of this

5 Act, the term ‘standard maximum deposit insur6 ance amount’ means $100,000, adjusted as pro7 vided under subparagraph (F) after March 31,

8 2010.

9 ‘‘(F) INFLATION ADJUSTMENT.—

10 ‘‘(i) IN GENERAL.—By April 1 of

11 2010, and the 1st day of each subsequent 5-

12 year period, the Board of Directors and the

13 National Credit Union Administration

14 Board shall jointly consider the factors set

15 forth under clause (v), and, upon deter16 mining that an inflation adjustment is ap17 propriate, shall jointly prescribe the amount

18 by which the standard maximum deposit

19 insurance amount and the standard max20 imum share insurance amount (as defined

21 in section 207(k) of the Federal Credit

22 Union Act) applicable to any depositor at

23 an insured depository institution shall be

24 increased by calculating the product of—

25 ‘‘(I) $100,000; and
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1 ‘‘(II) the ratio of the published

2 annual value of the Personal Consump3 tion Expenditures Chain-Type Price

4 Index (or any successor index thereto),

5 published by the Department of Com6 merce, for the calendar year preceding

7 the year in which the adjustment is

8 calculated under this clause, to the

9 published annual value of such index

10 for the calendar year preceding the

11 date this subparagraph takes effect

12 under the Federal Deposit Insurance

13 Reform Act of 2005.

14 The values used in the calculation under

15 subclause (II) shall be, as of the date of the

16 calculation, the values most recently pub17 lished by the Department of Commerce.

18 ‘‘(ii) ROUNDING.—If the amount deter19 mined under clause (ii) for any period is

20 not a multiple of $10,000, the amount so

21 determined shall be rounded down to the

22 nearest $10,000.

23 ‘‘(iii) PUBLICATION AND REPORT TO

24 THE CONGRESS.—Not later than April 5 of

25 any calendar year in which an adjustment
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1 is required to be calculated under clause (i)

2 to the standard maximum deposit insurance

3 amount and the standard maximum share

4 insurance amount under such clause, the

5 Board of Directors and the National Credit

6 Union Administration Board shall—

7 ‘‘(I) publish in the Federal Reg8 ister the standard maximum deposit

9 insurance amount, the standard max10 imum share insurance amount, and

11 the amount of coverage under para12 graph (3)(A) and section 207(k)(3) of

13 the Federal Credit Union Act, as so

14 calculated; and

15 ‘‘(II) jointly submit a report to

16 the Congress containing the amounts

17 described in subclause (I).

18 ‘‘(iv) 6-MONTH IMPLEMENTATION PE19 RIOD.—Unless an Act of Congress enacted

20 before July 1 of the calendar year in which

21 an adjustment is required to be calculated

22 under clause (i) provides otherwise, the in23 crease in the standard maximum deposit

24 insurance amount and the standard max25 imum share insurance amount shall take ef-
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1 fect on January 1 of the year immediately

2 succeeding such calendar year.

3 ‘‘(v) INFLATION ADJUSTMENT CONSID4 ERATION.—In making any determination

5 under clause (i) to increase the standard

6 maximum deposit insurance amount and

7 the standard maximum share insurance

8 amount, the Board of Directors and the Na9 tional Credit Union Administration Board

10 shall jointly consider—

11 ‘‘(I) the overall state of the De12 posit Insurance Fund and the eco13 nomic conditions affecting insured de14 pository institutions;

15 ‘‘(II) potential problems affecting

16 insured depository institutions; or

17 ‘‘(III) whether the increase will

18 cause the reserve ratio of the fund to

19 fall below 1.15 percent of estimated in20 sured deposits.’’.

21 (b) COVERAGE FOR CERTAIN EMPLOYEE BENEFIT

22 PLAN DEPOSITS.—Section 11(a)(1)(D) of the Federal De23 posit Insurance Act (12 U.S.C. 1821(a)(1)(D)) is amended

24 to read as follows:
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1 ‘‘(D) COVERAGE FOR CERTAIN EMPLOYEE

2 BENEFIT PLAN DEPOSITS.—

3 ‘‘(i) PASS-THROUGH INSURANCE.—The

4 Corporation shall provide pass-through de5 posit insurance for the deposits of any em6 ployee benefit plan.

7 ‘‘(ii) PROHIBITION ON ACCEPTANCE OF

8 BENEFIT PLAN DEPOSITS.—An insured de9 pository institution that is not well capital10 ized or adequately capitalized may not ac11 cept employee benefit plan deposits.

12 ‘‘(iii) DEFINITIONS.—For purposes of

13 this subparagraph, the following definitions

14 shall apply:

15 ‘‘(I) CAPITAL STANDARDS.—The

16 terms ‘well capitalized’ and ‘ade17 quately capitalized’ have the same

18 meanings as in section 38.

19 ‘‘(II) EMPLOYEE BENEFIT

20 PLAN.—The term ‘employee benefit

21 plan’ has the same meaning as in

22 paragraph (5)(B)(ii), and includes any

23 eligible deferred compensation plan de24 scribed in section 457 of the Internal

25 Revenue Code of 1986.
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1 ‘‘(III) PASS-THROUGH DEPOSIT

2 INSURANCE.—The term ‘pass-through

3 deposit insurance’ means, with respect

4 to an employee benefit plan, deposit

5 insurance coverage based on the inter6 est of each participant, in accordance

7 with regulations issued by the Corpora8 tion.’’.

9 (c) INCREASED AMOUNT OF DEPOSIT INSURANCE FOR

10 CERTAIN RETIREMENT ACCOUNTS.—Section 11(a)(3)(A) of

11 the Federal Deposit Insurance Act (12 U.S.C.

12 1821(a)(3)(A)) is amended by striking ‘‘$100,000’’ and in13 serting ‘‘$250,000 (which amount shall be subject to infla14 tion adjustments as provided in paragraph (1)(F), except

15 that $250,000 shall be substituted for $100,000 wherever

16 such term appears in such paragraph)’’.

17 (d) EFFECTIVE DATE.—This section and the amend18 ments made by this section shall take effect on the date the

19 final regulations required under section 9(a)(2) take effect.

20 SEC. 2104. SETTING ASSESSMENTS AND REPEAL OF SPE21 CIAL RULES RELATING TO MINIMUM ASSESS22 MENTS AND FREE DEPOSIT INSURANCE.

23 (a) SETTING ASSESSMENTS.—Section 7(b)(2) of the

24 Federal Deposit Insurance Act (12 U.S.C. 1817(b)(2)) is

25 amended—
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1 (1) by striking subparagraphs (A) and (B) and

2 inserting the following new subparagraphs:

3 ‘‘(A) IN GENERAL.—The Board of Directors

4 shall set assessments for insured depository insti5 tutions in such amounts as the Board of Direc6 tors may determine to be necessary or appro7 priate, subject to subparagraph (D).

8 ‘‘(B) FACTORS TO BE CONSIDERED.—In set9 ting assessments under subparagraph (A), the

10 Board of Directors shall consider the following

11 factors:

12 ‘‘(i) The estimated operating expenses

13 of the Deposit Insurance Fund.

14 ‘‘(ii) The estimated case resolution ex15 penses and income of the Deposit Insurance

16 Fund.

17 ‘‘(iii) The projected effects of the pay18 ment of assessments on the capital and

19 earnings of insured depository institutions.

20 ‘‘(iv) The risk factors and other factors

21 taken into account pursuant to paragraph

22 (1) under the risk-based assessment system,

23 including the requirement under such para24 graph to maintain a risk-based system.
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1 ‘‘(v) Any other factors the Board of Di2 rectors may determine to be appropriate.’’;

3 and

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

6 ‘‘(D) NO DISCRIMINATION BASED ON

7 SIZE.—No insured depository institution shall be

8 barred from the lowest-risk category solely be9 cause of size.’’.

10 (b) ASSESSMENT RECORDKEEPING PERIOD SHORT11 ENED.—Paragraph (5) of section 7(b) of the Federal De12 posit Insurance Act (12 U.S.C. 1817(b)) is amended to read

13 as follows:

14 ‘‘(5) DEPOSITORY INSTITUTION REQUIRED TO

15 MAINTAIN ASSESSMENT-RELATED RECORDS.—Each

16 insured depository institution shall maintain all

17 records that the Corporation may require for

18 verifying the correctness of any assessment on the in19 sured depository institution under this subsection

20 until the later of—

21 ‘‘(A) the end of the 3-year period beginning

22 on the due date of the assessment; or

23 ‘‘(B) in the case of a dispute between the in24 sured depository institution and the Corporation
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1 with respect to such assessment, the date of a

2 final determination of any such dispute.’’.

3 (c) INCREASE IN FEES FOR LATE ASSESSMENT PAY4 MENTS.—Subsection (h) of section 18 of the Federal Deposit

5 Insurance Act (12 U.S.C. 1828(h)) is amended to read as

6 follows:

7 ‘‘(h) PENALTY FOR FAILURE TO TIMELY PAY ASSESS8 MENTS.—

9 ‘‘(1) IN GENERAL.—Subject to paragraph (3),

10 any insured depository institution which fails or re11 fuses to pay any assessment shall be subject to a pen12 alty in an amount of not more than 1 percent of the

13 amount of the assessment due for each day that such

14 violation continues.

15 ‘‘(2) EXCEPTION IN CASE OF DISPUTE.—Para16 graph (1) shall not apply if—

17 ‘‘(A) the failure to pay an assessment is due

18 to a dispute between the insured depository insti19 tution and the Corporation over the amount of

20 such assessment; and

21 ‘‘(B) the insured depository institution de22 posits security satisfactory to the Corporation for

23 payment upon final determination of the issue.

24 ‘‘(3) SPECIAL RULE FOR SMALL ASSESSMENT

25 AMOUNTS.—If the amount of the assessment which an
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1 insured depository institution fails or refuses to pay

2 is less than $10,000 at the time of such failure or re3 fusal, the amount of any penalty to which such insti4 tution is subject under paragraph (1) shall not exceed

5 $100 for each day that such violation continues.

6 ‘‘(4) AUTHORITY TO MODIFY OR REMIT PEN7 ALTY.—The Corporation, in the sole discretion of the

8 Corporation, may compromise, modify or remit any

9 penalty which the Corporation may assess or has al10 ready assessed under paragraph (1) upon a finding

11 that good cause prevented the timely payment of an

12 assessment.’’.

13 (d) STATUTE OF LIMITATIONS FOR ASSESSMENT AC14 TIONS.—Subsection (g) of section 7 of the Federal Deposit

15 Insurance Act (12 U.S.C. 1817(g)) is amended to read as

16 follows:

17 ‘‘(g) ASSESSMENT ACTIONS.—

18 ‘‘(1) IN GENERAL.—The Corporation, in any

19 court of competent jurisdiction, shall be entitled to re20 cover from any insured depository institution the

21 amount of any unpaid assessment lawfully payable

22 by such insured depository institution.

23 ‘‘(2) STATUTE OF LIMITATIONS.—The following

24 provisions shall apply to actions relating to assess-
 †

25

S 1932 EAS

1 ments, notwithstanding any other provision in Fed2 eral law, or the law of any State:

3 ‘‘(A) Any action by an insured depository

4 institution to recover from the Corporation the

5 overpaid amount of any assessment shall be

6 brought within 3 years after the date the assess7 ment payment was due, subject to the exception

8 in subparagraph (E).

9 ‘‘(B) Any action by the Corporation to re10 cover from an insured depository institution the

11 underpaid amount of any assessment shall be

12 brought within 3 years after the date the assess13 ment payment was due, subject to the exceptions

14 in subparagraphs (C) and (E).

15 ‘‘(C) If an insured depository institution

16 has made a false or fraudulent statement with

17 intent to evade any or all of its assessment, the

18 Corporation shall have until 3 years after the

19 date of discovery of the false or fraudulent state20 ment in which to bring an action to recover the

21 underpaid amount.

22 ‘‘(D) Except as provided in subparagraph

23 (C), assessment deposit information contained in

24 records no longer required to be maintained pur-
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26

S 1932 EAS

1 suant to subsection (b)(4) shall be considered

2 conclusive and not subject to change.

3 ‘‘(E) Any action for the underpaid or over4 paid amount of any assessment that became due

5 before the amendment to this subsection under

6 the Federal Deposit Insurance Reform Act of

7 2005 took effect shall be subject to the statute of

8 limitations for assessments in effect at the time

9 the assessment became due.’’.

10 (e) EFFECTIVE DATE.—This section and the amend11 ments made by this section shall take effect on the date that

12 the final regulations required under section 9(a)(5) take ef13 fect.

14 SEC. 2105. REPLACEMENT OF FIXED DESIGNATED RESERVE

15 RATIO WITH RESERVE RANGE.

16 (a) IN GENERAL.—Section 7(b)(3) of the Federal De17 posit Insurance Act (12 U.S.C. 1817(b)(3)) is amended to

18 read as follows:

19 ‘‘(3) DESIGNATED RESERVE RATIO.—

20 ‘‘(A) ESTABLISHMENT.—

21 ‘‘(i) IN GENERAL.—Before the begin22 ning of each calendar year, the Board of

23 Directors shall designate the reserve ratio

24 applicable with respect to the Deposit In-
 †

27

S 1932 EAS

1 surance Fund and publish the reserve ratio

2 so designated.

3 ‘‘(ii) RULEMAKING REQUIREMENT.—

4 Any change to the designated reserve ratio

5 shall be made by the Board of Directors by

6 regulation after notice and opportunity for

7 comment.

8 ‘‘(B) RANGE.—The reserve ratio designated

9 by the Board of Directors for any year—

10 ‘‘(i) may not exceed 1.5 percent of esti11 mated insured deposits; and

12 ‘‘(ii) may not be less than 1.15 percent

13 of estimated insured deposits.

14 ‘‘(C) FACTORS.—In designating a reserve

15 ratio for any year, the Board of Directors

16 shall—

17 ‘‘(i) take into account the risk of losses

18 to the Deposit Insurance Fund in such year

19 and future years, including historic experi20 ence and potential and estimated losses

21 from insured depository institutions;

22 ‘‘(ii) take into account economic condi23 tions generally affecting insured depository

24 institutions so as to allow the designated re25 serve ratio to increase during more favor-
 †

28

S 1932 EAS

1 able economic conditions and to decrease

2 during less favorable economic conditions,

3 notwithstanding the increased risks of loss

4 that may exist during such less favorable

5 conditions, as determined to be appropriate

6 by the Board of Directors;

7 ‘‘(iii) seek to prevent sharp swings in

8 the assessment rates for insured depository

9 institutions; and

10 ‘‘(iv) take into account such other fac11 tors as the Board of Directors may deter12 mine to be appropriate, consistent with the

13 requirements of this subparagraph.

14 ‘‘(D) PUBLICATION OF PROPOSED CHANGE

15 IN RATIO.—In soliciting comment on any pro16 posed change in the designated reserve ratio in

17 accordance with subparagraph (A), the Board of

18 Directors shall include in the published proposal

19 a thorough analysis of the data and projections

20 on which the proposal is based.’’.

21 (b) EFFECTIVE DATE.—This section and the amend22 ments made by this section shall take effect on the date that

23 the final regulations required under section 9(a)(1) take ef24 fect.
 †

29

S 1932 EAS

1 SEC. 2106. REQUIREMENTS APPLICABLE TO THE RISK2 BASED ASSESSMENT SYSTEM.

3 Section 7(b)(1) of the Federal Deposit Insurance Act

4 (12 U.S.C. 1817(b)(1)) is amended by adding at the end

5 the following new subparagraphs:

6 ‘‘(E) INFORMATION CONCERNING RISK OF

7 LOSS AND ECONOMIC CONDITIONS.—

8 ‘‘(i) SOURCES OF INFORMATION.—For

9 purposes of determining risk of losses at in10 sured depository institutions and economic

11 conditions generally affecting depository in12 stitutions, the Corporation shall collect in13 formation, as appropriate, from all sources

14 the Board of Directors considers appro15 priate, such as reports of condition, inspec16 tion reports, and other information from all

17 Federal banking agencies, any information

18 available from State bank supervisors, State

19 insurance and securities regulators, the Se20 curities and Exchange Commission (includ21 ing information described in section 35),

22 the Secretary of the Treasury, the Com23 modity Futures Trading Commission, the

24 Farm Credit Administration, the Federal

25 Trade Commission, any Federal reserve

26 bank or Federal home loan bank, and other
 †

30

S 1932 EAS

1 regulators of financial institutions, and any

2 information available from credit rating en3 tities, and other private economic or busi4 ness analysts.

5 ‘‘(ii) CONSULTATION WITH FEDERAL

6 BANKING AGENCIES.—

7 ‘‘(I) IN GENERAL.—Except as pro8 vided in subclause (II), in assessing the

9 risk of loss to the Deposit Insurance

10 Fund with respect to any insured de11 pository institution, the Corporation

12 shall consult with the appropriate Fed13 eral banking agency of such institu14 tion.

15 ‘‘(II) TREATMENT ON AGGREGATE

16 BASIS.—In the case of insured deposi17 tory institutions that are well capital18 ized (as defined in section 38) and, in

19 the most recent examination, were

20 found to be well managed, the consulta21 tion under subclause (I) concerning the

22 assessment of the risk of loss posed by

23 such institutions may be made on an

24 aggregate basis.
 †

31

S 1932 EAS

1 ‘‘(iii) RULE OF CONSTRUCTION.—No

2 provision of this paragraph shall be con3 strued as providing any new authority for

4 the Corporation to require submission of in5 formation by insured depository institutions

6 to the Corporation.

7 ‘‘(F) MODIFICATIONS TO THE RISK-BASED

8 ASSESSMENT SYSTEM ALLOWED ONLY AFTER NO9 TICE AND COMMENT.—In revising or modifying

10 the risk-based assessment system at any time

11 after the date of the enactment of the Federal De12 posit Insurance Reform Act of 2005, the Board

13 of Directors may implement such revisions or

14 modification in final form only after notice and

15 opportunity for comment.’’.

16 SEC. 2107. REFUNDS, DIVIDENDS, AND CREDITS FROM DE17 POSIT INSURANCE FUND.

18 (a) IN GENERAL.—Subsection (e) of section 7 of the

19 Federal Deposit Insurance Act (12 U.S.C. 1817(e)) is

20 amended to read as follows:

21 ‘‘(e) REFUNDS, DIVIDENDS, AND CREDITS.—

22 ‘‘(1) REFUNDS OF OVERPAYMENTS.—In the case

23 of any payment of an assessment by an insured de24 pository institution in excess of the amount due to the

25 Corporation, the Corporation may—
 †

32

S 1932 EAS

1 ‘‘(A) refund the amount of the excess pay2 ment to the insured depository institution; or

3 ‘‘(B) credit such excess amount toward the

4 payment of subsequent assessments until such

5 credit is exhausted.

6 ‘‘(2) DIVIDENDS FROM EXCESS AMOUNTS IN DE7 POSIT INSURANCE FUND.—

8 ‘‘(A) RESERVE RATIO IN EXCESS OF 1.5

9 PERCENT OF ESTIMATED INSURED DEPOSITS.—

10 If, at the end of a calendar year, the reserve

11 ratio of the Deposit Insurance Fund exceeds 1.5

12 percent of estimated insured deposits, the Cor13 poration shall declare the amount in the Fund

14 in excess of the amount required to maintain the

15 reserve ratio at 1.5 percent of estimated insured

16 deposits, as dividends to be paid to insured de17 pository institutions.

18 ‘‘(B) RESERVE RATIO EQUAL TO OR IN EX19 CESS OF 1.35 PERCENT OF ESTIMATED INSURED

20 DEPOSITS AND NOT MORE THAN 1.5 PERCENT.—

21 If, at the end of a calendar year, the reserve

22 ratio of the Deposit Insurance Fund equals or

23 exceeds 1.35 percent of estimated insured deposits

24 and is not more than 1.5 percent of such depos25 its, the Corporation shall declare the amount in
 †

33

S 1932 EAS

1 the Fund that is equal to 50 percent of the

2 amount in excess of the amount required to

3 maintain the reserve ratio at 1.35 percent of the

4 estimated insured deposits as dividends to be

5 paid to insured depository institutions.

6 ‘‘(C) BASIS FOR DISTRIBUTION OF DIVI7 DENDS.—

8 ‘‘(i) IN GENERAL.—Solely for the pur9 poses of dividend distribution under this

10 paragraph, the Corporation shall determine

11 each insured depository institution’s rel12 ative contribution to the Deposit Insurance

13 Fund (or any predecessor deposit insurance

14 fund) for calculating such institution’s

15 share of any dividend declared under this

16 paragraph, taking into account the factors

17 described in clause (ii).

18 ‘‘(ii) FACTORS FOR DISTRIBUTION.—In

19 implementing this paragraph in accordance

20 with regulations, the Corporation shall take

21 into account the following factors:

22 ‘‘(I) The ratio of the assessment

23 base of an insured depository institu24 tion (including any predecessor) on

25 December 31, 1996, to the assessment
 †

34

S 1932 EAS

1 base of all eligible insured depository

2 institutions on that date.

3 ‘‘(II) The total amount of assess4 ments paid on or after January 1,

5 1997, by an insured depository institu6 tion (including any predecessor) to the

7 Deposit Insurance Fund (and any

8 predecessor deposit insurance fund).

9 ‘‘(III) That portion of assessments

10 paid by an insured depository institu11 tion (including any predecessor) that

12 reflects higher levels of risk assumed by

13 such institution.

14 ‘‘(IV) Such other factors as the

15 Corporation may determine to be ap16 propriate.

17 ‘‘(D) NOTICE AND OPPORTUNITY FOR COM18 MENT.—The Corporation shall prescribe by regu19 lation, after notice and opportunity for com20 ment, the method for the calculation, declaration,

21 and payment of dividends under this paragraph.

22 ‘‘(E) LIMITATION.—The Board of Directors

23 may suspend or limit dividends paid under sub24 paragraph (B), if the Board determines in writ25 ing that—
 †

35

S 1932 EAS

1 ‘‘(i) a significant risk of losses to the

2 Deposit Insurance Fund exists over the next

3 1-year period; and

4 ‘‘(ii) it is likely that such losses will be

5 sufficiently high as to justify a finding by

6 the Board that the reserve ratio should tem7 porarily be allowed—

8 ‘‘(I) to grow without requiring

9 dividends under subparagraph (B); or

10 ‘‘(II) to exceed the maximum

11 amount established under subsection

12 (b)(3)(B)(i).

13 ‘‘(F) CONSIDERATIONS.—In making a de14 termination under subparagraph (E), the Board

15 shall consider—

16 ‘‘(i) national and regional conditions

17 and their impact on insured depository in18 stitutions;

19 ‘‘(ii) potential problems affecting in20 sured depository institutions or a specific

21 group or type of depository institution;

22 ‘‘(iii) the degree to which the contin23 gent liability of the Corporation for antici24 pated failures of insured institutions ade-
 †

36

S 1932 EAS

1 quately addresses concerns over funding lev2 els in the Deposit Insurance Fund; and

3 ‘‘(iv) any other factors that the Board

4 determines are appropriate.

5 ‘‘(G) REVIEW OF DETERMINATION.—

6 ‘‘(i) ANNUAL REVIEW.—A determina7 tion to suspend or limit dividends under

8 subparagraph (E) shall be reviewed by the

9 Board of Directors annually.

10 ‘‘(ii) ACTION BY BOARD.—Based on

11 each annual review under clause (i), the

12 Board of Directors shall either renew or re13 move a determination to suspend or limit

14 dividends under subparagraph (E), or shall

15 make a new determination in accordance

16 with this paragraph. Unless justified under

17 the terms of the renewal or new determina18 tion, the Corporation shall be required to

19 provide cash dividends under subparagraph

20 (A) or (B), as appropriate.

21 ‘‘(3) ONE-TIME CREDIT BASED ON TOTAL AS22 SESSMENT BASE AT YEAR-END 1996.—

23 ‘‘(A) IN GENERAL.—Before the end of the

24 270-day period beginning on the date of the en25 actment of the Federal Deposit Insurance Reform
 †

37

S 1932 EAS

1 Act of 2005, the Board of Directors shall, by reg2 ulation after notice and opportunity for com3 ment, provide for a credit to each eligible insured

4 depository institution (or a successor insured de5 pository institution), based on the assessment

6 base of the institution on December 31, 1996, as

7 compared to the combined aggregate assessment

8 base of all eligible insured depository institu9 tions, taking into account such factors as the

10 Board of Directors may determine to be appro11 priate.

12 ‘‘(B) CREDIT LIMIT.—The aggregate

13 amount of credits available under subparagraph

14 (A) to all eligible insured depository institutions

15 shall equal the amount that the Corporation

16 could collect if the Corporation imposed an as17 sessment of 10.5 basis points on the combined as18 sessment base of the Bank Insurance Fund and

19 the Savings Association Insurance Fund as of

20 December 31, 2001.

21 ‘‘(C) ELIGIBLE INSURED DEPOSITORY IN22 STITUTION DEFINED.—For purposes of this para23 graph, the term ‘eligible insured depository insti24 tution’ means any insured depository institution

25 that—
 †

38

S 1932 EAS

1 ‘‘(i) was in existence on December 31,

2 1996, and paid a deposit insurance assess3 ment prior to that date; or

4 ‘‘(ii) is a successor to any insured de5 pository institution described in clause (i).

6 ‘‘(D) APPLICATION OF CREDITS.—

7 ‘‘(i) IN GENERAL.—Subject to clause

8 (ii), the amount of a credit to any eligible

9 insured depository institution under this

10 paragraph shall be applied by the Corpora11 tion, subject to subsection (b)(3)(E), to the

12 assessments imposed on such institution

13 under subsection (b) that become due for as14 sessment periods beginning after the effec15 tive date of regulations prescribed under

16 subparagraph (A).

17 ‘‘(ii) TEMPORARY RESTRICTION ON USE

18 OF CREDITS.—The amount of a credit to

19 any eligible insured depository institution

20 under this paragraph may not be applied to

21 more than 90 percent of the assessments im22 posed on such institution under subsection

23 (b) that become due for assessment periods

24 beginning in fiscal years 2008, 2009, and

25 2010.
 †

39

S 1932 EAS

1 ‘‘(iii) REGULATIONS.—The regulations

2 prescribed under subparagraph (A) shall es3 tablish the qualifications and procedures

4 governing the application of assessment

5 credits pursuant to clause (i).

6 ‘‘(E) LIMITATION ON AMOUNT OF CREDIT

7 FOR CERTAIN DEPOSITORY INSTITUTIONS.—In

8 the case of an insured depository institution that

9 exhibits financial, operational, or compliance

10 weaknesses ranging from moderately severe to

11 unsatisfactory, or is not adequately capitalized

12 (as defined in section 38) at the beginning of an

13 assessment period, the amount of any credit al14 lowed under this paragraph against the assess15 ment on that depository institution for such pe16 riod may not exceed the amount calculated by

17 applying to that depository institution the aver18 age assessment rate on all insured depository in19 stitutions for such assessment period.

20 ‘‘(F) SUCCESSOR DEFINED.—The Corpora21 tion shall define the term ‘successor’ for purposes

22 of this paragraph, by regulation, and may con23 sider any factors as the Board may deem appro24 priate.

25 ‘‘(4) ADMINISTRATIVE REVIEW.—
 †

40

S 1932 EAS

1 ‘‘(A) IN GENERAL.—The regulations pre2 scribed under paragraphs (2)(D) and (3) shall

3 include provisions allowing an insured deposi4 tory institution a reasonable opportunity to

5 challenge administratively the amount of the

6 credit or dividend determined under paragraph

7 (2) or (3) for such institution.

8 ‘‘(B) ADMINISTRATIVE REVIEW.—Any re9 view under subparagraph (A) of any determina10 tion of the Corporation under paragraph (2) or

11 (3) shall be final and not subject to judicial re12 view.’’.

13 (b) DEFINITION OF RESERVE RATIO.—Section 3(y) of

14 the Federal Deposit Insurance Act (12 U.S.C. 1813(y)) (as

15 amended by section 2105(b) of this subtitle) is amended by

16 adding at the end the following new paragraph:

17 ‘‘(3) RESERVE RATIO.—The term ‘reserve ratio’,

18 when used with regard to the Deposit Insurance Fund

19 other than in connection with a reference to the des20 ignated reserve ratio, means the ratio of the net worth

21 of the Deposit Insurance Fund to the value of the ag22 gregate estimated insured deposits.’’.
 †

41

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1 SEC. 2108. DEPOSIT INSURANCE FUND RESTORATION

2 PLANS.

3 Section 7(b)(3) of the Federal Deposit Insurance Act

4 (12 U.S.C. 1817(b)(3)) (as amended by section 2105(a) of

5 this subtitle) is amended by adding at the end the following

6 new subparagraph:

7 ‘‘(E) DIF RESTORATION PLANS.—

8 ‘‘(i) IN GENERAL.—Whenever—

9 ‘‘(I) the Corporation projects that

10 the reserve ratio of the Deposit Insur11 ance Fund will, within 6 months of

12 such determination, fall below the min13 imum amount specified in subpara14 graph (B)(ii) for the designated reserve

15 ratio; or

16 ‘‘(II) the reserve ratio of the De17 posit Insurance Fund actually falls

18 below the minimum amount specified

19 in subparagraph (B)(ii) for the des20 ignated reserve ratio without any de21 termination under subclause (I) having

22 been made,

23 the Corporation shall establish and imple24 ment a Deposit Insurance Fund restoration

25 plan within 90 days that meets the require26 ments of clause (ii) and such other condi-
 †

42

S 1932 EAS

1 tions as the Corporation determines to be

2 appropriate.

3 ‘‘(ii) REQUIREMENTS OF RESTORATION

4 PLAN.—A Deposit Insurance Fund restora5 tion plan meets the requirements of this

6 clause if the plan provides that the reserve

7 ratio of the Fund will meet or exceed the

8 minimum amount specified in subpara9 graph (B)(ii) for the designated reserve

10 ratio before the end of the 5-year period be11 ginning upon the implementation of the

12 plan (or such longer period as the Corpora13 tion may determine to be necessary due to

14 extraordinary circumstances).

15 ‘‘(iii) RESTRICTION ON ASSESSMENT

16 CREDITS.—As part of any restoration plan

17 under this subparagraph, the Corporation

18 may elect to restrict the application of as19 sessment credits provided under subsection

20 (e)(3) for any period that the plan is in ef21 fect.

22 ‘‘(iv) LIMITATION ON RESTRICTION.—

23 Notwithstanding clause (iii), while any res24 toration plan under this subparagraph is in

25 effect, the Corporation shall apply credits
 †

43

S 1932 EAS

1 provided to an insured depository institu2 tion under subsection (e)(3) against any as3 sessment imposed on the institution for any

4 assessment period in an amount equal to

5 the lesser of—

6 ‘‘(I) the amount of the assessment;

7 or

8 ‘‘(II) the amount equal to 3 basis

9 points of the institution’s assessment

10 base.

11 ‘‘(v) TRANSPARENCY.—Not more than

12 30 days after the Corporation establishes

13 and implements a restoration plan under

14 clause (i), the Corporation shall publish in

15 the Federal Register a detailed analysis of

16 the factors considered and the basis for the

17 actions taken with regard to the plan.’’.

18 SEC. 2109. REGULATIONS REQUIRED.

19 (a) IN GENERAL.—Not later than 270 days after the

20 date of the enactment of this Act, the Board of Directors

21 of the Federal Deposit Insurance Corporation shall pre22 scribe final regulations, after notice and opportunity for

23 comment—

24 (1) designating the reserve ratio for the Deposit

25 Insurance Fund in accordance with section 7(b)(3) of
 †

44

S 1932 EAS

1 the Federal Deposit Insurance Act (as amended by

2 section 2105 of this subtitle);

3 (2) implementing increases in deposit insurance

4 coverage in accordance with the amendments made by

5 section 2103 of this subtitle;

6 (3) implementing the dividend requirement

7 under section 7(e)(2) of the Federal Deposit Insurance

8 Act (as amended by section 2107 of this subtitle);

9 (4) implementing the 1-time assessment credit to

10 certain insured depository institutions in accordance

11 with section 7(e)(3) of the Federal Deposit Insurance

12 Act, as amended by section 2107 of this subtitle, in13 cluding the qualifications and procedures under

14 which the Corporation would apply assessment cred15 its; and

16 (5) providing for assessments under section 7(b)

17 of the Federal Deposit Insurance Act, as amended by

18 this subtitle.

19 (b) TRANSITION PROVISIONS.—

20 (1) CONTINUATION OF EXISTING ASSESSMENT

21 REGULATIONS.—No provision of this subtitle or any

22 amendment made by this subtitle shall be construed

23 as affecting the authority of the Corporation to set or

24 collect deposit insurance assessments pursuant to any
 †

45

S 1932 EAS

1 regulations in effect before the effective date of the

2 final regulations prescribed under subsection (a).

3 (2) TREATMENT OF DIF MEMBERS UNDER EXIST4 ING REGULATIONS.—As of the date of the merger of

5 the Bank Insurance Fund and the Savings Associa6 tion Insurance Fund pursuant to section 2102, the

7 assessment regulations in effect immediately before the

8 date of the enactment of this Act shall continue to

9 apply to all members of the Deposit Insurance Fund,

10 until such regulations are modified by the Corpora11 tion, notwithstanding that such regulations may refer

12 to ‘‘Bank Insurance Fund members’’ or ‘‘Savings As13 sociation Insurance Fund members’’.

14 TITLE III—DIGITAL TELEVISION

15 TRANSITION AND PUBLIC

16 SAFETY

17 SEC. 3001. SHORT TITLE; DEFINITION.

18 (a) SHORT TITLE.—This title may be cited as the

19 ‘‘Digital Television Transition and Public Safety Act of

20 2005’’.

21 (b) DEFINITION.—As used in this Act, the term ‘‘As22 sistant Secretary’’ means the Assistant Secretary for Com23 munications and Information of the Department of Com24 merce.
 †

46

S 1932 EAS

1 SEC. 3002. ANALOG SPECTRUM RECOVERY: FIRM DEADLINE.

2 (a) AMENDMENTS.—Section 309(j)(14) of the Commu3 nications Act of 1934 (47 U.S.C. 309(j)(14)) is amended—

4 (1) in subparagraph (A)—

5 (A) by inserting ‘‘full-power’’ before ‘‘tele6 vision broadcast license’’; and

7 (B) by striking ‘‘December 31, 2006’’ and

8 inserting ‘‘February 17, 2009’’;

9 (2) by striking subparagraph (B);

10 (3) in subparagraph (C)(i)(I), by striking ‘‘or

11 (B)’’;

12 (4) in subparagraph (D), by striking ‘‘subpara13 graph (C)(i)’’ and inserting ‘‘subparagraph (B)(i)’’;

14 and

15 (5) by redesignating subparagraphs (C) and (D)

16 as subparagraphs (B) and (C), respectively.

17 (b) TERMINATIONS OF ANALOG LICENSES AND BROAD18 CASTING.—The Federal Communications Commission shall

19 take such actions as are necessary—

20 (1) to terminate all licenses for full-power tele21 vision stations in the analog television service, and to

22 require the cessation of broadcasting by full-power

23 stations in the analog television service, by February

24 18, 2009; and

25 (2) to require by February 18, 2009, that all

26 broadcasting by Class A stations, whether in the ana-
 †

47

S 1932 EAS

1 log television service or digital television service, and

2 all broadcasting by full-power stations in the digital

3 television service, occur only on channels between

4 channels 2 and 36, inclusive, or 38 and 51, inclusive

5 (between frequencies 54 and 698 megahertz, inclu6 sive).

7 (c) CONFORMING AMENDMENTS.—

8 (1) Section 337(e) of the Communications Act of

9 1934 (47 U.S.C. 337(e)) is amended—

10 (A) in paragraph (1)—

11 (i) by striking ‘‘CHANNELS 60 TO 69’’

12 and inserting ‘‘CHANNELS 52 TO 69’’;

13 (ii) by striking ‘‘person who’’ and in14 serting ‘‘full-power television station li15 censee that’’;

16 (iii) by striking ‘‘746 and 806 mega17 hertz’’ and inserting ‘‘698 and 806 mega18 hertz’’; and

19 (iv) by striking ‘‘the date on which the

20 digital television service transition period

21 terminates, as determined by the Commis22 sion’’ and inserting ‘‘February 17, 2009’’;

23 and

24 (B) in paragraph (2), by striking ‘‘746

25 megahertz’’ and inserting ‘‘698 megahertz’’.
 †

48

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1 SEC. 3003. AUCTION OF RECOVERED SPECTRUM.

2 (a) DEADLINE FOR AUCTION.—Section 309(j) of the

3 Communications Act of 1934 (47 U.S.C. 309(j)) is

4 amended—

5 (1) by redesignating the second paragraph (15)

6 of such section (as added by section 203(b) of the

7 Commercial Spectrum Enhancement Act (Pub. L.

8 108–494; 118 Stat. 3993)), as paragraph (16) of such

9 section; and

10 (2) in the first paragraph (15) of such section

11 (as added by section 3(a) of the Auction Reform Act

12 of 2002 (Pub. L. 107–195; 116 Stat. 716)), by adding

13 at the end of subparagraph (C) the following new

14 clauses:

15 ‘‘(v) ADDITIONAL DEADLINES FOR RE16 COVERED ANALOG SPECTRUM.—Notwith17 standing subparagraph (B), the Commis18 sion shall conduct the auction of the licenses

19 for recovered analog spectrum by com20 mencing the bidding not later than January

21 28, 2008, and shall deposit the proceeds of

22 such auction in accordance with paragraph

23 (8)(E)(ii) not later than June 30, 2008.

24 ‘‘(vi) RECOVERED ANALOG SPEC25 TRUM.—For purposes of clause (v), the term

26 ‘recovered analog spectrum’ means the spec-
 †

49

S 1932 EAS

1 trum between channels 52 and 69, inclusive

2 (between frequencies 698 and 806 mega3 hertz, inclusive) reclaimed from analog tele4 vision service broadcasting under para5 graph (14), other than—

6 ‘‘(I) the spectrum required by sec7 tion 337 to be made available for pub8 lic safety services; and

9 ‘‘(II) the spectrum auctioned

10 prior to the date of enactment of the

11 Digital Television Transition and Pub12 lic Safety Act of 2005.’’.

13 (b) EXTENSION OF AUCTION AUTHORITY.—Section

14 309(j)(11) of such Act (47 U.S.C. 309(j)(11)) is amended

15 by striking ‘‘2007’’ and inserting ‘‘2011’’.

16 SEC. 3004. RESERVATION OF AUCTION PROCEEDS.

17 Section 309(j)(8) of the Communications Act of 1934

18 (47 U.S.C. 309(j)(8)) is amended—

19 (1) in subparagraph (A), by striking ‘‘subpara20 graph (B) or subparagraph (D)’’ and inserting ‘‘sub21 paragraphs (B), (D), and (E)’’;

22 (2) in subparagraph (C)(i), by inserting before

23 the semicolon at the end the following: ‘‘, except as

24 otherwise provided in subparagraph (E)(ii)’’; and
 †

50

S 1932 EAS

1 (3) by adding at the end the following new sub2 paragraph:

3 ‘‘(E) TRANSFER OF RECEIPTS.—

4 ‘‘(i) ESTABLISHMENT OF FUND.—There

5 is established in the Treasury of the United

6 States a fund to be known as the Digital

7 Television Transition and Public Safety

8 Fund.

9 ‘‘(ii) PROCEEDS FOR FUNDS.—Not10 withstanding subparagraph (A), the pro11 ceeds (including deposits and upfront pay12 ments from successful bidders) from the use

13 of a competitive bidding system under this

14 subsection with respect to recovered analog

15 spectrum shall be deposited in the Digital

16 Television Transition and Public Safety

17 Fund.

18 ‘‘(iii) TRANSFER OF AMOUNT TO

19 TREASURY.—On September 30, 2009, the

20 Secretary shall transfer $7,363,000,000

21 from the Digital Television Transition and

22 Public Safety Fund to the general fund of

23 the Treasury.

24 ‘‘(iv) RECOVERED ANALOG SPEC25 TRUM.—For purposes of clause (i), the term
 †

51

S 1932 EAS

1 ‘recovered analog spectrum’ has the mean2 ing provided in paragraph (15)(C)(vi).’’.

3 SEC. 3005. DIGITAL-TO-ANALOG CONVERTER BOX PROGRAM.

4 (a) CREATION OF PROGRAM.—The Assistant Secretary

5 shall—

6 (1) implement and administer a program

7 through which households in the United States may

8 obtain coupons that can be applied toward the pur9 chase of digital-to-analog converter boxes; and

10 (2) make payments of not to exceed

11 $990,000,000, in the aggregate, through fiscal year

12 2009 to carry out that program from the Digital Tele13 vision Transition and Public Safety Fund established

14 under section 309(j)(8)(E) of the Communications Act

15 of 1934 (47 U.S.C. 309(j)(8)(E)).

16 (b) CREDIT.—The Assistant Secretary may borrow

17 from the Treasury beginning on October 1, 2006 such sums

18 as may be necessary, but not to exceed $1,500,000,000, to

19 implement this section. The Assistant Secretary shall reim20 burse the Treasury, without interest, as funds are deposited

21 into the Digital Television Transition and Public Safety

22 Fund.

23 (c) PROGRAM SPECIFICATIONS.—

24 (1) LIMITATIONS.—
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1 (A) TWO-PER-HOUSEHOLD MAXIMUM.—A

2 household may obtain coupons by making a re3 quest as required by the regulations under this

4 section between January 1, 2008, and March 31,

5 2009, inclusive. The Assistant Secretary shall en6 sure that each requesting household receives, via

7 the United States Postal Service, no more than

8 two coupons.

9 (B) NO COMBINATIONS OF COUPONS.—Two

10 coupons may not be used in combination toward

11 the purchase of a single digital-to-analog con12 verter box.

13 (C) DURATION.—All coupons shall expire 3

14 months after issuance.

15 (2) DISTRIBUTION OF COUPONS.—The Assistant

16 Secretary shall expend not more than $100,000,000

17 on administrative expenses and shall ensure that the

18 sum of—

19 (A) all administrative expenses for the pro20 gram, including not more than $5,000,000 for

21 consumer education concerning the digital tele22 vision transition and the availability of the dig23 ital-to-analog converter box program; and
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1 (B) the total maximum value of all the cou2 pons redeemed, and issued but not expired, does

3 not exceed $990,000,000.

4 (3) USE OF ADDITIONAL AMOUNT.—If the Assist5 ant Secretary transmits to the Committee on Energy

6 and Commerce of the House of Representatives and

7 Committee on Commerce, Science, and Transpor8 tation of the Senate a statement certifying that the

9 sum permitted to be expended under paragraph (2)

10 will be insufficient to fulfill the requests for coupons

11 from eligible households—

12 (A) paragraph (2) shall be applied—

13 (i) by substituting ‘‘$160,000,000’’ for

14 ‘‘$100,000,000’’; and

15 (ii) by substituting ‘‘$1,500,000,000’’

16 for ‘‘$990,000,000’’;

17 (B) subsection (a)(2) shall be applied by

18 substituting ‘‘$1,500,000,000’’ for

19 ‘‘$990,000,000’’; and

20 (C) the additional amount permitted to be

21 expended shall be available 60 days after the As22 sistant Secretary sends such statement.

23 (4) COUPON VALUE.—The value of each coupon

24 shall be $40.
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1 (d) DEFINITION OF DIGITAL-TO-ANALOG CONVERTER

2 BOX.—For purposes of this section, the term ‘‘digital-to3 analog converter box’’ means a stand-alone device that does

4 not contain features or functions except those necessary to

5 enable a consumer to convert any channel broadcast in the

6 digital television service into a format that the consumer

7 can display on television receivers designed to receive and

8 display signals only in the analog television service, but

9 may also include a remote control device.

10 SEC. 3006. PUBLIC SAFETY INTEROPERABLE COMMUNICA11 TIONS.

12 (a) CREATION OF PROGRAM.—The Assistant Sec13 retary, in consultation with the Secretary of the Depart14 ment of Homeland Security—

15 (1) may take such administrative action as is

16 necessary to establish and implement a grant pro17 gram to assist public safety agencies in the acquisi18 tion of, deployment of, or training for the use of

19 interoperable communications systems that utilize, or

20 enable interoperability with communications systems

21 that can utilize, reallocated public safety spectrum for

22 radio communication; and

23 (2) shall make payments of not to exceed

24 $1,000,000,000, in the aggregate, through fiscal year

25 2010 to carry out that program from the Digital Tele-
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1 vision Transition and Public Safety Fund established

2 under section 309(j)(8)(E) of the Communications Act

3 of 1934 (47 U.S.C. 309(j)(8)(E)).

4 (b) CREDIT.—The Assistant Secretary may borrow

5 from the Treasury beginning on October 1, 2006 such sums

6 as may be necessary, but not to exceed $1,000,000,000, to

7 implement this section. The Assistant Secretary shall reim8 burse the Treasury, without interest, as funds are deposited

9 into the Digital Television Transition and Public Safety

10 Fund.

11 (c) CONDITION OF GRANTS.—In order to obtain a

12 grant under the grant program, a public safety agency shall

13 agree to provide, from non-Federal sources, not less than

14 20 percent of the costs of acquiring and deploying the inter15 operable communications systems funded under the grant

16 program.

17 (d) DEFINITIONS.—For purposes of this section:

18 (1) PUBLIC SAFETY AGENCY.—The term ‘‘public

19 safety agency’’ means any State, local, or tribal gov20 ernment entity, or nongovernmental organization au21 thorized by such entity, whose sole or principal pur22 pose is to protect the safety of life, health, or property.

23 (2) INTEROPERABLE COMMUNICATIONS SYS24 TEMS.—The term ‘‘interoperable communications sys25 tems’’ means communications systems which enable
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1 public safety agencies to share information amongst

2 local, State, Federal, and tribal public safety agencies

3 in the same area via voice or data signals.

4 (3) REALLOCATED PUBLIC SAFETY SPECTRUM.—

5 The term ‘‘reallocated public safety spectrum’’ means

6 the bands of spectrum located at 764–776 megahertz

7 and 794–806 megahertz, inclusive.

8 SEC. 3007. NYC 9/11 DIGITAL TRANSITION.

9 (a) FUNDS AVAILABLE.—From the Digital Television

10 Transition and Public Safety Fund established under sec11 tion 309(j)(8)(E) of the Communications Act of 1934 (47

12 U.S.C. 309(j)(8)(E)) the Assistant Secretary shall make

13 payments of not to exceed $30,000,000, in the aggregate,

14 which shall be available to carry out this section for fiscal

15 years 2007 through 2008. The Assistant Secretary may bor16 row from the Treasury beginning October 1, 2006 such sums

17 as may be necessary not to exceed $30,000,000 to implement

18 and administer the program in accordance with this sec19 tion. The Assistant Secretary shall reimburse the Treasury,

20 without interest, as funds are deposited into the Digital Tel21 evision Transition and Public Safety Fund.

22 (b) USE OF FUNDS.—The sums available under sub23 section (a) shall be made available by the Assistant Sec24 retary by grant to be used to reimburse the Metropolitan

25 Television Alliance for costs incurred in the design and de-
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1 ployment of a temporary digital television broadcast system

2 to ensure that, until a permanent facility atop the Freedom

3 Tower is constructed, the members of the Metropolitan Tele4 vision Alliance can provide the New York City area with

5 an adequate digital television signal as determined by the

6 Federal Communications Commission.

7 (c) DEFINITIONS.—For purposes of this section:

8 (1) METROPOLITAN TELEVISION ALLIANCE.—The

9 term ‘‘Metropolitan Television Alliance’’ means the

10 organization formed by New York City television

11 broadcast station licensees to locate new shared facili12 ties as a result of the attacks on September 11, 2001

13 and the loss of use of shared facilities that housed

14 broadcast equipment.

15 (2) NEW YORK CITY AREA.—The term ‘‘New York

16 City area’’ means the five counties comprising New

17 York City and counties of northern New Jersey in im18 mediate proximity to New York City (Bergen, Essex,

19 Union, and Hudson Counties) .

20 SEC. 3008. LOW-POWER TELEVISION AND TRANSLATOR DIG21 ITAL-TO-ANALOG CONVERSION.

22 (a) CREATION OF PROGRAM.—The Assistant Secretary

23 shall make payments of not to exceed $10,000,000, in the

24 aggregate, during the fiscal year 2008 and 2009 period from

25 the Digital Television Transition and Public Safety Fund
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1 established under section 309(j)(8)(E) of the Communica2 tions Act of 1934 (47 U.S.C. 309(j)(8)(E)) to implement

3 and administer a program through which each eligible low4 power television station may receive compensation toward

5 the cost of the purchase of a digital-to-analog conversion

6 device that enables it to convert the incoming digital signal

7 of its corresponding full-power television station to analog

8 format for transmission on the low-power television sta9 tion’s analog channel. An eligible low-power television sta10 tion may receive such compensation only if it submits a

11 request for such compensation on or before February 17,

12 2009. Priority compensation shall be given to eligible low13 power television stations in which the license is held by a

14 non-profit corporation and eligible low-power television sta15 tions that serve rural areas of fewer than 10,000 viewers.

16 (b) CREDIT.—The Assistant Secretary may borrow

17 from the Treasury beginning October 1, 2006 such sums as

18 may be necessary, but not to exceed $10,000,000, to imple19 ment this section. The Assistant Secretary shall reimburse

20 the Treasury, without interest, as funds are deposited into

21 the Digital Television Transition and Public Safety Fund.

22 (c) ELIGIBLE STATIONS.—For purposes of this section,

23 the term ‘‘eligible low-power television station’’ means a

24 low-power television broadcast station, Class A television
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1 station, television translator station, or television booster

2 station—

3 (1) that is itself broadcasting exclusively in ana4 log format; and

5 (2) that has not purchased a digital-to-analog

6 conversion device prior to the date of enactment of the

7 Digital Television Transition and Public Safety Act

8 of 2005.

9 SEC. 3009. LOW-POWER TELEVISION AND TRANSLATOR UP10 GRADE PROGRAM.

11 (a) ESTABLISHMENT.—The Assistant Secretary shall

12 make payments of not to exceed $65,000,000, in the aggre13 gate, during fiscal year 2009 the Digital Television Transi14 tion and Public Safety Fund established under section

15 309(j)(8)(E) of the Communications Act of 1934 (47 U.S.C.

16 309(j)(8)(E)) to implement and administer a program

17 through which each licensee of an eligible low-power tele18 vision station may receive reimbursement for equipment to

19 upgrade low-power television stations from analog to digital

20 in eligible rural communities, as that term is defined in

21 section 610(b)(2) of the Rural Electrification Act of 1937

22 (7 U.S.C. 950bb(b)(2)). Such reimbursements shall be issued

23 to eligible stations no earlier than October 1, 2010. Priority

24 reimbursements shall be given to eligible low-power tele25 vision stations in which the license is held by a non-profit
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1 corporation and eligible low-power television stations that

2 serve rural areas of fewer than 10,000 viewers.

3 (b) ELIGIBLE STATIONS.—For purposes of this section,

4 the term ‘‘eligible low-power television station’’ means a

5 low-power television broadcast station, Class A television

6 station, television translator station, or television booster

7 station—

8 (1) that is itself broadcasting exclusively in ana9 log format; and

10 (2) that has not converted from analog to digital

11 operations prior to the date of enactment of the Dig12 ital Television Transition and Public Safety Act of

13 2005.

14 SEC. 3010. NATIONAL ALERT AND TSUNAMI WARNING PRO15 GRAM.

16 The Assistant Secretary shall make payments of not

17 to exceed $156,000,000, in the aggregate, during the fiscal

18 year 2007 through 2012 period from the Digital Television

19 Transition and Public Safety Fund established under sec20 tion 309(j)(8)(E) of the Communications Act of 1934 (47

21 U.S.C. 309(j)(8)(E)) to implement a unified national alert

22 system capable of alerting the public, on a national, re23 gional, or local basis to emergency situations by using a

24 variety of communications technologies. The Assistant Sec-
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1 retary shall use $50,000,000 of such amounts to implement

2 a tsunami warning and coastal vulnerability program.

3 SEC. 3011. ENHANCE 911.

4 The Assistant Secretary shall make payments of not

5 to exceed $43,500,000, in the aggregate, from the Digital

6 Television Transition and Public Safety Fund established

7 under section 309(j)(8)(E) of the Communications Act of

8 1934 (47 U.S.C. 309(j)(8)(E)) to implement the ENHANCE

9 911 Act of 2004.

10 SEC. 3012. ESSENTIAL AIR SERVICE PROGRAM.

11 (a) IN GENERAL.—If the amount appropriated to

12 carry out the essential air service program under sub13 chapter II of chapter 417 of title 49, United States Code,

14 equals or exceeds $110,000,000 for fiscal year 2007 or 2008,

15 then the Secretary of Commerce shall make $15,000,000

16 available, from the Digital Television Transition and Pub17 lic Safety Fund established by section 309(j)(8)(E) of the

18 Communications Act of 1934 (47 U.S.C. 309(j)(8)(E)), to

19 the Secretary of Transportation for use in carrying out the

20 essential air service program for that fiscal year.

21 (b) APPLICATION WITH OTHER FUNDS.—Amounts

22 made available under subsection (a) for any fiscal year

23 shall be in addition to any amounts—

24 (1) appropriated for that fiscal year; or
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1 (2) derived from fees collected pursuant to section

2 45301(a)(1) of title 49, United States Code, that are

3 made available for obligation and expenditure to

4 carry out the essential air service program for that

5 fiscal year.

6 (c) ADVANCES.—The Secretary of Transportation may

7 borrow from the Treasury such sums as may be necessary,

8 but not to exceed $30,000,000 on a temporary and reim9 bursable basis to implement subsection (a). The Secretary

10 of Transportation shall reimburse the Treasury, without in11 terest, as funds are deposited into the Digital Television

12 Transition and Public Safety Fund under section

13 309(j)(8)(E) of the Communications Act of 1934 (47 U.S.C.

14 309(j)(8)(E)) and made available to the Secretary under

15 subsection (a).

16 SEC. 3013. SUPPLEMENTAL LICENSE FEES.

17 In addition to any fees assessed under the Communica18 tions Act of 1934 (47 U.S.C. 151 et seq.), the Federal Com19 munications Commission shall assess extraordinary fees for

20 licenses in the aggregate amount of $10,000,000, which shall

21 be deposited in the Treasury during fiscal year 2006 as off22 setting receipts.
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1 TITLE IV—TRANSPORTATION

2 PROVISIONS

3 SEC. 4001. EXTENSION OF VESSEL TONNAGE DUTIES.

4 (a) EXTENSION OF DUTIES.—Section 36 of the Act en5 titled ‘‘An Act to provide revenue, equalize duties and en6 courage the industries of the United States, and for other

7 purposes’’, approved August 5, 1909 (36 Stat. 111; 46

8 U.S.C. App. 121), is amended—

9 (1) by striking ‘‘9 cents per ton’’ and all that fol10 lows through ‘‘2002,’’ the first place it appears and

11 inserting ‘‘4.5 cents per ton, not to exceed in the ag12 gregate 22.5 cents per ton in any one year, for fiscal

13 years 2006 through 2010,’’; and

14 (2) by striking ‘‘27 cents per ton’’ and all that

15 follows through ‘‘2002,’’ and inserting ‘‘13.5 cents per

16 ton, not to exceed 67.5 cents per ton per annum, for

17 fiscal years 2006 through 2010,’’.

18 (b) CONFORMING AMENDMENT.—The Act entitled ‘‘An

19 Act concerning tonnage duties on vessels entering otherwise

20 than by sea’’, approved March 8, 1910 (36 Stat. 234; 46

21 U.S.C. App. 132), is amended by striking ‘‘9 cents per ton’’

22 and all that follows through ‘‘and 2 cents’’ and inserting

23 ‘‘4.5 cents per ton, not to exceed in the aggregate 22.5 cents

24 per ton in any one year, for fiscal years 2006 through 2010,

25 and 2 cents’’.
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1 TITLE V—MEDICARE

2 Subtitle A—Provisions Relating to

3 Part A

4 SEC. 5001. HOSPITAL QUALITY IMPROVEMENT.

5 (a) SUBMISSION OF HOSPITAL DATA.—Section

6 1886(b)(3)(B) of the Social Security Act (42 U.S.C.

7 1395ww(b)(3)(B)) is amended—

8 (1) in clause (i)—

9 (A) in subclause (XIX), by striking ‘‘2007’’

10 and inserting ‘‘2006’’; and

11 (B) in subclause (XX), by striking ‘‘for fis12 cal year 2008 and each subsequent fiscal year,’’

13 and inserting ‘‘for each subsequent fiscal year,

14 subject to clause (viii),’’;

15 (2) in clause (vii)—

16 (A) in subclause (I), by striking ‘‘for each

17 of fiscal years 2005 through 2007’’ and inserting

18 ‘‘for fiscal years 2005 and 2006’’; and

19 (B) in subclause (II), by striking ‘‘Each’’

20 and inserting ‘‘For fiscal years 2005 and 2006,

21 each’’; and

22 (3) by adding at the end the following new

23 clauses:

24 ‘‘(viii)(I) For purposes of clause (i) for

25 fiscal year 2007 and each subsequent fiscal
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1 year, in the case of a subsection (d) hospital

2 that does not submit, to the Secretary in ac3 cordance with this clause, data required to

4 be submitted on measures selected under this

5 clause with respect to such a fiscal year, the

6 applicable percentage increase under clause

7 (i) for such fiscal year shall be reduced by

8 2.0 percentage points. Such reduction shall

9 apply only with respect to the fiscal year

10 involved and the Secretary shall not take

11 into account such reduction in computing

12 the applicable percentage increase under

13 clause (i) for a subsequent fiscal year, and

14 the Secretary and the Medicare Payment

15 Advisory Commission shall carry out the re16 quirements under section 5001(b) of the Def17 icit Reduction Act of 2005.

18 ‘‘(II) Each subsection (d) hospital shall

19 submit data on measures selected under this

20 clause to the Secretary in a form and man21 ner, and at a time, specified by the Sec22 retary for purposes of this clause.

23 ‘‘(III) The Secretary shall expand, be24 yond the measures specified under clause

25 (vii)(II) and consistent with the succeeding
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1 subclauses, the set of measures that the Sec2 retary determines to be appropriate for the

3 measurement of the quality of care fur4 nished by hospitals in inpatient settings.

5 ‘‘(IV) Effective for payments beginning

6 with fiscal year 2007, in expanding the

7 number of measures under subclause (III),

8 the Secretary shall begin to adopt the base9 line set of performance measures as set forth

10 in the November 2005 report by the Insti11 tute of Medicine of the National Academy of

12 Sciences under section 238(b) of the Medi13 care Prescription Drug, Improvement, and

14 Modernization Act of 2003.

15 ‘‘(V) Effective for payments beginning

16 with fiscal year 2008, the Secretary shall

17 add other measures that reflect consensus

18 among affected parties and, to the extent

19 feasible and practicable, shall include meas20 ures set forth by one or more national con21 sensus building entities.

22 ‘‘(VI) For purposes of this clause and

23 clause (vii), the Secretary may replace any

24 measures or indicators in appropriate cases,

25 such as where all hospitals are effectively in
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1 compliance or the measures or indicators

2 have been subsequently shown not to rep3 resent the best clinical practice.

4 ‘‘(VII) The Secretary shall establish

5 procedures for making data submitted

6 under this clause available to the public.

7 Such procedures shall ensure that a hospital

8 has the opportunity to review the data that

9 are to be made public with respect to the

10 hospital prior to such data being made pub11 lic. The Secretary shall report quality meas12 ures of process, structure, outcome, patients’

13 perspectives on care, efficiency, and costs of

14 care that relate to services furnished in in15 patient settings in hospitals on the Internet

16 website of the Centers for Medicare & Med17 icaid Services.’’.

18 (b) PLAN FOR HOSPITAL VALUE BASED PURCHASING

19 PROGRAM.—

20 (1) IN GENERAL.—The Secretary of Health and

21 Human Services shall develop a plan to implement a

22 value based purchasing program for payments under

23 the Medicare program for subsection (d) hospitals be24 ginning with fiscal year 2009.
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1 (2) DETAILS.—Such a plan shall include consid2 eration of the following issues:

3 (A) The on-going development, selection,

4 and modification process for measures of quality

5 and efficiency in hospital inpatient settings.

6 (B) The reporting, collection, and valida7 tion of quality data.

8 (C) The structure of value based payment

9 adjustments, including the determination of

10 thresholds or improvements in quality that

11 would substantiate a payment adjustment, the

12 size of such payments, and the sources of funding

13 for the value based payments.

14 (D) The disclosure of information on hos15 pital performance.

16 In developing such a plan, the Secretary shall consult

17 with relevant affected parties and shall consider expe18 rience with such demonstrations that are relevant to

19 the value based purchasing program under this sub20 section.

21 (c) QUALITY ADJUSTMENT IN DRG PAYMENTS FOR

22 CERTAIN HOSPITAL ACQUIRED INFECTIONS.—

23 (1) IN GENERAL.—Section 1886(d)(4) of the So24 cial Security Act (42 U.S.C. 1395ww(d)(4)) is
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1 amended by adding at the end the following new sub2 paragraph:

3 ‘‘(D)(i) For discharges occurring on or after October

4 1, 2008, the diagnosis-related group to be assigned under

5 this paragraph for a discharge described in clause (ii) shall

6 be a diagnosis-related group that does not result in higher

7 payment based on the presence of a secondary diagnosis

8 code described in clause (iv).

9 ‘‘(ii) A discharge described in this clause is a discharge

10 which meets the following requirements:

11 ‘‘(I) The discharge includes a condition identi12 fied by a diagnosis code selected under clause (iv) as

13 a secondary diagnosis.

14 ‘‘(II) But for clause (i), the discharge would have

15 been classified to a diagnosis-related group that re16 sults in a higher payment based on the presence of a

17 secondary diagnosis code selected under clause (iv).

18 ‘‘(III) At the time of admission, no code selected

19 under clause (iv) was present.

20 ‘‘(iii) As part of the information required to be re21 ported by a hospital with respect to a discharge of an indi22 vidual in order for payment to be made under this sub23 section, for discharges occurring on or after October 1, 2007,

24 the information shall include the secondary diagnosis of the

25 individual at admission.
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1 ‘‘(iv) By not later than October 1, 2007, the Secretary

2 shall select diagnosis codes associated with at least two con3 ditions, each of which codes meets all of the following re4 quirements (as determined by the Secretary):

5 ‘‘(I) Cases described by such code have a high

6 cost or high volume, or both, under this title.

7 ‘‘(II) The code results in the assignment of a case

8 to a diagnosis-related group that has a higher pay9 ment when the code is present as a secondary diag10 nosis.

11 ‘‘(III) The code describes such conditions that

12 could reasonably have been prevented through the ap13 plication of evidence-based guidelines.

14 The Secretary may from time to time revise (through addi15 tion or deletion of codes) the diagnosis codes selected under

16 this clause so long as there are diagnosis codes associated

17 with at least two conditions selected for discharges occur18 ring during any fiscal year.

19 ‘‘(v) In selecting and revising diagnosis codes under

20 clause (iv), the Secretary shall consult with the Centers for

21 Disease Control and Prevention and other appropriate enti22 ties.

23 ‘‘(vi) Any change resulting from the application of this

24 subparagraph shall not be taken into account in adjusting
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1 the weighting factors under subparagraph (C)(i) or in ap2 plying budget neutrality under subparagraph (C)(iii).’’.

3 (2) NO JUDICIAL REVIEW.—Section

4 1886(d)(7)(B) of such Act (42 U.S.C.

5 1395ww(d)(7)(B)) is amended by inserting before the

6 period the following: ‘‘, including the selection and re7 vision of codes under paragraph (4)(D)’’.

8 SEC. 5002. CLARIFICATION OF DETERMINATION OF MED9 ICAID PATIENT DAYS FOR DSH COMPUTA10 TION.

11 (a) IN GENERAL.—Section 1886(d)(5)(F)(vi) of the

12 Social Security Act (42 U.S.C. 1395ww(d)(5)(F)(vi)) is

13 amended by adding after and below subclause (II) the fol14 lowing:

15 ‘‘In determining under subclause (II) the number of the hos16 pital’s patient days for such period which consist of pa17 tients who (for such days) were eligible for medical assist18 ance under a State plan approved under title XIX, the Sec19 retary may, to the extent and for the period the Secretary

20 determines appropriate, include patient days of patients

21 not so eligible but who are regarded as such because they

22 receive benefits under a demonstration project approved

23 under title XI.’’.

24 (b) RATIFICATION AND PROSPECTIVE APPLICATION OF

25 PREVIOUS REGULATIONS.—
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1 (1) IN GENERAL.—Subject to paragraph (2), reg2 ulations described in paragraph (3), insofar as such

3 regulations provide for the treatment of individuals

4 eligible for medical assistance under a demonstration

5 project approved under title XI of the Social Security

6 Act under section 1886(d)(5)(F)(vi) of such Act, are

7 hereby ratified, effective as of the date of their respec8 tive promulgations.

9 (2) NO APPLICATION TO CLOSED COST RE10 PORTS.—Paragraph (1) shall not be applied in a

11 manner that requires the reopening of any cost re12 ports which are closed as of the date of the enactment

13 of this Act.

14 (3) REGULATIONS DESCRIBED.—For purposes of

15 paragraph (1), the regulations described in this para16 graph are as follows:

17 (A) 2000 REGULATION.—Regulations pro18 mulgated on January 20, 2000, at 65 Federal

19 Register 3136 et seq., including the policy in

20 such regulations regarding discharges occurring

21 prior to January 20, 2000.

22 (B) 2003 REGULATION.—Regulations pro23 mulgated on August 1, 2003, at 68 Federal Reg24 ister 45345 et seq.
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1 SEC. 5003. IMPROVEMENTS TO THE MEDICARE-DEPENDENT

2 HOSPITAL (MDH) PROGRAM.

3 (a) 5-YEAR EXTENSION.—

4 (1) EXTENSION OF PAYMENT METHODOLOGY.—

5 Section 1886(d)(5)(G) of the Social Security Act (42

6 U.S.C. 1395ww(d)(5)(G)) is amended—

7 (A) in clause (i), by striking ‘‘October 1,

8 2006’’ and inserting ‘‘October 1, 2011’’; and

9 (B) in clause (ii)(II)—

10 (i) by striking ‘‘October 1, 2006’’ and

11 inserting ‘‘October 1, 2011’’; and

12 (ii) by inserting ‘‘or for discharges in

13 the fiscal year’’ after ‘‘for the cost reporting

14 period’’.

15 (2) CONFORMING AMENDMENTS.—

16 (A) EXTENSION OF TARGET AMOUNT.—Sec17 tion 1886(b)(3)(D) of such Act (42 U.S.C.

18 1395ww(b)(3)(D)) is amended—

19 (i) in the matter preceding clause (i)—

20 (I) by striking ‘‘beginning’’ and

21 inserting ‘‘occurring’’; and

22 (II) by striking ‘‘October 1, 2006’’

23 and inserting ‘‘October 1, 2011’’; and

24 (ii) in clause (iv), by striking ‘‘through

25 fiscal year 2005’’ and inserting ‘‘through

26 fiscal year 2011’’.
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1 (B) PERMITTING HOSPITALS TO DECLINE

2 RECLASSIFICATION.—Section 13501(e)(2) of the

3 Omnibus Budget Reconciliation Act of 1993 (42

4 U.S.C. 1395ww note) is amended by striking

5 ‘‘through fiscal year 2005’’ and inserting

6 ‘‘through fiscal year 2011’’.

7 (b) OPTION TO USE 2002 AS BASE YEAR.—Section

8 1886(b)(3) of such Act (42 U.S.C. 1395ww(b)(3)) is

9 amended—

10 (1) in subparagraph (D), by inserting ‘‘subject to

11 subparagraph (K),’’ after ‘‘(d)(5)(G)),’’; and

12 (2) by adding at the end the following new sub13 paragraph:

14 ‘‘(K)(i) With respect to discharges occurring on or

15 after October 1, 2006, in the case of a medicare-dependent,

16 small rural hospital, for purposes of applying subpara17 graph (D)—

18 ‘‘(I) there shall be substituted for the base cost re19 porting period described in subparagraph (D)(i) the

20 12-month cost reporting period beginning during fis21 cal year 2002; and

22 ‘‘(II) any reference in such subparagraph to the

23 ‘first cost reporting period’ described in such subpara24 graph is deemed a reference to the first cost reporting

25 period beginning on or after October 1, 2006.
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1 ‘‘(ii) This subparagraph shall only apply to a hospital

2 if the substitution described in clause (i)(I) results in an

3 increase in the target amount under subparagraph (D) for

4 the hospital.’’.

5 (c) ENHANCED PAYMENT FOR AMOUNT BY WHICH THE

6 TARGET EXCEEDS THE PPS RATE.—Section

7 1886(d)(5)(G)(ii)(II) of such Act (42 U.S.C.

8 1395ww(d)(5)(G)(iv)(II)) is amended by inserting ‘‘(or 75

9 percent in the case of discharges occurring on or after Octo10 ber 1, 2006)’’ after ‘‘50 percent’’.

11 (d) ENHANCED DISPROPORTIONATE SHARE HOSPITAL

12 (DSH) TREATMENT FOR MEDICARE-DEPENDENT HOS13 PITALS.—Section 1886(d)(5)(F)(xiv)(II) of such Act (42

14 U.S.C. 1395ww(d)(5)(F)(xiv)(II)) is amended by inserting

15 ‘‘or, in the case of discharges occurring on or after October

16 1, 2006, as a medicare-dependent, small rural hospital

17 under subparagraph (G)(iv)’’ before the period at the end.

18 SEC. 5004. REDUCTION IN PAYMENTS TO SKILLED NURSING

19 FACILITIES FOR BAD DEBT.

20 (a) IN GENERAL.—Section 1861(v)(1) of the Social Se21 curity Act (42 U.S.C. 1395x(v)(1)) is amended by adding

22 at the end the following new subparagraph:

23 ‘‘(V) In determining such reasonable costs for skilled

24 nursing facilities with respect to cost reporting periods be25 ginning on or after October 1, 2005, the amount of bad
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1 debts otherwise treated as allowed costs which are attrib2 utable to the coinsurance amounts under this title for indi3 viduals who are entitled to benefits under part A and—

4 ‘‘(i) are not described in section

5 1935(c)(6)(A)(ii) shall be reduced by 30 percent of

6 such amount otherwise allowable; and

7 ‘‘(ii) are described in such section shall not be re8 duced.’’.

9 (b) TECHNICAL AMENDMENT.—Section 1861(v)(1)(T)

10 of such Act (42 U.S.C. 1395x(v)(1)(T)) is amended by strik11 ing ‘‘section 1833(t)(5)(B)’’ and inserting ‘‘section

12 1833(t)(8)(B)’’.

13 SEC. 5005. EXTENDED PHASE-IN OF THE INPATIENT REHA14 BILITATION FACILITY CLASSIFICATION CRI15 TERIA.

16 (a) IN GENERAL.—Notwithstanding section

17 412.23(b)(2) of title 42, Code of Federal Regulations, the

18 Secretary of Health and Human Services shall apply the

19 applicable percent specified in subsection (b) in the classi20 fication criterion used under the IRF regulation (as defined

21 in subsection (c)) to determine whether a hospital or unit

22 of a hospital is an inpatient rehabilitation facility under

23 the Medicare program under title XVIII of the Social Secu24 rity Act.
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1 (b) APPLICABLE PERCENT.—For purposes of sub2 section (a), the applicable percent specified in this sub3 section for cost reporting periods—

4 (1) beginning during the 12-month period begin5 ning on July 1, 2006, is 60 percent;

6 (2) beginning during the 12-month period begin7 ning on July 1, 2007, is 65 percent; and

8 (3) beginning on or after July 1, 2008, is 75

9 percent.

10 (c) IRF REGULATION.—For purposes of subsection (a),

11 the term ‘‘IRF regulation’’ means the rule published in the

12 Federal Register on May 7, 2004, entitled ‘‘Medicare Pro13 gram; Final Rule; Changes to the Criteria for Being Classi14 fied as an Inpatient Rehabilitation Facility’’ (69 Fed. Reg.

15 25752).

16 SEC. 5006. DEVELOPMENT OF A STRATEGIC PLAN REGARD17 ING PHYSICIAN INVESTMENT IN SPECIALTY

18 HOSPITALS.

19 (a) DEVELOPMENT.—

20 (1) IN GENERAL.—The Secretary of Health and

21 Human Services (in this section referred to as the

22 ‘‘Secretary’’) shall develop a strategic and imple23 menting plan to address issues described in para24 graph (2) regarding physician investment in spe25 cialty hospitals (as defined in section 1877(h)(7)(A)
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1 of the Social Security Act (42 U.S.C.

2 1395nn(h)(7)(A)).

3 (2) ISSUES DESCRIBED.—The issues described in

4 this paragraph are the following:

5 (A) Proportionality of investment return.

6 (B) Bona fide investment.

7 (C) Annual disclosure of investment infor8 mation.

9 (D) The provision by specialty hospitals

10 of—

11 (i) care to patients who are eligible for

12 medical assistance under a State plan ap13 proved under title XIX of the Social Secu14 rity Act, including patients not so eligible

15 but who are regarded as such because they

16 receive benefits under a demonstration

17 project approved under title XI of such Act;

18 and

19 (ii) charity care.

20 (E) Appropriate enforcement.

21 (b) REPORTS.—

22 (1) INTERIM REPORT.—Not later than 3 months

23 after the date of the enactment of this Act, the Sec24 retary shall submit an interim report to the appro25 priate committees of jurisdiction of Congress on the
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1 status of the development of the plan under subsection

2 (a).

3 (2) FINAL REPORT.—Not later than six months

4 after the date of the enactment of this Act, the Sec5 retary shall submit a final report to the appropriate

6 committees of jurisdiction of Congress on the plan de7 veloped under subsection (a) together with rec8 ommendations for such legislation and administrative

9 actions as the Secretary considers appropriate.

10 (c) CONTINUATION OF SUSPENSION ON ENROLL11 MENT.—

12 (1) IN GENERAL.—Subject to paragraph (2), the

13 Secretary shall continue the suspension on enrollment

14 of new specialty hospitals (as so defined) under title

15 XVIII of the Social Security Act until the earlier of—

16 (A) the date that the Secretary submits the

17 final report under subsection (b)(2); or

18 (B) the date that is six months after the

19 date of the enactment of this Act.

20 (2) EXTENSION OF SUSPENSION.—If the Sec21 retary fails to submit the final report described in

22 subsection (b)(2) by the date required under such sub23 section, the Secretary shall—
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1 (A) extend the suspension on enrollment

2 under paragraph (1) for an additional two

3 months; and

4 (B) provide a certification to the appro5 priate committees of jurisdiction of Congress of

6 such failure.

7 (d) WAIVER.—In developing the plan and report re8 quired under this section, the Secretary may waive such

9 requirements of section 553 of title 5, United States Code,

10 as the Secretary determines necessary.

11 (e) FUNDING.—Out of any funds in the Treasury not

12 otherwise appropriated, there are appropriated to the Sec13 retary for fiscal year 2006, $2,000,000 to carry out this

14 section.

15 SEC. 5007. MEDICARE DEMONSTRATION PROJECTS TO PER16 MIT GAINSHARING ARRANGEMENTS.

17 (a) ESTABLISHMENT.—The Secretary shall establish

18 under this section a qualified gainsharing demonstration

19 program under which the Secretary shall approve dem20 onstration projects by not later than November 1, 2006, to

21 test and evaluate methodologies and arrangements between

22 hospitals and physicians designed to govern the utilization

23 of inpatient hospital resources and physician work to im24 prove the quality and efficiency of care provided to Medi25 care beneficiaries and to develop improved operational and
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1 financial hospital performance with sharing of remunera2 tion as specified in the project. Such projects shall be oper3 ational by not later than January 1, 2007.

4 (b) REQUIREMENTS DESCRIBED.—A demonstration

5 project under this section shall meet the following require6 ments for purposes of maintaining or improving quality

7 while achieving cost savings:

8 (1) ARRANGEMENT FOR REMUNERATION AS

9 SHARE OF SAVINGS.—The demonstration project shall

10 involve an arrangement between a hospital and a

11 physician under which the hospital provides remu12 neration to the physician that represents solely a

13 share of the savings incurred directly as a result of

14 collaborative efforts between the hospital and the phy15 sician.

16 (2) WRITTEN PLAN AGREEMENT.—The dem17 onstration project shall be conducted pursuant to a

18 written agreement that—

19 (A) is submitted to the Secretary prior to

20 implementation of the project; and

21 (B) includes a plan outlining how the

22 project will achieve improvements in quality and

23 efficiency.

24 (3) PATIENT NOTIFICATION.—The demonstration

25 project shall include a notification process to inform
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1 patients who are treated in a hospital participating

2 in the project of the participation of the hospital in

3 such project.

4 (4) MONITORING QUALITY AND EFFICIENCY OF

5 CARE.—The demonstration project shall provide

6 measures to ensure that the quality and efficiency of

7 care provided to patients who are treated in a hos8 pital participating in the demonstration project is

9 continuously monitored to ensure that such quality

10 and efficiency is maintained or improved.

11 (5) INDEPENDENT REVIEW.—The demonstration

12 project shall certify, prior to implementation, that the

13 elements of the demonstration project are reviewed by

14 an organization that is not affiliated with the hos15 pital or the physician participating in the project.

16 (6) REFERRAL LIMITATIONS.—The demonstra17 tion project shall not be structured in such a manner

18 as to reward any physician participating in the

19 project on the basis of the volume or value of referrals

20 to the hospital by the physician.

21 (c) WAIVER OF CERTAIN RESTRICTIONS.—

22 (1) IN GENERAL.—An incentive payment made

23 by a hospital to a physician under and in accordance

24 with a demonstration project shall not constitute—
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1 (A) remuneration for purposes of section

2 1128B of the Social Security Act (42 U.S.C.

3 1320a–7b);

4 (B) a payment intended to induce a physi5 cian to reduce or limit services to a patient enti6 tled to benefits under Medicare or a State plan

7 approved under title XIX of such Act in viola8 tion of section 1128A of such Act (42 U.S.C.

9 1320a–7a); or

10 (C) a financial relationship for purposes of

11 section 1877 of such Act (42 U.S.C. 1395nn).

12 (2) PROTECTION FOR EXISTING ARRANGE13 MENTS.—In no case shall the failure to comply with

14 the requirements described in paragraph (1) affect a

15 finding made by the Inspector General of the Depart16 ment of Health and Human Services prior to the date

17 of the enactment of this Act that an arrangement be18 tween a hospital and a physician does not violate

19 paragraph (1) or (2) of section 1128A(a) of the Social

20 Security Act (42 U.S.C. 1320a–7(a)).

21 (d) PROGRAM ADMINISTRATION.—

22 (1) SOLICITATION OF APPLICATIONS.—By not

23 later than 90 days after the date of the enactment of

24 this Act, the Secretary shall solicit applications for

25 approval of a demonstration project, in such form
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1 and manner, and at such time specified by the Sec2 retary.

3 (2) NUMBER OF PROJECTS APPROVED.—The Sec4 retary shall approve not more than 6 demonstration

5 projects, at least 2 of which shall be located in a rural

6 area.

7 (3) DURATION.—The qualified gainsharing dem8 onstration program under this section shall be con9 ducted for the period beginning on January 1, 2007,

10 and ending on December 31, 2009.

11 (e) REPORTS.—

12 (1) INITIAL REPORT.—By not later than Decem13 ber 1, 2006, the Secretary shall submit to Congress a

14 report on the number of demonstration projects that

15 will be conducted under this section.

16 (2) PROJECT UPDATE.—By not later than De17 cember 1, 2007, the Secretary shall submit to Con18 gress a report on the details of such projects (includ19 ing the project improvements towards quality and ef20 ficiency described in subsection (b)(2)(B)).

21 (3) QUALITY IMPROVEMENT AND SAVINGS.—By

22 not later than December 1, 2008, the Secretary shall

23 submit to Congress a report on quality improvement

24 and savings achieved as a result of the qualified
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1 gainsharing demonstration program established under

2 subsection (a).

3 (4) FINAL REPORT.—By not later than May 1,

4 2010, the Secretary shall submit to Congress a final

5 report on the information described in paragraph (3).

6 (f) FUNDING.—

7 (1) IN GENERAL.—Out of any funds in the

8 Treasury not otherwise appropriated, there are ap9 propriated to the Secretary for fiscal year 2006

10 $6,000,000, to carry out this section.

11 (2) AVAILABILITY.—Funds appropriated under

12 paragraph (1) shall remain available for expenditure

13 through fiscal year 2010.

14 (g) DEFINITIONS.—For purposes of this section:

15 (1) DEMONSTRATION PROJECT.—The term ‘‘dem16 onstration project’’ means a project implemented

17 under the qualified gainsharing demonstration pro18 gram established under subsection (a).

19 (2) HOSPITAL.—The term ‘‘hospital’’ means a

20 hospital that receives payment under section 1886(d)

21 of the Social Security Act (42 U.S.C. 1395ww(d)),

22 and does not include a critical access hospital (as de23 fined in section 1861(mm) of such Act (42 U.S.C.

24 1395x(mm))).
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1 (3) MEDICARE.—The term ‘‘Medicare’’ means the

2 programs under title XVIII of the Social Security

3 Act.

4 (4) PHYSICIAN.—The term ‘‘physician’’ means,

5 with respect to a demonstration project, a physician

6 described in paragraph (1) or (3) of section 1861(r)

7 of the Social Security Act (42 U.S.C. 1395x(r)) who

8 is licensed as such a physician in the area in which

9 the project is located and meets requirements to pro10 vide services for which benefits are provided under

11 Medicare. Such term shall be deemed to include a

12 practitioner described in section 1842(e)(18)(C) of

13 such Act (42 U.S.C. 1395u(e)(18)(C)).

14 (5) SECRETARY.—The term ‘‘Secretary’’ means

15 the Secretary of Health and Human Services.

16 SEC. 5008. POST-ACUTE CARE PAYMENT REFORM DEM17 ONSTRATION PROGRAM.

18 (a) ESTABLISHMENT.—

19 (1) IN GENERAL.—By not later than January 1,

20 2008, the Secretary of Health and Human Services

21 (in this section referred to as the ‘‘Secretary’’) shall

22 establish a demonstration program for purposes of

23 understanding costs and outcomes across different

24 post-acute care sites. Under such program, with re25 spect to diagnoses specified by the Secretary, an indi-
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1 vidual who receives treatment from a provider for

2 such a diagnosis shall receive a single comprehensive

3 assessment on the date of discharge from a subsection

4 (d) hospital (as defined in section 1886(d)(1)(B) of

5 the Social Security Act (42 U.S.C. 1395ww(d)(1)(B)))

6 of the needs of the patient and the clinical character7 istics of the diagnosis to determine the appropriate

8 placement of such patient in a post-acute care site.

9 The Secretary shall use a standardized patient assess10 ment instrument across all post-acute care sites to

11 measure functional status and other factors during

12 the treatment and at discharge from each provider.

13 Participants in the program shall provide informa14 tion on the fixed and variable costs for each indi15 vidual. An additional comprehensive assessment shall

16 be provided at the end of the episode of care.

17 (2) NUMBER OF SITES.—The Secretary shall

18 conduct the demonstration program under this section

19 with sufficient numbers to determine statistically reli20 able results.

21 (3) DURATION.—The Secretary shall conduct the

22 demonstration program under this section for a 3-

23 year period.

24 (b) WAIVER AUTHORITY.—The Secretary may waive

25 such requirements of titles XI and XVIII of the Social Secu-
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1 rity Act (42 U.S.C. 1301 et seq.; 42 U.S.C. 1395 et seq.)

2 as may be necessary for the purpose of carrying out the

3 demonstration program under this section.

4 (c) REPORT.—Not later than 6 months after the com5 pletion of the demonstration program under this section,

6 the Secretary shall submit to Congress a report on such pro7 gram, that includes the results of the program and rec8 ommendations for such legislation and administrative ac9 tion as the Secretary determines to be appropriate.

10 (d) FUNDING.—The Secretary shall provide for the

11 transfer from the Federal Hospital Insurance Trust Fund

12 established under section 1817 of the Social Security Act

13 (42 U.S.C. 1395i), $6,000,000 for the costs of carrying out

14 the demonstration program under this section.

15 Subtitle B—Provisions Relating to

16 Part B

17 CHAPTER 1—PAYMENT PROVISIONS

18 SEC. 5101. BENEFICIARY OWNERSHIP OF CERTAIN DURA19 BLE MEDICAL EQUIPMENT (DME).

20 (a) DME.—

21 (1) IN GENERAL.—Section 1834(a)(7)(A) of the

22 Social Security Act (42 U.S.C. 1395m(a)(7)(A)) is

23 amended to read as follows:

24 ‘‘(A) PAYMENT.—In the case of an item of

25 durable medical equipment not described in
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1 paragraphs (2) through (6), the following rules

2 shall apply:

3 ‘‘(i) RENTAL.—

4 ‘‘(I) IN GENERAL.—Except as pro5 vided in clause (iii), payment for the

6 item shall be made on a monthly basis

7 for the rental of the item during the

8 period of medical need (but payments

9 under this clause may not extend over

10 a period of continuous use (as deter11 mined by the Secretary) of longer than

12 36 months).

13 ‘‘(II) PAYMENT AMOUNT.—Subject

14 to subparagraph (B), the amount rec15 ognized for the item, for each of the

16 first 3 months of such period, is 10

17 percent of the purchase price recog18 nized under paragraph (8) with respect

19 to the item, and, for each of the re20 maining months of such period, is 7.5

21 percent of such purchase price.

22 ‘‘(ii) OWNERSHIP AFTER RENTAL.—On

23 the first day that begins after the 36th con24 tinuous month during which payment is

25 made for the rental of an item under clause
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1 (i), the supplier of the item shall transfer

2 title to the item to the individual.

3 ‘‘(iii) PURCHASE AGREEMENT OPTION

4 FOR POWER-DRIVEN WHEELCHAIRS.—In the

5 case of a power-driven wheelchair, at the

6 time the supplier furnishes the item, the

7 supplier shall offer the individual the option

8 to purchase the item, and payment for such

9 item shall be made on a lump-sum basis if

10 the individual exercises such option.

11 ‘‘(iv) MAINTENANCE AND SERVICING.—

12 After the supplier transfers title to the item

13 under clause (ii) or in the case of a power14 driven wheelchair for which a purchase

15 agreement has been entered into under

16 clause (iii), maintenance and servicing pay17 ments shall, if the Secretary determines

18 such payments are reasonable and nec19 essary, be made (for parts and labor not

20 covered by the supplier’s or manufacturer’s

21 warranty, as determined by the Secretary to

22 be appropriate for the particular type of

23 durable medical equipment), and such pay24 ments shall be in an amount determined to

25 be appropriate by the Secretary.’’.
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1 (2) EFFECTIVE DATE.—The amendment made by

2 paragraph (1) shall apply to items furnished for

3 which the first rental month occurs on or after Janu4 ary 1, 2006.

5 (b) OXYGEN EQUIPMENT.—

6 (1) IN GENERAL.—Section 1834(a)(5) of such

7 Act (42 U.S.C. 1395m(a)(5)) is amended—

8 (A) in subparagraph (A), by striking ‘‘and

9 (E)’’ and inserting ‘‘(E), and (F)’’; and

10 (B) by adding at the end the following new

11 subparagraph:

12 ‘‘(F) OWNERSHIP OF EQUIPMENT.—

13 ‘‘(i) IN GENERAL.—Payment for oxy14 gen equipment (including portable oxygen

15 equipment) under this paragraph may not

16 extend over a period of continuous use (as

17 determined by the Secretary) of longer than

18 36 months.

19 ‘‘(ii) OWNERSHIP.—

20 ‘‘(I) TRANSFER OF TITLE.—On

21 the first day that begins after the 36th

22 continuous month during which pay23 ment is made for the equipment under

24 this paragraph, the supplier of the
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1 equipment shall transfer title to the

2 equipment to the individual.

3 ‘‘(II) PAYMENTS FOR OXYGEN AND

4 MAINTENANCE AND SERVICING.—After

5 the supplier transfers title to the equip6 ment under subclause (I)—

7 ‘‘(aa) payments for oxygen

8 shall continue to be made in the

9 amount recognized for oxygen

10 under paragraph (9) for the pe11 riod of medical need; and

12 ‘‘(bb) maintenance and serv13 icing payments shall, if the Sec14 retary determines such payments

15 are reasonable and necessary, be

16 made (for parts and labor not

17 covered by the supplier’s or manu18 facturer’s warranty, as deter19 mined by the Secretary to be ap20 propriate for the equipment), and

21 such payments shall be in an

22 amount determined to be appro23 priate by the Secretary.’’.

24 (2) EFFECTIVE DATE.—
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1 (A) IN GENERAL.—The amendments made

2 by paragraph (1) shall take effect on January 1,

3 2006.

4 (B) APPLICATION TO CERTAIN INDIVID5 UALS.—In the case of an individual receiving

6 oxygen equipment on December 31, 2005, for

7 which payment is made under section 1834(a) of

8 the Social Security Act (42 U.S.C. 1395m(a)),

9 the 36-month period described in paragraph

10 (5)(F)(i) of such section, as added by paragraph

11 (1), shall begin on January 1, 2006.

12 SEC. 5102. ADJUSTMENTS IN PAYMENT FOR IMAGING SERV13 ICES.

14 (a) MULTIPLE PROCEDURE PAYMENT REDUCTION FOR

15 IMAGING EXEMPTED FROM BUDGET NEUTRALITY.—Sec16 tion 1848(c)(2)(B) of the Social Security Act (42 U.S.C.

17 1395w–4(c)(2)(B)) is amended—

18 (1) in clause (ii)(II), by striking ‘‘clause (iv)’’

19 and inserting ‘‘clauses (iv) and (v)’’;

20 (2) in clause (iv) in the heading, by inserting

21 ‘‘OF CERTAIN ADDITIONAL EXPENDITURES’’ after ‘‘EX22 EMPTION’’; and

23 (3) by adding at the end the following new

24 clause:
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1 ‘‘(v) EXEMPTION OF CERTAIN REDUCED

2 EXPENDITURES FROM BUDGET-NEUTRALITY

3 CALCULATION.—The following reduced ex4 penditures, as estimated by the Secretary,

5 shall not be taken into account in applying

6 clause (ii)(II):

7 ‘‘(I) REDUCED PAYMENT FOR

8 MULTIPLE IMAGING PROCEDURES.—Ef9 fective for fee schedules established be10 ginning with 2007, reduced expendi11 tures attributable to the multiple pro12 cedure payment reduction for imaging

13 under the final rule published by the

14 Secretary in the Federal Register on

15 November 21, 2005 (42 CFR 405, et

16 al.) insofar as it relates to the physi17 cian fee schedules for 2006 and 2007.’’.

18 (b) REDUCTION IN PHYSICIAN FEE SCHEDULE TO

19 OPD PAYMENT AMOUNT FOR IMAGING SERVICES.—Section

20 1848 of such Act (42 U.S.C. 1395w–4) is amended—

21 (1) in subsection (b), by adding at the end the

22 following new paragraph:

23 ‘‘(4) SPECIAL RULE FOR IMAGING SERVICES.—
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1 ‘‘(A) IN GENERAL.—In the case of imaging

2 services described in subparagraph (B) furnished

3 on or after January 1, 2007, if—

4 ‘‘(i) the technical component (includ5 ing the technical component portion of a

6 global fee) of the service established for a

7 year under the fee schedule described in

8 paragraph (1) without application of the

9 geographic adjustment factor described in

10 paragraph (1)(C), exceeds

11 ‘‘(ii) the Medicare OPD fee schedule

12 amount established under the prospective

13 payment system for hospital outpatient de14 partment services under paragraph (3)(D)

15 of section 1833(t) for such service for such

16 year, determined without regard to geo17 graphic adjustment under paragraph (2)(D)

18 of such section,

19 the Secretary shall substitute the amount de20 scribed in clause (ii), adjusted by the geographic

21 adjustment factor described in paragraph (1)(C),

22 for the fee schedule amount for such technical

23 component for such year.

24 ‘‘(B) IMAGING SERVICES DESCRIBED.—For

25 purposes of subparagraph (A), imaging services
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1 described in this subparagraph are imaging and

2 computer-assisted imaging services, including X3 ray, ultrasound (including echocardiography),

4 nuclear medicine (including positron emission

5 tomography), magnetic resonance imaging, com6 puted tomography, and fluoroscopy, but exclud7 ing diagnostic and screening mammography.’’;

8 and

9 (2) in subsection (c)(2)(B)(v), as added by sub10 section (a)(3), by adding at the end the following new

11 subclause:

12 ‘‘(II) OPD PAYMENT CAP FOR IM13 AGING SERVICES.—Effective for fee

14 schedules established beginning with

15 2007, reduced expenditures attributable

16 to subsection (b)(4).’’.

17 SEC. 5103. LIMITATION ON PAYMENTS FOR PROCEDURES IN

18 AMBULATORY SURGICAL CENTERS.

19 Section 1833(i)(2) of the Social Security Act (42

20 U.S.C. 1395l(i)(2)) is amended—

21 (1) in subparagraph (A), by inserting ‘‘subject to

22 subparagraph (E),’’ after ‘‘subparagraph (D),’’;

23 (2) in subparagraph (D)(ii), by inserting before

24 the period at the end the following: ‘‘and taking into

25 account reduced expenditures that would apply if sub-
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1 paragraph (E) were to continue to apply, as esti2 mated by the Secretary’’; and

3 (3) by adding at the end the following new sub4 paragraph:

5 ‘‘(E) With respect to surgical procedures furnished on

6 or after January 1, 2007, and before the effective date of

7 the implementation of a revised payment system under sub8 paragraph (D), if—

9 ‘‘(i) the standard overhead amount under sub10 paragraph (A) for a facility service for such proce11 dure, without the application of any geographic ad12 justment, exceeds

13 ‘‘(ii) the Medicare OPD fee schedule amount es14 tablished under the prospective payment system for

15 hospital outpatient department services under para16 graph (3)(D) of section 1833(t) for such service for

17 such year, determined without regard to geographic

18 adjustment under paragraph (2)(D) of such section,

19 the Secretary shall substitute under subparagraph (A) the

20 amount described in clause (ii) for the standard overhead

21 amount for such service referred to in clause (i).’’.

22 SEC. 5104. UPDATE FOR PHYSICIANS’ SERVICES FOR 2006.

23 (a) UPDATE FOR 2006.—Section 1848(d) of the Social

24 Security Act (42 U.S.C. 1395w–4(d)) is amended—
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1 (1) in paragraph (4)(B), in the matter preceding

2 clause (i), by striking ‘‘paragraph (5)’’ and inserting

3 ‘‘paragraphs (5) and (6)’’; and

4 (2) by adding at the end the following new para5 graph:

6 ‘‘(6) UPDATE FOR 2006.—The update to the sin7 gle conversion factor established in paragraph (1)(C)

8 for 2006 shall be 0 percent.’’.

9 (b) NOT TREATED AS CHANGE IN LAW AND REGULA10 TION IN SUSTAINABLE GROWTH RATE DETERMINATION.—

11 The amendments made by subsection (a) shall not be treated

12 as a change in law for purposes of applying section

13 1848(f)(2)(D) of the Social Security Act (42 U.S.C. 1395w–

14 4(f)(2)(D)).

15 (c) MEDPAC REPORT.—

16 (1) IN GENERAL.—By not later than March 1,

17 2007, the Medicare Payment Advisory Commission

18 shall submit a report to Congress on mechanisms that

19 could be used to replace the sustainable growth rate

20 system under section 1848(f) of the Social Security

21 Act (42 U.S.C. 1395w–4(f)).

22 (2) REQUIREMENTS.—The report required under

23 paragraph (1) shall—

24 (A) identify and examine alternative meth25 ods for assessing volume growth;
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1 (B) review options to control the volume of

2 physicians’ services under the Medicare program

3 while maintaining access to such services by

4 Medicare beneficiaries;

5 (C) examine the application of volume con6 trols under the Medicare physician fee schedule

7 under section 1848 of the Social Security Act (42

8 U.S.C. 1395w–4);

9 (D) identify levels of application of volume

10 controls, such as group practice, hospital medical

11 staff, type of service, geographic area, and

12 outliers;

13 (E) examine the administrative feasibility

14 of implementing the options reviewed under sub15 paragraph (B), including the availability of

16 data and time lags;

17 (F) examine the extent to which the alter18 native methods identified and examined under

19 subparagraph (A) should be specified in such sec20 tion 1848; and

21 (G) identify the appropriate level of discre22 tion for the Secretary of Health and Human

23 Services to change payment rates under the

24 Medicare physician fee schedule or otherwise take

25 steps that affect physician behavior.
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1 Such report shall include such recommendations on

2 alternative mechanisms to replace the sustainable

3 growth rate system as the Medicare Payment Advi4 sory Commission determines appropriate.

5 (3) FUNDING.—Out of any funds in the Treas6 ury not otherwise appropriated, there are appro7 priated to the Medicare Payment Advisory Commis8 sion $550,000, to carry out this subsection.

9 SEC. 5105. THREE-YEAR TRANSITION OF HOLD HARMLESS

10 PAYMENTS FOR SMALL RURAL HOSPITALS

11 UNDER THE PROSPECTIVE PAYMENT SYSTEM

12 FOR HOSPITAL OUTPATIENT DEPARTMENT

13 SERVICES.

14 Section 1833(t)(7)(D)(i) of the Social Security Act (42

15 U.S.C. 1395l(t)(7)(D)(i)) is amended—

16 (1) by inserting ‘‘(I)’’ before ‘‘In the case’’; and

17 (2) by adding at the end the following new sub18 clause:

19 ‘‘(II) In the case of a hospital located

20 in a rural area and that has not more than

21 100 beds and that is not a sole community

22 hospital (as defined in section

23 1886(d)(5)(D)(iii)), for covered OPD serv24 ices furnished on or after January 1, 2006,

25 and before January 1, 2009, for which the
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1 PPS amount is less than the pre-BBA

2 amount, the amount of payment under this

3 subsection shall be increased by the applica4 ble percentage of the amount of such dif5 ference. For purposes of the previous sen6 tence, with respect to covered OPD services

7 furnished during 2006, 2007, or 2008, the

8 applicable percentage shall be 95 percent,

9 90 percent, and 85 percent, respectively.’’.

10 SEC. 5106. UPDATE TO THE COMPOSITE RATE COMPONENT

11 OF THE BASIC CASE-MIX ADJUSTED PROSPEC12 TIVE PAYMENT SYSTEM FOR DIALYSIS SERV13 ICES.

14 Section 1881(b)(12) of the Social Security Act (42

15 U.S.C. 1395rr(b)(12)) is amended—

16 (1) in subparagraph (F), in the flush matter at

17 the end, by striking ‘‘Nothing’’ and inserting ‘‘Except

18 as provided in subparagraph (G), nothing’’;

19 (2) by redesignating subparagraph (G) as sub20 paragraph (H); and

21 (3) by inserting after subparagraph (F) the fol22 lowing new subparagraph:

23 ‘‘(G) The Secretary shall increase the amount of the

24 composite rate component of the basic case-mix adjusted

25 system under subparagraph (B) for dialysis services fur-
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1 nished on or after January 1, 2006, by 1.6 percent above

2 the amount of such composite rate component for such serv3 ices furnished on December 31, 2005.’’.

4 SEC. 5107. REVISIONS TO PAYMENTS FOR THERAPY SERV5 ICES.

6 (a) EXCEPTION TO CAPS FOR 2006.—

7 (1) IN GENERAL.—Section 1833(g) of the Social

8 Security Act (42 U.S.C. 1395l(g)) is amended—

9 (A) in each of paragraphs (1) and (3), by

10 striking ‘‘paragraph (4)’’ and inserting ‘‘para11 graphs (4) and (5)’’; and

12 (B) by adding at the end the following new

13 paragraph:

14 ‘‘(5) With respect to expenses incurred during 2006 for

15 services, the Secretary shall implement a process under

16 which an individual enrolled under this part may, upon

17 request of the individual or a person on behalf of the indi18 vidual, obtain an exception from the uniform dollar limita19 tion specified in paragraph (2), for services described in

20 paragraphs (1) and (3) if the provision of such services is

21 determined to be medically necessary. Under such process,

22 if the Secretary does not make a decision on such a request

23 for an exception within 10 business days of the date of the

24 Secretary’s receipt of the request, the Secretary shall be
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1 deemed to have found the services to be medically nec2 essary.’’.

3 (2) TIMELY IMPLEMENTATION.—The Secretary of

4 Health and Human Services shall waive such provi5 sions of law and regulation (including those described

6 in section 110(c) of Pub. L. 108–173) as are nec7 essary to implement the amendments made by para8 graph (1) on a timely basis and, notwithstanding any

9 other provision of law, may implement such amend10 ments by program instruction or otherwise. There

11 shall be no administrative or judicial review under

12 section 1869 or section 1878 of the Social Security

13 Act (42 U.S.C. 1395ff and 1395oo), or otherwise of the

14 process (including the establishment of the process)

15 under section 1833(g)(5) of such Act, as added by

16 paragraph (1).

17 (b) IMPLEMENTATION OF CLINICALLY APPROPRIATE

18 CODE EDITS IN ORDER TO IDENTIFY AND ELIMINATE IM19 PROPER PAYMENTS FOR THERAPY SERVICES.—By not later

20 than July 1, 2006, the Secretary of Health and Human

21 Services shall implement clinically appropriate code edits

22 with respect to payments under part B of title XVIII of

23 the Social Security Act for physical therapy services, occu24 pational therapy services, and speech-language pathology

25 services in order to identify and eliminate improper pay-
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1 ments for such services, including edits of clinically illogical

2 combinations of procedure codes and other edits to control

3 inappropriate billings.

4 CHAPTER 2—MISCELLANEOUS

5 SEC. 5111. ACCELERATED IMPLEMENTATION OF INCOME6 RELATED REDUCTION IN PART B PREMIUM

7 SUBSIDY.

8 Section 1839(i)(3)(B) of the Social Security Act (42

9 U.S.C. 1395r(i)(3)(B)) is amended—

10 (1) in the heading, by striking ‘‘5-YEAR’’ and in11 serting ‘‘3-YEAR’’;

12 (2) in the matter preceding clause (i), by strik13 ing ‘‘2011’’ and inserting ‘‘2009’’;

14 (3) in clause (i), by striking ‘‘20 percent’’ and

15 inserting ‘‘33 percent’’;

16 (4) in clause (ii), by striking ‘‘40 percent’’ and

17 inserting ‘‘67 percent’’; and

18 (5) by striking clauses (iii) and (iv).

19 SEC. 5112. MEDICARE COVERAGE OF ULTRASOUND SCREEN20 ING FOR ABDOMINAL AORTIC ANEURYSMS.

21 (a) IN GENERAL.—Section 1861 of the Social Security

22 Act (42 U.S.C. 1395x) is amended—

23 (1) in subsection (s)(2)—

24 (A) by striking ‘‘and’’ at the end of sub25 paragraph (Y);
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1 (B) by adding ‘‘and’’ at the end of subpara2 graph (Z) and moving such subparagraph 2 ems

3 to the left; and

4 (C) by adding at the end the following new

5 subparagraph:

6 ‘‘(AA) ultrasound screening for abdominal aortic

7 aneurysm (as defined in subsection (bbb)) for an

8 individual—

9 ‘‘(i) who receives a referral for such an

10 ultrasound screening as a result of an initial

11 preventive physical examination (as defined in

12 section 1861(ww)(1));

13 ‘‘(ii) who has not been previously furnished

14 such an ultrasound screening under this title;

15 and

16 ‘‘(iii) who—

17 ‘‘(I) has a family history of abdominal

18 aortic aneurysm; or

19 ‘‘(II) manifests risk factors included in

20 a beneficiary category recommended for

21 screening by the United States Preventive

22 Services Task Force regarding abdominal

23 aortic aneurysms;’’; and

24 (2) by adding at the end the following new sub25 section:
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1 ‘‘Ultrasound Screening for Abdominal Aortic Aneurysm

2 ‘‘(bbb) The term ‘ultrasound screening for abdominal

3 aortic aneurysm’ means—

4 ‘‘(1) a procedure using sound waves (or such

5 other procedures using alternative technologies, of

6 commensurate accuracy and cost, that the Secretary

7 may specify) provided for the early detection of ab8 dominal aortic aneurysm; and

9 ‘‘(2) includes a physician’s interpretation of the

10 results of the procedure.’’.

11 (b) INCLUSION OF ULTRASOUND SCREENING FOR AB12 DOMINAL AORTIC ANEURYSM IN INITIAL PREVENTIVE

13 PHYSICAL EXAMINATION.—Section 1861(ww)(2) of such

14 Act (42 U.S.C. 1395x(ww)(2)) is amended by adding at the

15 end the following new subparagraph:

16 ‘‘(L) Ultrasound screening for abdominal aortic

17 aneurysm as defined in section 1861(bbb).’’.

18 (c) PAYMENT FOR ULTRASOUND SCREENING FOR AB19 DOMINAL AORTIC ANEURYSM.—Section 1848(j)(3) of such

20 Act (42 U.S.C. 1395w–4(j)(3)) is amended by inserting

21 ‘‘(2)(AA),’’ after ‘‘(2)(W),’’.

22 (d) FREQUENCY.—Section 1862(a)(1) of such Act (42

23 U.S.C. 1395y(a)(1)) is amended—

24 (1) by striking ‘‘and’’ at the end of subpara25 graph (L);
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1 (2) by striking the semicolon at the end of sub2 paragraph (M) and inserting ‘‘, and’’; and

3 (3) by adding at the end the following new sub4 paragraph:

5 ‘‘(N) in the case of ultrasound screening for ab6 dominal aortic aneurysm which is performed more

7 frequently than is provided for under section

8 1861(s)(2)(AA);’’.

9 (e) NON-APPLICATION OF PART B DEDUCTIBLE.—Sec10 tion 1833(b) of such Act (42 U.S.C. 1395l(b)) is amended

11 in the first sentence—

12 (1) by striking ‘‘and’’ before ‘‘(6)’’; and

13 (2) by inserting ‘‘, and (7) such deductible shall

14 not apply with respect to ultrasound screening for ab15 dominal aortic aneurysm (as defined in section

16 1861(bbb))’’ before the period at the end.

17 (f) EFFECTIVE DATE.—The amendments made by this

18 section shall apply to services furnished on or after January

19 1, 2007.

20 SEC. 5113. IMPROVING PATIENT ACCESS TO, AND UTILIZA21 TION OF, COLORECTAL CANCER SCREENING.

22 (a) NON-APPLICATION OF DEDUCTIBLE FOR

23 COLORECTAL CANCER SCREENING TESTS.—Section

24 1833(b) of the Social Security Act (42 U.S.C. 1395l(b)), as
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1 amended by section 5112(e), is amended in the first

2 sentence—

3 (1) by striking ‘‘and’’ before ‘‘(7)’’; and

4 (2) by inserting ‘‘, and (8) such deductible shall

5 not apply with respect to colorectal cancer screening

6 tests (as described in section 1861(pp)(1))’’ before the

7 period at the end.

8 (b) CONFORMING AMENDMENTS.—Paragraphs

9 (2)(C)(ii) and (3)(C)(ii) of section 1834(d) of such Act (42

10 U.S.C. 1395m(d)) are each amended—

11 (1) by striking ‘‘DEDUCTIBLE AND’’ in the head12 ing; and

13 (2) in subclause (I), by striking ‘‘deductible or’’

14 each place it appears.

15 (c) EFFECTIVE DATE.—The amendments made by this

16 section shall apply to services furnished on or after January

17 1, 2007.

18 SEC. 5114. DELIVERY OF SERVICES AT FEDERALLY QUALI19 FIED HEALTH CENTERS.

20 (a) COVERAGE.—

21 (1) IN GENERAL.—Section 1861(aa)(3) of the So22 cial Security Act (42 U.S.C. 1395x(aa)(3)) is

23 amended—
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1 (A) in subparagraph (A), by striking ‘‘,

2 and’’ and inserting ‘‘and services described in

3 subsections (qq) and (vv); and’’;

4 (B) in subparagraph (B), by striking ‘‘sec5 tions 329, 330, and 340’’ and inserting ‘‘section

6 330’’; and

7 (C) in the flush matter at the end, by in8 serting ‘‘by the center or by a health care profes9 sional under contract with the center’’ after

10 ‘‘outpatient of a Federally qualified health cen11 ter’’.

12 (2) CONSOLIDATED BILLING.—The first sentence

13 of section 1842(b)(6)(F) of such Act (42 U.S.C.

14 1395u(b)(6)(F)) is amended—

15 (A) by striking ‘‘and (G)’’ and inserting

16 ‘‘(G)’’; and

17 (B) by inserting before the period at the end

18 the following: ‘‘, and (H) in the case of services

19 described in section 1861(aa)(3) that are fur20 nished by a health care professional under con21 tract with a Federally qualified health center,

22 payment shall be made to the center’’.

23 (b) TECHNICAL CORRECTIONS.—Clauses (i) and

24 (ii)(II) of section 1861(aa)(4)(A) of such Act (42 U.S.C.
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1 1395x(aa)(4)(A)) are each amended by striking ‘‘(other

2 than subsection (h))’’.

3 (c) EFFECTIVE DATES.—The amendments made by

4 this section shall apply to services furnished on or after

5 January 1, 2006.

6 SEC. 5115. WAIVER OF PART B LATE ENROLLMENT PENALTY

7 FOR CERTAIN INTERNATIONAL VOLUNTEERS.

8 (a) IN GENERAL.—

9 (1) WAIVER OF PENALTY.—Section 1839(b) of

10 the Social Security Act (42 U.S.C. 1395r(b)) is

11 amended in the second sentence by inserting the fol12 lowing before the period at the end: ‘‘or months for

13 which the individual can demonstrate that the indi14 vidual was an individual described in section

15 1837(k)(3)’’.

16 (2) SPECIAL ENROLLMENT PERIOD.—

17 (A) IN GENERAL.—Section 1837 of such Act

18 (42 U.S.C. 1395p) is amended by adding at the

19 end the following new subsection:

20 ‘‘(k)(1) In the case of an individual who—

21 ‘‘(A) at the time the individual first satisfies

22 paragraph (1) or (2) of section 1836, is described in

23 paragraph (3), and has elected not to enroll (or to be

24 deemed enrolled) under this section during the indi25 vidual’s initial enrollment period; or
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1 ‘‘(B) has terminated enrollment under this sec2 tion during a month in which the individual is de3 scribed in paragraph (3),

4 there shall be a special enrollment period described in para5 graph (2).

6 ‘‘(2) The special enrollment period described in this

7 paragraph is the 6-month period beginning on the first day

8 of the month which includes the date that the individual

9 is no longer described in paragraph (3).

10 ‘‘(3) For purposes of paragraph (1), an individual de11 scribed in this paragraph is an individual who—

12 ‘‘(A) is serving as a volunteer outside of the

13 United States through a program—

14 ‘‘(i) that covers at least a 12-month period;

15 and

16 ‘‘(ii) that is sponsored by an organization

17 described in section 501(c)(3) of the Internal

18 Revenue Code of 1986 and exempt from taxation

19 under section 501(a) of such Code; and

20 ‘‘(B) demonstrates health insurance coverage

21 while serving in the program.’’.

22 (B) COVERAGE PERIOD.—Section 1838 of

23 such Act (42 U.S.C. 1395q) is amended by add24 ing at the end the following new subsection:
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1 ‘‘(f) Notwithstanding subsection (a), in the case of an

2 individual who enrolls during a special enrollment period

3 pursuant to section 1837(k), the coverage period shall begin

4 on the first day of the month following the month in which

5 the individual so enrolls.’’.

6 (b) EFFECTIVE DATE.—The amendment made by sub7 section (a)(1) shall apply to months beginning with Janu8 ary 2007 and the amendments made by subsection (a)(2)

9 shall take effect on January 1, 2007.

10 Subtitle C—Provisions Relating to

11 Parts A and B

12 SEC. 5201. HOME HEALTH PAYMENTS.

13 (a) 2006 UPDATE.—Section 1895(b)(3)(B)(ii) of the

14 Social Security Act (42 U.S.C. 1395fff(b)(3)(B)(ii)) is

15 amended—

16 (1) in subclause (III), by striking ‘‘each of 2005

17 and 2006’’ and inserting ‘‘all of 2005’’;

18 (2) by striking ‘‘or’’ at the end of subclause (III);

19 (3) in subclause (IV), by striking ‘‘2007 and’’

20 and by redesignating such subclause as subclause (V);

21 and

22 (4) by inserting after subclause (III) the fol23 lowing new subclause:

24 ‘‘(IV) 2006, 0 percent; and’’.
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1 (b) APPLYING RURAL ADD-ON POLICY FOR 2006.—

2 Section 421(a) of Medicare Prescription Drug, Improve3 ment, and Modernization Act of 2003 (Pub. L. 108–173;

4 117 Stat. 2283) is amended by inserting ‘‘and episodes and

5 visits beginning on or after January 1, 2006, and before

6 January 1, 2007,’’ after ‘‘April 1, 2005,’’.

7 (c) HOME HEALTH CARE QUALITY IMPROVEMENT.—

8 Section 1895(b)(3)(B) of the Social Security Act (42 U.S.C.

9 1395fff(b)(3)(B)) is amended—

10 (1) in clause (ii)(V), as redesignated by sub11 section (a)(3), by inserting ‘‘subject to clause (v),’’

12 after ‘‘subsequent year,’’; and

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

14 clause:

15 ‘‘(v) ADJUSTMENT IF QUALITY DATA

16 NOT SUBMITTED.—

17 ‘‘(I) ADJUSTMENT.—For purposes

18 of clause (ii)(V), for 2007 and each

19 subsequent year, in the case of a home

20 health agency that does not submit

21 data to the Secretary in accordance

22 with subclause (II) with respect to such

23 a year, the home health market basket

24 percentage increase applicable under

25 such clause for such year shall be re-
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1 duced by 2 percentage points. Such re2 duction shall apply only with respect

3 to the year involved, and the Secretary

4 shall not take into account such reduc5 tion in computing the prospective pay6 ment amount under this section for a

7 subsequent year, and the Medicare

8 Payment Advisory Commission shall

9 carry out the requirements under sec10 tion 5201(d) of the Deficit Reduction

11 Act of 2005.

12 ‘‘(II) SUBMISSION OF QUALITY

13 DATA.—For 2007 and each subsequent

14 year, each home health agency shall

15 submit to the Secretary such data that

16 the Secretary determines are appro17 priate for the measurement of health

18 care quality. Such data shall be sub19 mitted in a form and manner, and at

20 a time, specified by the Secretary for

21 purposes of this clause.

22 ‘‘(III) PUBLIC AVAILABILITY OF

23 DATA SUBMITTED.—The Secretary

24 shall establish procedures for making

25 data submitted under subclause (II)
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1 available to the public. Such proce2 dures shall ensure that a home health

3 agency has the opportunity to review

4 the data that is to be made public with

5 respect to the agency prior to such data

6 being made public.’’.

7 (d) MEDPAC REPORT ON VALUE BASED PUR8 CHASING.—

9 (1) IN GENERAL.—Not later than June 1, 2007,

10 the Medicare Payment Advisory Commission shall

11 submit to Congress a report that includes rec12 ommendations on a detailed structure of value based

13 payment adjustments for home health services under

14 the Medicare program under title XVIII of the Social

15 Security Act. Such report shall include recommenda16 tions concerning the determination of thresholds, the

17 size of such payments, sources of funds, and the rela18 tionship of payments for improvement and attain19 ment of quality.

20 (2) FUNDING.—Out of any funds in the Treas21 ury not otherwise appropriated, there are appro22 priated to the Medicare Payment Advisory Commis23 sion $550,000, to carry out this subsection.
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1 SEC. 5202. REVISION OF PERIOD FOR PROVIDING PAYMENT

2 FOR CLAIMS THAT ARE NOT SUBMITTED

3 ELECTRONICALLY.

4 (a) REVISION.—

5 (1) PART A.—Section 1816(c)(3)(B)(ii) of the

6 Social Security Act (42 U.S.C. 1395h(c)(3)(B)(ii)) is

7 amended by striking ‘‘26 days’’ and inserting ‘‘28

8 days’’.

9 (2) PART B.—Section 1842(c)(3)(B)(ii) of such

10 Act (42 U.S.C. 1395u(c)(3)(B)(ii)) is amended by

11 striking ‘‘26 days’’ and inserting ‘‘28 days’’.

12 (b) EFFECTIVE DATE.—The amendments made by this

13 section shall apply to claims submitted on or after January

14 1, 2006.

15 SEC. 5203. TIMEFRAME FOR PART A AND B PAYMENTS.

16 Notwithstanding sections 1816(c) and 1842(c)(2) of the

17 Social Security Act or any other provision of law—

18 (1) any payment from the Federal Hospital In19 surance Trust Fund under section 1817 of the Social

20 Security Act (42 U.S.C. 1395i) or from the Federal

21 Supplementary Medical Insurance Trust Fund under

22 section 1841 of such Act (42 U.S.C. 1395t) for claims

23 submitted under part A or B of title XVIII of such

24 Act for items and services furnished under such part

25 A or B, respectively, that would otherwise be payable

26 during the period beginning on September 22, 2006,
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1 and ending on September 30, 2006, shall be paid on

2 the first business day of October 2006; and

3 (2) no interest or late penalty shall be paid to

4 an entity or individual for any delay in a payment

5 by reason of the application of paragraph (1).

6 SEC. 5204. MEDICARE INTEGRITY PROGRAM FUNDING.

7 Section 1817(k)(4) of the Social Security Act (42

8 U.S.C. 1395i(k)(4)) is amended—

9 (1) in subparagraph (B), by striking ‘‘The

10 amount’’ and inserting ‘‘Subject to subparagraph (C),

11 the amount’’; and

12 (2) by adding at the end the following new sub13 paragraph:

14 ‘‘(C) ADJUSTMENTS.—The amount appro15 priated under subparagraph (A) for a fiscal year

16 is increased as follows:

17 ‘‘(i) For fiscal year 2006,

18 $100,000,000.’’.
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1 Subtitle D—Provisions Relating to

2 Part C

3 SEC. 5301. PHASE-OUT OF RISK ADJUSTMENT BUDGET NEU4 TRALITY IN DETERMINING THE AMOUNT OF

5 PAYMENTS TO MEDICARE ADVANTAGE ORGA6 NIZATIONS.

7 (a) IN GENERAL.—Section 1853 of the Social Security

8 Act (42 U.S.C. 1395w–23) is amended—

9 (1) in subsection (j)(1)—

10 (A) in subparagraph (A)—

11 (i) by inserting ‘‘(or, beginning with

2007, 1 12 ⁄12 of the applicable amount deter13 mined under subsection (k)(1))’’ after

14 ‘‘1853(c)(1)’’; and

15 (ii) by inserting ‘‘(for years before

16 2007)’’ after ‘‘adjusted as appropriate’’;

17 (B) in subparagraph (B), by inserting ‘‘(for

18 years before 2007)’’ after ‘‘adjusted as appro19 priate’’; and

20 (2) by adding at the end the following new sub21 section:

22 ‘‘(k) DETERMINATION OF APPLICABLE AMOUNT FOR

23 PURPOSES OF CALCULATING THE BENCHMARK

24 AMOUNTS.—
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1 ‘‘(1) APPLICABLE AMOUNT DEFINED.—For pur2 poses of subsection (j), subject to paragraph (2), the

3 term ‘applicable amount’ means for an area—

4 ‘‘(A) for 2007—

5 ‘‘(i) if such year is not specified under

6 subsection (c)(1)(D)(ii), an amount equal to

7 the amount specified in subsection (c)(1)(C)

8 for the area for 2006—

9 ‘‘(I) first adjusted by the rescaling

10 factor for 2006 for the area (as made

11 available by the Secretary in the an12 nouncement of the rates on April 4,

13 2005, under subsection (b)(1), but ex14 cluding any national adjustment fac15 tors for coding intensity and risk ad16 justment budget neutrality that were

17 included in such factor); and

18 ‘‘(II) then increased by the na19 tional per capita MA growth percent20 age, described in subsection (c)(6) for

21 2007, but not taking into account any

22 adjustment under subparagraph (C) of

23 such subsection for a year before 2004;
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1 ‘‘(ii) if such year is specified under

2 subsection (c)(1)(D)(ii), an amount equal to

3 the greater of—

4 ‘‘(I) the amount determined under

5 clause (i) for the area for the year; or

6 ‘‘(II) the amount specified in sub7 section (c)(1)(D) for the area for the

8 year; and

9 ‘‘(B) for a subsequent year—

10 ‘‘(i) if such year is not specified under

11 subsection (c)(1)(D)(ii), an amount equal to

12 the amount determined under this para13 graph for the area for the previous year (de14 termined without regard to paragraph (2)),

15 increased by the national per capita MA

16 growth percentage, described in subsection

17 (c)(6) for that succeeding year, but not tak18 ing into account any adjustment under sub19 paragraph (C) of such subsection for a year

20 before 2004; and

21 ‘‘(ii) if such year is specified under

22 subsection (c)(1)(D)(ii), an amount equal to

23 the greater of—

24 ‘‘(I) the amount determined under

25 clause (i) for the area for the year; or
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1 ‘‘(II) the amount specified in sub2 section (c)(1)(D) for the area for the

3 year.

4 ‘‘(2) PHASE-OUT OF BUDGET NEUTRALITY FAC5 TOR.—

6 ‘‘(A) IN GENERAL.—Except as provided in

7 subparagraph (D), in the case of 2007 through

8 2010, the applicable amount determined under

9 paragraph (1) shall be multiplied by a factor

10 equal to 1 plus the product of—

11 ‘‘(i) the percent determined under sub12 paragraph (B) for the year; and

13 ‘‘(ii) the applicable phase-out factor for

14 the year under subparagraph (C).

15 ‘‘(B) PERCENT DETERMINED.—

16 ‘‘(i) IN GENERAL.—For purposes of

17 subparagraph (A)(i), subject to clause (iv),

18 the percent determined under this subpara19 graph for a year is a percent equal to a

20 fraction the numerator of which is described

21 in clause (ii) and the denominator of which

22 is described in clause (iii).

23 ‘‘(ii) NUMERATOR BASED ON DIF24 FERENCE BETWEEN DEMOGRAPHIC RATE

25 AND RISK RATE.—
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1 ‘‘(I) IN GENERAL.—The numer2 ator described in this clause is an

3 amount equal to the amount by which

4 the demographic rate described in sub5 clause (II) exceeds the risk rate de6 scribed in subclause (III).

7 ‘‘(II) DEMOGRAPHIC RATE.—The

8 demographic rate described in this sub9 clause is the Secretary’s estimate of the

10 total payments that would have been

11 made under this part in the year if all

12 the monthly payment amounts for all

MA plans were equal to 1 13 ⁄12 of the an14 nual MA capitation rate under sub15 section (c)(1) for the area and year,

16 adjusted pursuant to subsection

17 (a)(1)(C).

18 ‘‘(III) RISK RATE.—The risk rate

19 described in this subclause is the Sec20 retary’s estimate of the total payments

21 that would have been made under this

22 part in the year if all the monthly

23 payment amounts for all MA plans

24 were equal to the amount described in

25 subsection (j)(1)(A) (determined as if
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1 this paragraph had not applied) under

2 subsection (j) for the area and year,

3 adjusted pursuant to subsection

4 (a)(1)(C).

5 ‘‘(iii) DENOMINATOR BASED ON RISK

6 RATE.—The denominator described in this

7 clause is equal to the total amount esti8 mated for the year under clause (ii)(III).

9 ‘‘(iv) REQUIREMENTS.—In estimating

10 the amounts under the previous clauses, the

11 Secretary shall—

12 ‘‘(I) use a complete set of the most

13 recent and representative Medicare Ad14 vantage risk scores under subsection

15 (a)(3) that are available from the risk

16 adjustment model announced for the

17 year;

18 ‘‘(II) adjust the risk scores to re19 flect changes in treatment and coding

20 practices in the fee-for-service sector;

21 ‘‘(III) adjust the risk scores for

22 differences in coding patterns between

23 Medicare Advantage plans and pro24 viders under the original Medicare fee25 for-service program under parts A and
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1 B to the extent that the Secretary has

2 identified such differences, as required

3 in subsection (a)(1)(C);

4 ‘‘(IV) as necessary, adjust the risk

5 scores for late data submitted by Medi6 care Advantage organizations;

7 ‘‘(V) as necessary, adjust the risk

8 scores for lagged cohorts; and

9 ‘‘(VI) as necessary, adjust the risk

10 scores for changes in enrollment in

11 Medicare Advantage plans during the

12 year.

13 ‘‘(v) AUTHORITY.—In computing such

14 amounts the Secretary may take into ac15 count the estimated health risk of enrollees

16 in preferred provider organization plans

17 (including MA regional plans) for the year.

18 ‘‘(C) APPLICABLE PHASE-OUT FACTOR.—

19 For purposes of subparagraph (A)(ii), the term

20 ‘applicable phase-out factor’ means—

21 ‘‘(i) for 2007, 0.55;

22 ‘‘(ii) for 2008, 0.40;

23 ‘‘(iii) for 2009, 0.25; and

24 ‘‘(iv) for 2010, 0.05.
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1 ‘‘(D) TERMINATION OF APPLICATION.—Sub2 paragraph (A) shall not apply in a year if the

3 amount estimated under subparagraph

4 (B)(ii)(III) for the year is equal to or greater

5 than the amount estimated under subparagraph

6 (B)(ii)(II) for the year.

7 ‘‘(3) NO REVISION IN PERCENT.—

8 ‘‘(A) IN GENERAL.—The Secretary may not

9 make any adjustment to the percent determined

10 under paragraph (2)(B) for any year.

11 ‘‘(B) RULE OF CONSTRUCTION.—Nothing in

12 this subsection shall be construed to limit the au13 thority of the Secretary to make adjustments to

14 the applicable amounts determined under para15 graph (1) as appropriate for purposes of updat16 ing data or for purposes of adopting an im17 proved risk adjustment methodology.’’.

18 (b) REFINEMENTS TO HEALTH STATUS ADJUST19 MENT.—Section 1853(a)(1)(C) of such Act (42 U.S.C.

20 1395w–23) is amended—

21 (1) by designating the matter after the heading

22 as a clause (i) with the following heading: ‘‘IN GEN23 ERAL.—’’ and indenting appropriately; and

24 (2) by adding at the end the following:
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1 ‘‘(ii) APPLICATION DURING PHASE-OUT

2 OF BUDGET NEUTRALITY FACTOR.—For

3 2006 through 2010:

4 ‘‘(I) In applying the adjustment

5 under clause (i) for health status to

6 payment amounts, the Secretary shall

7 ensure that such adjustment reflects

8 changes in treatment and coding prac9 tices in the fee-for-service sector and re10 flects differences in coding patterns be11 tween Medicare Advantage plans and

12 providers under part A and B to the

13 extent that the Secretary has identified

14 such differences.

15 ‘‘(II) In order to ensure payment

16 accuracy, the Secretary shall conduct

17 an analysis of the differences described

18 in subclause (I). The Secretary shall

19 complete such analysis by a date nec20 essary to ensure that the results of such

21 analysis are incorporated into the risk

22 scores only for 2008, 2009, and 2010.

23 In conducting such analysis, the Sec24 retary shall use data submitted with
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1 respect to 2004 and subsequent years,

2 as available.’’.

3 SEC. 5302. RURAL PACE PROVIDER GRANT PROGRAM.

4 (a) DEFINITIONS.—In this section:

5 (1) CMS.—The term ‘‘CMS’’ means the Centers

6 for Medicare & Medicaid Services.

7 (2) PACE PROGRAM.—The term ‘‘PACE pro8 gram’’ has the meaning given that term in sections

9 1894(a)(2) and 1934(a)(2) of the Social Security Act

10 (42 U.S.C. 1395eee(a)(2); 1396u–4(a)(2)).

11 (3) PACE PROVIDER.—The term ‘‘PACE pro12 vider’’ has the meaning given that term in section

13 1894(a)(3) or 1934(a)(3) of the Social Security Act

14 (42 U.S.C. 1395eee(a)(3); 1396u–4(a)(3)).

15 (4) RURAL AREA.—The term ‘‘rural area’’ has

16 the meaning given that term in section 1886(d)(2)(D)

17 of the Social Security Act (42 U.S.C.

18 1395ww(d)(2)(D)).

19 (5) RURAL PACE PILOT SITE.—The term ‘‘rural

20 PACE pilot site’’ means a PACE provider that has

21 been approved to provide services in a geographic

22 service area that is, in whole or in part, a rural area,

23 and that has received a site development grant under

24 this section.
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1 (6) SECRETARY.—The term ‘‘Secretary’’ means

2 the Secretary of Health and Human Services.

3 (b) SITE DEVELOPMENT GRANTS AND TECHNICAL AS4 SISTANCE PROGRAM.—

5 (1) SITE DEVELOPMENT GRANTS.—

6 (A) IN GENERAL.—The Secretary shall es7 tablish a process and criteria to award site de8 velopment grants to qualified PACE providers

9 that have been approved to serve a rural area.

10 (B) AMOUNT PER AWARD.—A site develop11 ment grant awarded under subparagraph (A) to

12 any individual rural PACE pilot site shall not

13 exceed $750,000.

14 (C) NUMBER OF AWARDS.—Not more than

15 15 rural PACE pilot sites shall be awarded a

16 site development grant under subparagraph (A).

17 (D) USE OF FUNDS.—Funds made available

18 under a site development grant awarded under

19 subparagraph (A) may be used for the following

20 expenses only to the extent such expenses are in21 curred in relation to establishing or delivering

22 PACE program services in a rural area:

23 (i) Feasibility analysis and planning.

24 (ii) Interdisciplinary team develop25 ment.
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1 (iii) Development of a provider net2 work, including contract development.

3 (iv) Development or adaptation of

4 claims processing systems.

5 (v) Preparation of special education

6 and outreach efforts required for the PACE

7 program.

8 (vi) Development of expense reporting

9 required for calculation of outlier payments

10 or reconciliation processes.

11 (vii) Development of any special qual12 ity of care or patient satisfaction data col13 lection efforts.

14 (viii) Establishment of a working cap15 ital fund to sustain fixed administrative,

16 facility, or other fixed costs until the pro17 vider reaches sufficient enrollment size.

18 (ix) Startup and development costs in19 curred prior to the approval of the rural

20 PACE pilot site’s PACE provider applica21 tion by CMS.

22 (x) Any other efforts determined by the

23 rural PACE pilot site to be critical to its

24 successful startup, as approved by the Sec25 retary.
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1 (E) APPROPRIATION.—

2 (i) IN GENERAL.—Out of funds in the

3 Treasury not otherwise appropriated, there

4 are appropriated to the Secretary to carry

5 out this subsection for fiscal year 2006,

6 $7,500,000.

7 (ii) AVAILABILITY.—Funds appro8 priated under clause (i) shall remain avail9 able for expenditure through fiscal year

10 2008.

11 (2) TECHNICAL ASSISTANCE PROGRAM.—The

12 Secretary shall establish a technical assistance pro13 gram to provide—

14 (A) outreach and education to State agen15 cies and provider organizations interested in es16 tablishing PACE programs in rural areas; and

17 (B) technical assistance necessary to sup18 port rural PACE pilot sites.

19 (c) COST OUTLIER PROTECTION FOR RURAL PACE

20 PILOT SITES.—

21 (1) ESTABLISHMENT OF FUND FOR REIMBURSE22 MENT OF OUTLIER COSTS.—Notwithstanding any

23 other provision of law, the Secretary shall establish

24 an outlier fund to reimburse rural PACE pilot sites

25 for recognized outlier costs (as defined in paragraph
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1 (3)) incurred for eligible outlier participants (as de2 fined in paragraph (2)) in an amount, subject to

3 paragraph (4), equal to 80 percent of the amount by

4 which the recognized outlier costs exceeds $50,000.

5 (2) ELIGIBLE OUTLIER PARTICIPANT.—For pur6 poses of this subsection, the term ‘‘eligible outlier par7 ticipant’’ means a PACE program eligible individual

8 (as defined in sections 1894(a)(5) and 1934(a)(5) of

9 the Social Security Act (42 U.S.C. 1395eee(a)(5);

10 1396u–4(a)(5))) who resides in a rural area and with

11 respect to whom the rural PACE pilot site incurs

12 more than $50,000 in recognized costs in a 12-month

13 period.

14 (3) RECOGNIZED OUTLIER COSTS DEFINED.—

15 (A) IN GENERAL.—For purposes of this sub16 section, the term ‘‘recognized outlier costs’’

17 means, with respect to services furnished to an

18 eligible outlier participant by a rural PACE

19 pilot site, the least of the following (as docu20 mented by the site to the satisfaction of the Sec21 retary) for the provision of inpatient and related

22 physician and ancillary services for the eligible

23 outlier participant in a given 12-month period:

24 (i) If the services are provided under a

25 contract between the pilot site and the pro-
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1 vider, the payment rate specified under the

2 contract.

3 (ii) The payment rate established

4 under the original Medicare fee-for-service

5 program for such service.

6 (iii) The amount actually paid for the

7 services by the pilot site.

8 (B) INCLUSION IN ONLY ONE PERIOD.—Rec9 ognized outlier costs may not be included in

10 more than one 12-month period.

11 (3) OUTLIER EXPENSE PAYMENT.—

12 (A) PAYMENT FOR OUTLIER COSTS.—Sub13 ject to subparagraph (B), in the case of a rural

14 PACE pilot site that has incurred outlier costs

15 for an eligible outlier participant, the rural

16 PACE pilot site shall receive an outlier expense

17 payment equal to 80 percent of such costs that

18 exceed $50,000.

19 (4) LIMITATIONS.—

20 (A) COSTS INCURRED PER ELIGIBLE

21 OUTLIER PARTICIPANT.—The total amount of

22 outlier expense payments made under this sub23 section to a rural PACE pilot site with respect

24 to an eligible outlier participant for any 12-
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1 month period shall not exceed $100,000 for the

2 12-month period used to calculate the payment.

3 (B) COSTS INCURRED PER PROVIDER.—No

4 rural PACE pilot site may receive more than

5 $500,000 in total outlier expense payments in a

6 12-month period.

7 (C) LIMITATION OF OUTLIER COST REIM8 BURSEMENT PERIOD.—A rural PACE pilot site

9 shall only receive outlier expense payments

10 under this subsection with respect to costs in11 curred during the first 3 years of the site’s oper12 ation.

13 (5) REQUIREMENT TO ACCESS RISK RESERVES

14 PRIOR TO PAYMENT.—A rural PACE pilot site shall

15 access and exhaust any risk reserves held or arranged

16 for the provider (other than revenue or reserves main17 tained to satisfy the requirements of section 460.80(c)

18 of title 42, Code of Federal Regulations) and any

19 working capital established through a site develop20 ment grant awarded under subsection (b)(1), prior to

21 receiving any payment from the outlier fund.

22 (6) APPLICATION.—In order to receive an outlier

23 expense payment under this subsection with respect to

24 an eligible outlier participant, a rural PACE pilot

25 site shall submit an application containing—
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1 (A) documentation of the costs incurred

2 with respect to the participant;

3 (B) a certification that the site has com4 plied with the requirements under paragraph

5 (4); and

6 (C) such additional information as the Sec7 retary may require.

8 (7) APPROPRIATION.—

9 (A) IN GENERAL.—Out of funds in the

10 Treasury not otherwise appropriated, there are

11 appropriated to the Secretary to carry out this

12 subsection for fiscal year 2006, $10,000,000.

13 (B) AVAILABILITY.—Funds appropriated

14 under subparagraph (A) shall remain available

15 for expenditure through fiscal year 2010.

16 (d) EVALUATION OF PACE PROVIDERS SERVING

17 RURAL SERVICE AREAS.—Not later than 60 months after

18 the date of enactment of this Act, the Secretary shall submit

19 a report to Congress containing an evaluation of the experi20 ence of rural PACE pilot sites.

21 (e) AMOUNTS IN ADDITION TO PAYMENTS UNDER SO22 CIAL SECURITY ACT.—Any amounts paid under the author23 ity of this section to a PACE provider shall be in addition

24 to payments made to the provider under section 1894 or
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1 1934 of the Social Security Act (42 U.S.C. 1395eee; 1396u–

2 4).

3 TITLE VI—MEDICAID AND SCHIP

4 Subtitle A—Medicaid

5 CHAPTER 1—PAYMENT FOR

6 PRESCRIPTION DRUGS

7 SEC. 6001. FEDERAL UPPER PAYMENT LIMIT FOR MULTIPLE

8 SOURCE DRUGS AND OTHER DRUG PAYMENT

9 PROVISIONS.

10 (a) MODIFICATION OF FEDERAL UPPER PAYMENT

11 LIMIT FOR MULTIPLE SOURCE DRUGS; DEFINITION OF

12 MULTIPLE SOURCE DRUGS.—Section 1927 of the Social Se13 curity Act (42 U.S.C. 1396r–8) is amended—

14 (1) in subsection (e)(4)—

15 (A) by striking ‘‘The Secretary’’ and insert16 ing ‘‘Subject to paragraph (5), the Secretary’’;

17 and

18 (B) by inserting ‘‘(or, effective January 1,

19 2007, two or more)’’ after ‘‘three or more’’;

20 (2) by adding at the end of subsection (e) the fol21 lowing new paragraph:

22 ‘‘(5) USE OF AMP IN UPPER PAYMENT LIMITS.—

23 Effective January 1, 2007, in applying the Federal

24 upper reimbursement limit under paragraph (4) and

25 section 447.332(b) of title 42 of the Code of Federal
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1 Regulations, the Secretary shall substitute 250 percent

2 of the average manufacturer price (as computed with3 out regard to customary prompt pay discounts ex4 tended to wholesalers) for 150 percent of the published

5 price.’’;

6 (3) in subsection (k)(7)(A)(i), in the matter pre7 ceding subclause (I), by striking ‘‘are 2 or more drug

8 products’’ and inserting ‘‘at least 1 other drug prod9 uct’’; and

10 (4) in subclauses (I), (II), and (III) of subsection

11 (k)(7)(A)(i), by striking ‘‘are’’ and inserting ‘‘is’’ each

12 place it appears.

13 (b) DISCLOSURE OF PRICE INFORMATION TO STATES

14 AND THE PUBLIC.—Subsection (b)(3) of such section is

15 amended—

16 (1) in subparagraph (A)—

17 (A) in clause (i), by inserting ‘‘month of a’’

18 after ‘‘last day of each’’; and

19 (B) by adding at the end the following: ‘‘Be20 ginning July 1, 2006, the Secretary shall provide

21 on a monthly basis to States under subpara22 graph (D)(iv) the most recently reported average

23 manufacturer prices for single source drugs and

24 for multiple source drugs and shall, on at least
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1 a quarterly basis, update the information posted

2 on the website under subparagraph (D)(v).’’; and

3 (2) in subparagraph (D)—

4 (A) by striking ‘‘and’’ at the end of clause

5 (ii);

6 (B) by striking the period at the end of

7 clause (iii) and inserting a comma; and

8 (C) by inserting after clause (iii) the fol9 lowing new clauses:

10 ‘‘(iv) to States to carry out this title,

11 and

12 ‘‘(v) to the Secretary to disclose

13 (through a website accessible to the public)

14 average manufacturer prices.’’.

15 (c) DEFINITION OF AVERAGE MANUFACTURER

16 PRICE.—

17 (1) EXCLUSION OF CUSTOMARY PROMPT PAY DIS18 COUNTS EXTENDED TO WHOLESALERS.—Subsection

19 (k)(1) of such section is amended—

20 (A) by striking ‘‘The term’’ and inserting

21 the following:

22 ‘‘(A) IN GENERAL.—Subject to subpara23 graph (B), the term’’;

24 (B) by striking ‘‘, after deducting cus25 tomary prompt pay discounts’’; and
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1 (C) by adding at the end the following:

2 ‘‘(B) EXCLUSION OF CUSTOMARY PROMPT

3 PAY DISCOUNTS EXTENDED TO WHOLESALERS.—

4 The average manufacturer price for a covered

5 outpatient drug shall be determined without re6 gard to customary prompt pay discounts ex7 tended to wholesalers.’’.

8 (2) MANUFACTURER REPORTING OF PROMPT PAY

9 DISCOUNTS.—Subsection (b)(3)(A)(i) of such section

10 is amended by inserting ‘‘, customary prompt pay

11 discounts extended to wholesalers,’’ after ‘‘(k)(1))’’.

12 (3) REQUIREMENT TO PROMULGATE REGULA13 TION.—

14 (A) INSPECTOR GENERAL RECOMMENDA15 TIONS.—Not later than June 1, 2006, the Inspec16 tor General of the Department of Health and

17 Human Services shall—

18 (i) review the requirements for, and

19 manner in which, average manufacturer

20 prices are determined under section 1927 of

21 the Social Security Act, as amended by this

22 section; and

23 (ii) shall submit to the Secretary of

24 Health and Human Services and Congress

25 such recommendations for changes in such
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1 requirements or manner as the Inspector

2 General determines to be appropriate.

3 (B) DEADLINE FOR PROMULGATION.—Not

4 later than July 1, 2007, the Secretary of Health

5 and Human Services shall promulgate a regula6 tion that clarifies the requirements for, and

7 manner in which, average manufacturer prices

8 are determined under section 1927 of the Social

9 Security Act, taking into consideration the rec10 ommendations submitted to the Secretary in ac11 cordance with subparagraph (A)(ii).

12 (d) EXCLUSION OF SALES AT A NOMINAL PRICE FROM

13 DETERMINATION OF BEST PRICE.—

14 (1) MANUFACTURER REPORTING OF SALES.—

15 Subsection (b)(3)(A)(iii) of such section is amended

16 by inserting before the period at the end the following:

17 ‘‘, and, for calendar quarters beginning on or after

18 January 1, 2007 and only with respect to the infor19 mation described in subclause (III), for covered out20 patient drugs’’.

21 (2) LIMITATION ON SALES AT A NOMINAL

22 PRICE.—Subsection (c)(1) of such section is amended

23 by adding at the end the following new subparagraph:

24 ‘‘(D) LIMITATION ON SALES AT A NOMINAL

25 PRICE.—
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1 ‘‘(i) IN GENERAL.—For purposes of

2 subparagraph (C)(ii)(III) and subsection

3 (b)(3)(A)(iii)(III), only sales by a manufac4 turer of covered outpatient drugs at nomi5 nal prices to the following shall be consid6 ered to be sales at a nominal price or mere7 ly nominal in amount:

8 ‘‘(I) A covered entity described in

9 section 340B(a)(4) of the Public Health

10 Service Act.

11 ‘‘(II) An intermediate care facil12 ity for the mentally retarded.

13 ‘‘(III) A State-owned or operated

14 nursing facility.

15 ‘‘(IV) Any other facility or entity

16 that the Secretary determines is a safe17 ty net provider to which sales of such

18 drugs at a nominal price would be ap19 propriate based on the factors described

20 in clause (ii).

21 ‘‘(ii) FACTORS.—The factors described

22 in this clause with respect to a facility or

23 entity are the following:

24 ‘‘(I) The type of facility or entity.
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1 ‘‘(II) The services provided by the

2 facility or entity.

3 ‘‘(III) The patient population

4 served by the facility or entity.

5 ‘‘(IV) The number of other facili6 ties or entities eligible to purchase at

7 nominal prices in the same service

8 area.

9 ‘‘(iii) NONAPPLICATION.—Clause (i)

10 shall not apply with respect to sales by a

11 manufacturer at a nominal price of covered

12 outpatient drugs pursuant to a master

13 agreement under section 8126 of title 38,

14 United States Code.’’.

15 (e) RETAIL SURVEY PRICES; STATE PAYMENT AND

16 UTILIZATION RATES; AND PERFORMANCE RANKINGS.—

17 Such section is further amended by inserting after sub18 section (e) the following new subsection:

19 ‘‘(f) SURVEY OF RETAIL PRICES; STATE PAYMENT AND

20 UTILIZATION RATES; AND PERFORMANCE RANKINGS.—

21 ‘‘(1) SURVEY OF RETAIL PRICES.—

22 ‘‘(A) USE OF VENDOR.—The Secretary may

23 contract services for—

24 ‘‘(i) the determination on a monthly

25 basis of retail survey prices for covered out-
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1 patient drugs that represent a nationwide

2 average of consumer purchase prices for

3 such drugs, net of all discounts and rebates

4 (to the extent any information with respect

5 to such discounts and rebates is available);

6 and

7 ‘‘(ii) the notification of the Secretary

8 when a drug product that is therapeutically

9 and pharmaceutically equivalent and bio10 equivalent becomes generally available.

11 ‘‘(B) SECRETARY RESPONSE TO NOTIFICA12 TION OF AVAILABILITY OF MULTIPLE SOURCE

13 PRODUCTS.—If contractor notifies the Secretary

14 under subparagraph (A)(ii) that a drug product

15 described in such subparagraph has become gen16 erally available, the Secretary shall make a de17 termination, within 7 days after receiving such

18 notification, as to whether the product is now de19 scribed in subsection (e)(4).

20 ‘‘(C) USE OF COMPETITIVE BIDDING.—In

21 contracting for such services, the Secretary shall

22 competitively bid for an outside vendor that has

23 a demonstrated history in—

24 ‘‘(i) surveying and determining, on a

25 representative nationwide basis, retail
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1 prices for ingredient costs of prescription

2 drugs;

3 ‘‘(ii) working with retail pharmacies,

4 commercial payers, and States in obtaining

5 and disseminating such price information;

6 and

7 ‘‘(iii) collecting and reporting such

8 price information on at least a monthly

9 basis.

10 In contracting for such services, the Secretary

11 may waive such provisions of the Federal Acqui12 sition Regulation as are necessary for the effi13 cient implementation of this subsection, other

14 than provisions relating to confidentiality of in15 formation and such other provisions as the Sec16 retary determines appropriate.

17 ‘‘(D) ADDITIONAL PROVISIONS.—A contract

18 with a vendor under this paragraph shall in19 clude such terms and conditions as the Secretary

20 shall specify, including the following:

21 ‘‘(i) The vendor must monitor the mar22 ketplace and report to the Secretary each

23 time there is a new covered outpatient drug

24 generally available.
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1 ‘‘(ii) The vendor must update the Sec2 retary no less often than monthly on the re3 tail survey prices for covered outpatient

4 drugs.

5 ‘‘(iii) The contract shall be effective for

6 a term of 2 years.

7 ‘‘(E) AVAILABILITY OF INFORMATION TO

8 STATES.—Information on retail survey prices ob9 tained under this paragraph, including applica10 ble information on single source drugs, shall be

11 provided to States on at least a monthly basis.

12 The Secretary shall devise and implement a

13 means for providing access to each State agency

14 designated under section 1902(a)(5) with respon15 sibility for the administration or supervision of

16 the administration of the State plan under this

17 title of the retail survey price determined under

18 this paragraph.

19 ‘‘(2) ANNUAL STATE REPORT.—Each State shall

20 annually report to the Secretary information on—

21 ‘‘(A) the payment rates under the State

22 plan under this title for covered outpatient

23 drugs;

24 ‘‘(B) the dispensing fees paid under such

25 plan for such drugs; and
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1 ‘‘(C) utilization rates for noninnovator mul2 tiple source drugs under such plan.

3 ‘‘(3) ANNUAL STATE PERFORMANCE RANKINGS.—

4 ‘‘(A) COMPARATIVE ANALYSIS.—The Sec5 retary annually shall compare, for the 50 most

6 widely prescribed drugs identified by the Sec7 retary, the national retail sales price data (col8 lected under paragraph (1)) for such drugs with

9 data on prices under this title for each such drug

10 for each State.

11 ‘‘(B) AVAILABILITY OF INFORMATION.—The

12 Secretary shall submit to Congress and the

13 States full information regarding the annual

14 rankings made under subparagraph (A).

15 ‘‘(4) APPROPRIATION.—Out of any funds in the

16 Treasury not otherwise appropriated, there is appro17 priated to the Secretary of Health and Human Serv18 ices $5,000,000 for each of fiscal years 2006 through

19 2010 to carry out this subsection.’’.

20 (f) MISCELLANEOUS AMENDMENTS.—

21 (1) IN GENERAL.—Sections 1927(g)(1)(B)(i)(II)

22 and 1861(t)(2)(B)(ii)(I) of such Act are each amend23 ed by inserting ‘‘(or its successor publications)’’ after

24 ‘‘United States Pharmacopoeia-Drug Information’’.
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1 (2) PAPERWORK REDUCTION.—The last sentence

2 of section 1927(g)(2)(A)(ii) of such Act (42 U.S.C.

3 1396r–8(g)(2)(A)(ii)) is amended by inserting before

4 the period at the end the following: ‘‘, or to require

5 verification of the offer to provide consultation or a

6 refusal of such offer’’.

7 (3) EFFECTIVE DATE.—The amendments made

8 by this subsection shall take effect on the date of the

9 enactment of this Act.

10 (g) EFFECTIVE DATE.—Except as otherwise provided,

11 the amendments made by this section shall take effect on

12 January 1, 2007, without regard to whether or not final

13 regulations to carry out such amendments have been pro14 mulgated by such date.

15 SEC. 6002. COLLECTION AND SUBMISSION OF UTILIZATION

16 DATA FOR CERTAIN PHYSICIAN ADMINIS17 TERED DRUGS.

18 (a) IN GENERAL.—Section 1927(a) of the Social Secu19 rity Act (42 U.S.C. 1396r–8(a)) is amended by adding at

20 the end the following new paragraph:

21 ‘‘(7) REQUIREMENT FOR SUBMISSION OF UTILI22 ZATION DATA FOR CERTAIN PHYSICIAN ADMINISTERED

23 DRUGS.—

24 ‘‘(A) SINGLE SOURCE DRUGS.—In order for

25 payment to be available under section 1903(a)
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1 for a covered outpatient drug that is a single

2 source drug that is physician administered

3 under this title (as determined by the Secretary),

4 and that is administered on or after January 1,

5 2006, the State shall provide for the collection

6 and submission of such utilization data and cod7 ing (such as J-codes and National Drug Code

8 numbers) for each such drug as the Secretary

9 may specify as necessary to identify the manu10 facturer of the drug in order to secure rebates

11 under this section for drugs administered for

12 which payment is made under this title.

13 ‘‘(B) MULTIPLE SOURCE DRUGS.—

14 ‘‘(i) IDENTIFICATION OF MOST FRE15 QUENTLY PHYSICIAN ADMINISTERED MUL16 TIPLE SOURCE DRUGS.—Not later than

17 January 1, 2007, the Secretary shall pub18 lish a list of the 20 physician administered

19 multiple source drugs that the Secretary de20 termines have the highest dollar volume of

21 physician administered drugs dispensed

22 under this title. The Secretary may modify

23 such list from year to year to reflect changes

24 in such volume.
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1 ‘‘(ii) REQUIREMENT.—In order for

2 payment to be available under section

3 1903(a) for a covered outpatient drug that

4 is a multiple source drug that is physician

5 administered (as determined by the Sec6 retary), that is on the list published under

7 clause (i), and that is administered on or

8 after January 1, 2008, the State shall pro9 vide for the submission of such utilization

10 data and coding (such as J-codes and Na11 tional Drug Code numbers) for each such

12 drug as the Secretary may specify as nec13 essary to identify the manufacturer of the

14 drug in order to secure rebates under this

15 section.

16 ‘‘(C) USE OF NDC CODES.—Not later than

17 January 1, 2007, the information shall be sub18 mitted under subparagraphs (A) and (B)(ii)

19 using National Drug Code codes unless the Sec20 retary specifies that an alternative coding system

21 should be used.

22 ‘‘(D) HARDSHIP WAIVER.—The Secretary

23 may delay the application of subparagraph (A)

24 or (B)(ii), or both, in the case of a State to pre25 vent hardship to States which require additional
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1 time to implement the reporting system required

2 under the respective subparagraph.’’.

3 (b) LIMITATION ON PAYMENT.—Section 1903(i)(10) of

4 such Act (42 U.S.C. 1396b(i)(10)), is amended—

5 (1) by striking ‘‘and’’ at the end of subpara6 graph (A);

7 (2) by striking ‘‘or’’ at the end of subparagraph

8 (B) and inserting ‘‘and’’; and

9 (3) by adding at the end the following new sub10 paragraph:

11 ‘‘(C) with respect to covered outpatient

12 drugs described in section 1927(a)(7), unless in13 formation respecting utilization data and coding

14 on such drugs that is required to be submitted

15 under such section is submitted in accordance

16 with such section; or’’.

17 SEC. 6003. IMPROVED REGULATION OF DRUGS SOLD UNDER

18 A NEW DRUG APPLICATION APPROVED

19 UNDER SECTION 505(c) OF THE FEDERAL

20 FOOD, DRUG, AND COSMETIC ACT.

21 (a) INCLUSION WITH OTHER REPORTED AVERAGE

22 MANUFACTURER AND BEST PRICES.—Section

23 1927(b)(3)(A) of the Social Security Act (42 U.S.C. 1396r–

24 8(b)(3)(A)) is amended—
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1 (1) by striking clause (i) and inserting the fol2 lowing:

3 ‘‘(i) not later than 30 days after the

4 last day of each rebate period under the

5 agreement—

6 ‘‘(I) on the average manufacturer

7 price (as defined in subsection (k)(1))

8 for covered outpatient drugs for the re9 bate period under the agreement (in10 cluding for all such drugs that are sold

11 under a new drug application ap12 proved under section 505(c) of the Fed13 eral Food, Drug, and Cosmetic Act);

14 and

15 ‘‘(II) for single source drugs and

16 innovator multiple source drugs (in17 cluding all such drugs that are sold

18 under a new drug application ap19 proved under section 505(c) of the Fed20 eral Food, Drug, and Cosmetic Act), on

21 the manufacturer’s best price (as de22 fined in subsection (c)(1)(C)) for such

23 drugs for the rebate period under the

24 agreement;’’; and
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1 (2) in clause (ii), by inserting ‘‘(including for

2 such drugs that are sold under a new drug applica3 tion approved under section 505(c) of the Federal

4 Food, Drug, and Cosmetic Act)’’ after ‘‘drugs’’.

5 (b) CONFORMING AMENDMENTS.—Section 1927 of such

6 Act (42 U.S.C. 1396r–8) is amended—

7 (1) in subsection (c)(1)(C)—

8 (A) in clause (i), in the matter preceding

9 subclause (I), by inserting after ‘‘or innovator

10 multiple source drug of a manufacturer’’ the fol11 lowing: ‘‘(including the lowest price available to

12 any entity for any such drug of a manufacturer

13 that is sold under a new drug application ap14 proved under section 505(c) of the Federal Food,

15 Drug, and Cosmetic Act)’’; and

16 (B) in clause (ii)—

17 (i) in subclause (II), by striking ‘‘and’’

18 at the end;

19 (ii) in subclause (III), by striking the

20 period at the end and inserting ‘‘; and’’;

21 and

22 (iii) by adding at the end the fol23 lowing:

24 ‘‘(IV) in the case of a manufac25 turer that approves, allows, or other-
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1 wise permits any other drug of the

2 manufacturer to be sold under a new

3 drug application approved under sec4 tion 505(c) of the Federal Food, Drug,

5 and Cosmetic Act, shall be inclusive of

6 the lowest price for such authorized

7 drug available from the manufacturer

8 during the rebate period to any manu9 facturer, wholesaler, retailer, provider,

10 health maintenance organization, non11 profit entity, or governmental entity

12 within the United States, excluding

13 those prices described in subclauses (I)

14 through (IV) of clause (i).’’; and

15 (2) in subsection (k), as amended by section

16 6001(c)(1), by adding at the end the following:

17 ‘‘(C) INCLUSION OF SECTION 505(c)

18 DRUGS.—In the case of a manufacturer that ap19 proves, allows, or otherwise permits any drug of

20 the manufacturer to be sold under a new drug

21 application approved under section 505(c) of the

22 Federal Food, Drug, and Cosmetic Act, such

23 term shall be inclusive of the average price paid

24 for such drug by wholesalers for drugs distrib25 uted to the retail pharmacy class of trade.’’.
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1 (c) EFFECTIVE DATE.—The amendments made by this

2 section take effect on January 1, 2007.

3 SEC. 6004. CHILDREN’S HOSPITAL PARTICIPATION IN SEC4 TION 340B DRUG DISCOUNT PROGRAM.

5 (a) IN GENERAL.—Section 1927(a)(5)(B) of the Social

6 Security Act (42 U.S.C. 1396r–8(a)(5)(B)) is amended by

7 inserting before the period at the end the following: ‘‘and

8 a children’s hospital described in section 1886(d)(1)(B)(iii)

9 which meets the requirements of clauses (i) and (iii) of sec10 tion 340B(b)(4)(L) of the Public Health Service Act and

11 which would meet the requirements of clause (ii) of such

12 section if that clause were applied by taking into account

13 the percentage of care provided by the hospital to patients

14 eligible for medical assistance under a State plan under this

15 title’’.

16 (b) EFFECTIVE DATE.—The amendment made by sub17 section (a) shall apply to drugs purchased on or after the

18 date of the enactment of this Act.
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1 CHAPTER 2—LONG-TERM CARE UNDER

2 MEDICAID

3 Subchapter A—Reform of Asset Transfer

4 Rules

5 SEC. 6011. LENGTHENING LOOK-BACK PERIOD; CHANGE IN

6 BEGINNING DATE FOR PERIOD OF INELIGI7 BILITY.

8 (a) LENGTHENING LOOK-BACK PERIOD FOR ALL DIS9 POSALS TO 5 YEARS.—Section 1917(c)(1)(B)(i) of the So10 cial Security Act (42 U.S.C. 1396p(c)(1)(B)(i)) is amended

11 by inserting ‘‘or in the case of any other disposal of assets

12 made on or after the date of the enactment of the Deficit

13 Reduction Act of 2005’’ before ‘‘, 60 months’’.

14 (b) CHANGE IN BEGINNING DATE FOR PERIOD OF IN15 ELIGIBILITY.—Section 1917(c)(1)(D) of such Act (42 U.S.C.

16 1396p(c)(1)(D)) is amended—

17 (1) by striking ‘‘(D) The date’’ and inserting

18 ‘‘(D)(i) In the case of a transfer of asset made before

19 the date of the enactment of the Deficit Reduction Act

20 of 2005, the date’’; and

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

22 clause:

23 ‘‘(ii) In the case of a transfer of asset made on or after

24 the date of the enactment of the Deficit Reduction Act of

25 2005, the date specified in this subparagraph is the first
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1 day of a month during or after which assets have been

2 transferred for less than fair market value, or the date on

3 which the individual is eligible for medical assistance under

4 the State plan and would otherwise be receiving institu5 tional level care described in subparagraph (C) based on

6 an approved application for such care but for the applica7 tion of the penalty period, whichever is later, and which

8 does not occur during any other period of ineligibility

9 under this subsection.’’.

10 (c) EFFECTIVE DATE.—The amendments made by this

11 section shall apply to transfers made on or after the date

12 of the enactment of this Act.

13 (d) AVAILABILITY OF HARDSHIP WAIVERS.—Each

14 State shall provide for a hardship waiver process in accord15 ance with section 1917(c)(2)(D) of the Social Security Act

16 (42 U.S.C. 1396p(c)(2)(D))—

17 (1) under which an undue hardship exists when

18 application of the transfer of assets provision would

19 deprive the individual—

20 (A) of medical care such that the individ21 ual’s health or life would be endangered; or

22 (B) of food, clothing, shelter, or other neces23 sities of life; and

24 (2) which provides for—
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1 (A) notice to recipients that an undue hard2 ship exception exists;

3 (B) a timely process for determining wheth4 er an undue hardship waiver will be granted;

5 and

6 (C) a process under which an adverse deter7 mination can be appealed.

8 (e) ADDITIONAL PROVISIONS ON HARDSHIP WAIV9 ERS.—

10 (1) APPLICATION BY FACILITY.—Section

11 1917(c)(2) of the Social Security Act (42 U.S.C.

12 1396p(c)(2)) is amended—

13 (A) by striking the semicolon at the end of

14 subparagraph (D) and inserting a period; and

15 (B) by adding after and below such sub16 paragraph the following:

17 ‘‘The procedures established under subparagraph (D)

18 shall permit the facility in which the institutionalized

19 individual is residing to file an undue hardship

20 waiver application on behalf of the individual with

21 the consent of the individual or the personal rep22 resentative of the individual.’’.

23 (2) AUTHORITY TO MAKE BED HOLD PAYMENTS

24 FOR HARDSHIP APPLICANTS.—Such section is further

25 amended by adding at the end the following: ‘‘While
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1 an application for an undue hardship waiver is

2 pending under subparagraph (D) in the case of an

3 individual who is a resident of a nursing facility, if

4 the application meets such criteria as the Secretary

5 specifies, the State may provide for payments for

6 nursing facility services in order to hold the bed for

7 the individual at the facility, but not in excess of

8 payments for 30 days.’’.

9 SEC. 6012. DISCLOSURE AND TREATMENT OF ANNUITIES.

10 (a) IN GENERAL.—Section 1917 of the Social Security

11 Act (42 U.S.C. 1396p) is amended by redesignating sub12 section (e) as subsection (f) and by inserting after subsection

13 (d) the following new subsection:

14 ‘‘(e)(1) In order to meet the requirements of this section

15 for purposes of section 1902(a)(18), a State shall require,

16 as a condition for the provision of medical assistance for

17 services described in subsection (c)(1)(C)(i) (relating to

18 long-term care services) for an individual, the application

19 of the individual for such assistance (including any recer20 tification of eligibility for such assistance) shall disclose a

21 description of any interest the individual or community

22 spouse has in an annuity (or similar financial instrument,

23 as may be specified by the Secretary), regardless of whether

24 the annuity is irrevocable or is treated as an asset. Such

25 application or recertification form shall include a statement
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1 that under paragraph (2) the State becomes a remainder

2 beneficiary under such an annuity or similar financial in3 strument by virtue of the provision of such medical assist4 ance.

5 ‘‘(2)(A) In the case of disclosure concerning an annu6 ity under subsection (c)(1)(F), the State shall notify the

7 issuer of the annuity of the right of the State under such

8 subsection as a preferred remainder beneficiary in the an9 nuity for medical assistance furnished to the individual.

10 Nothing in this paragraph shall be construed as preventing

11 such an issuer from notifying persons with any other re12 mainder interest of the State’s remainder interest under

13 such subsection.

14 ‘‘(B) In the case of such an issuer receiving notice

15 under subparagraph (A), the State may require the issuer

16 to notify the State when there is a change in the amount

17 of income or principal being withdrawn from the amount

18 that was being withdrawn at the time of the most recent

19 disclosure described in paragraph (1). A State shall take

20 such information into account in determining the amount

21 of the State’s obligations for medical assistance or in the

22 individual’s eligibility for such assistance.

23 ‘‘(3) The Secretary may provide guidance to States on

24 categories of transactions that may be treated as a transfer

25 of asset for less than fair market value.
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1 ‘‘(4) Nothing in this subsection shall be construed as

2 preventing a State from denying eligibility for medical as3 sistance for an individual based on the income or resources

4 derived from an annuity described in paragraph (1).’’.

5 (b) REQUIREMENT FOR STATE TO BE NAMED AS A

6 REMAINDER BENEFICIARY.—Section 1917(c)(1) of such Act

7 (42 U.S.C. 1396p(c)(1)), is amended by adding at the end

8 the following:

9 ‘‘(F) For purposes of this paragraph, the purchase of

10 an annuity shall be treated as the disposal of an asset for

11 less than fair market value unless—

12 ‘‘(i) the State is named as the remainder bene13 ficiary in the first position for at least the total

14 amount of medical assistance paid on behalf of the

15 annuitant under this title; or

16 ‘‘(ii) the State is named as such a beneficiary in

17 the second position after the community spouse or

18 minor or disabled child and is named in the first po19 sition if such spouse or a representative of such child

20 disposes of any such remainder for less than fair

21 market value.’’.

22 (c) INCLUSION OF TRANSFERS TO PURCHASE BAL23 LOON ANNUITIES.—Section 1917(c)(1) of such Act (42

24 U.S.C. 1396p(c)(1)), as amended by subsection (b), is

25 amended by adding at the end the following:
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1 ‘‘(G) For purposes of this paragraph with respect to

2 a transfer of assets, the term ‘assets’ includes an annuity

3 purchased by or on behalf of an annuitant who has applied

4 for medical assistance with respect to nursing facility serv5 ices or other long-term care services under this title unless—

6 ‘‘(i) the annuity is—

7 ‘‘(I) an annuity described in subsection (b)

8 or (q) of section 408 of the Internal Revenue

9 Code of 1986; or

10 ‘‘(II) purchased with proceeds from—

11 ‘‘(aa) an account or trust described in

12 subsection (a), (c), or (p) of section 408 of

13 such Code;

14 ‘‘(bb) a simplified employee pension

15 (within the meaning of section 408(k) of

16 such Code); or

17 ‘‘(cc) a Roth IRA described in section

18 408A of such Code; or

19 ‘‘(ii) the annuity—

20 ‘‘(I) is irrevocable and nonassignable;

21 ‘‘(II) is actuarially sound (as determined in

22 accordance with actuarial publications of the Of23 fice of the Chief Actuary of the Social Security

24 Administration); and
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1 ‘‘(III) provides for payments in equal

2 amounts during the term of the annuity, with no

3 deferral and no balloon payments made.’’.

4 (d) EFFECTIVE DATE.—The amendments made by this

5 section shall apply to transactions (including the purchase

6 of an annuity) occurring on or after the date of the enact7 ment of this Act.

8 SEC. 6013. APPLICATION OF ‘‘INCOME-FIRST’’ RULE IN AP9 PLYING COMMUNITY SPOUSE’S INCOME BE10 FORE ASSETS IN PROVIDING SUPPORT OF

11 COMMUNITY SPOUSE.

12 (a) IN GENERAL.—Section 1924(d) of the Social Secu13 rity Act (42 U.S.C. 1396r–5(d)) is amended by adding at

14 the end the following new subparagraph:

15 ‘‘(6) APPLICATION OF ‘INCOME FIRST’ RULE TO

16 REVISION OF COMMUNITY SPOUSE RESOURCE ALLOW17 ANCE.—For purposes of this subsection and sub18 sections (c) and (e), a State must consider that all in19 come of the institutionalized spouse that could be

20 made available to a community spouse, in accordance

21 with the calculation of the community spouse monthly

22 income allowance under this subsection, has been

23 made available before the State allocates to the com24 munity spouse an amount of resources adequate to

25 provide the difference between the minimum monthly
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1 maintenance needs allowance and all income avail2 able to the community spouse.’’.

3 (b) EFFECTIVE DATE.—The amendment made by sub4 section (a) shall apply to transfers and allocations made

5 on or after the date of the enactment of this Act by individ6 uals who become institutionalized spouses on or after such

7 date.

8 SEC. 6014. DISQUALIFICATION FOR LONG-TERM CARE AS9 SISTANCE FOR INDIVIDUALS WITH SUBSTAN10 TIAL HOME EQUITY.

11 (a) IN GENERAL.—Section 1917 of the Social Security

12 Act, as amended by section 6012(a), is further amended by

13 redesignating subsection (f) as subsection (g) and by insert14 ing after subsection (e) the following new subsection:

15 ‘‘(f)(1)(A) Notwithstanding any other provision of this

16 title, subject to subparagraphs (B) and (C) of this para17 graph and paragraph (2), in determining eligibility of an

18 individual for medical assistance with respect to nursing

19 facility services or other long-term care services, the indi20 vidual shall not be eligible for such assistance if the individ21 ual’s equity interest in the individual’s home exceeds

22 $500,000.

23 ‘‘(B) A State may elect, without regard to the require24 ments of section 1902(a)(1) (relating to statewideness) and

25 section 1902(a)(10)(B) (relating to comparability), to
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1 apply subparagraph (A) by substituting for ‘$500,000’, an

2 amount that exceeds such amount, but does not exceed

3 $750,000.

4 ‘‘(C) The dollar amounts specified in this paragraph

5 shall be increased, beginning with 2011, from year to year

6 based on the percentage increase in the consumer price

7 index for all urban consumers (all items; United States city

8 average), rounded to the nearest $1,000.

9 ‘‘(2) Paragraph (1) shall not apply with respect to an

10 individual if—

11 ‘‘(A) the spouse of such individual, or

12 ‘‘(B) such individual’s child who is under age

13 21, or (with respect to States eligible to participate

14 in the State program established under title XVI) is

15 blind or permanently and totally disabled, or (with

16 respect to States which are not eligible to participate

17 in such program) is blind or disabled as defined in

18 section 1614,

19 is lawfully residing in the individual’s home.

20 ‘‘(3) Nothing in this subsection shall be construed as

21 preventing an individual from using a reverse mortgage or

22 home equity loan to reduce the individual’s total equity in23 terest in the home.
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1 ‘‘(4) The Secretary shall establish a process whereby

2 paragraph (1) is waived in the case of a demonstrated hard3 ship.’’.

4 (b) EFFECTIVE DATE.—The amendment made by sub5 section (a) shall apply to individuals who are determined

6 eligible for medical assistance with respect to nursing facil7 ity services or other long-term care services based on an ap8 plication filed on or after January 1, 2006.

9 SEC. 6015. ENFORCEABILITY OF CONTINUING CARE RETIRE10 MENT COMMUNITIES (CCRC) AND LIFE CARE

11 COMMUNITY ADMISSION CONTRACTS.

12 (a) ADMISSION POLICIES OF NURSING FACILITIES.—

13 Section 1919(c)(5) of the Social Security Act (42 U.S.C.

14 1396r(c)(5)) is amended—

15 (1) in subparagraph (A)(i)(II), by inserting

16 ‘‘subject to clause (v),’’ after ‘‘(II)’’; and

17 (2) by adding at the end of subparagraph (B)

18 the following new clause:

19 ‘‘(v) TREATMENT OF CONTINUING CARE

20 RETIREMENT COMMUNITIES ADMISSION CON21 TRACTS.—Notwithstanding subclause (II) of

22 subparagraph (A)(i), subject to subsections

23 (c) and (d) of section 1924, contracts for ad24 mission to a State licensed, registered, cer25 tified, or equivalent continuing care retire-
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1 ment community or life care community,

2 including services in a nursing facility that

3 is part of such community, may require

4 residents to spend on their care resources

5 declared for the purposes of admission be6 fore applying for medical assistance.’’.

7 (b) TREATMENT OF ENTRANCE FEES.—Section 1917

8 of such Act (42 U.S.C. 1396p), as amended by sections

9 6012(a) and 6014(a), is amended by redesignating sub10 section (g) as subsection (h) and by inserting after sub11 section (f) the following new subsection:

12 ‘‘(g) TREATMENT OF ENTRANCE FEES OF INDIVIDUALS

13 RESIDING IN CONTINUING CARE RETIREMENT COMMU14 NITIES.—

15 ‘‘(1) IN GENERAL.—For purposes of determining

16 an individual’s eligibility for, or amount of, benefits

17 under a State plan under this title, the rules specified

18 in paragraph (2) shall apply to individuals residing

19 in continuing care retirement communities or life

20 care communities that collect an entrance fee on ad21 mission from such individuals.

22 ‘‘(2) TREATMENT OF ENTRANCE FEE.—For pur23 poses of this subsection, an individual’s entrance fee

24 in a continuing care retirement community or life
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1 care community shall be considered a resource avail2 able to the individual to the extent that—

3 ‘‘(A) the individual has the ability to use

4 the entrance fee, or the contract provides that the

5 entrance fee may be used, to pay for care should

6 other resources or income of the individual be in7 sufficient to pay for such care;

8 ‘‘(B) the individual is eligible for a refund

9 of any remaining entrance fee when the indi10 vidual dies or terminates the continuing care re11 tirement community or life care community con12 tract and leaves the community; and

13 ‘‘(C) the entrance fee does not confer an

14 ownership interest in the continuing care retire15 ment community or life care community.’’.

16 SEC. 6016. ADDITIONAL REFORMS OF MEDICAID ASSET

17 TRANSFER RULES.

18 (a) REQUIREMENT TO IMPOSE PARTIAL MONTHS OF

19 INELIGIBILITY.—Section 1917(c)(1)(E) of the Social Secu20 rity Act (42 U.S.C. 1396p(c)(1)(E)) is amended by adding

21 at the end the following:

22 ‘‘(iv) A State shall not round down, or otherwise dis23 regard any fractional period of ineligibility determined

24 under clause (i) or (ii) with respect to the disposal of as25 sets.’’.
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1 (b) AUTHORITY FOR STATES TO ACCUMULATE MUL2 TIPLE TRANSFERS INTO ONE PENALTY PERIOD.—Section

3 1917(c)(1) of such Act (42 U.S.C. 1396p(c)(1)), as amended

4 by subsections (b) and (c) of section 6012, is amended by

5 adding at the end the following:

6 ‘‘(H) Notwithstanding the preceding provisions of this

7 paragraph, in the case of an individual (or individual’s

8 spouse) who makes multiple fractional transfers of assets

9 in more than 1 month for less than fair market value on

10 or after the applicable look-back date specified in subpara11 graph (B), a State may determine the period of ineligibility

12 applicable to such individual under this paragraph by—

13 ‘‘(i) treating the total, cumulative uncompen14 sated value of all assets transferred by the individual

15 (or individual’s spouse) during all months on or after

16 the look-back date specified in subparagraph (B) as 1

17 transfer for purposes of clause (i) or (ii) (as the case

18 may be) of subparagraph (E); and

19 ‘‘(ii) beginning such period on the earliest date

20 which would apply under subparagraph (D) to any

21 of such transfers.’’.

22 (c) INCLUSION OF TRANSFER OF CERTAIN NOTES AND

23 LOANS ASSETS.—Section 1917(c)(1) of such Act (42 U.S.C.

24 1396p(c)(1)), as amended by subsection (b), is amended by

25 adding at the end the following:
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1 ‘‘(I) For purposes of this paragraph with respect to

2 a transfer of assets, the term ‘assets’ includes funds used

3 to purchase a promissory note, loan, or mortgage unless

4 such note, loan, or mortgage—

5 ‘‘(i) has a repayment term that is actuarially

6 sound (as determined in accordance with actuarial

7 publications of the Office of the Chief Actuary of the

8 Social Security Administration);

9 ‘‘(ii) provides for payments to be made in equal

10 amounts during the term of the loan, with no deferral

11 and no balloon payments made; and

12 ‘‘(iii) prohibits the cancellation of the balance

13 upon the death of the lender.

14 In the case of a promissory note, loan, or mortgage that

15 does not satisfy the requirements of clauses (i) through (iii),

16 the value of such note, loan, or mortgage shall be the out17 standing balance due as of the date of the individual’s ap18 plication for medical assistance for services described in

19 subparagraph (C).’’.

20 (d) INCLUSION OF TRANSFERS TO PURCHASE LIFE

21 ESTATES.—Section 1917(c)(1) of such Act (42 U.S.C.

22 1396p(c)(1)), as amended by subsection (c), is amended by

23 adding at the end the following:

24 ‘‘(J) For purposes of this paragraph with respect to

25 a transfer of assets, the term ‘assets’ includes the purchase
 †

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1 of a life estate interest in another individual’s home unless

2 the purchaser resides in the home for a period of at least

3 1 year after the date of the purchase.’’.

4 (e) EFFECTIVE DATES.—

5 (1) IN GENERAL.—Except as provided in para6 graphs (2) and (3), the amendments made by this sec7 tion shall apply to payments under title XIX of the

8 Social Security Act (42 U.S.C. 1396 et seq.) for cal9 endar quarters beginning on or after the date of en10 actment of this Act, without regard to whether or not

11 final regulations to carry out such amendments have

12 been promulgated by such date.

13 (2) EXCEPTIONS.—The amendments made by

14 this section shall not apply—

15 (A) to medical assistance provided for serv16 ices furnished before the date of enactment;

17 (B) with respect to assets disposed of on or

18 before the date of enactment of this Act; or

19 (C) with respect to trusts established on or

20 before the date of enactment of this Act.

21 (3) EXTENSION OF EFFECTIVE DATE FOR STATE

22 LAW AMENDMENT.—In the case of a State plan under

23 title XIX of the Social Security Act (42 U.S.C. 1396

24 et seq.) which the Secretary of Health and Human

25 Services determines requires State legislation in order
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1 for the plan to meet the additional requirements im2 posed by the amendments made by a provision of this

3 section, the State plan shall not be regarded as failing

4 to comply with the requirements of such title solely on

5 the basis of its failure to meet these additional re6 quirements before the first day of the first calendar

7 quarter beginning after the close of the first regular

8 session of the State legislature that begins after the

9 date of the enactment of this Act. For purposes of the

10 previous sentence, in the case of a State that has a

11 2-year legislative session, each year of the session is

12 considered to be a separate regular session of the

13 State legislature.

14 Subchapter B—Expanded Access to Certain

15 Benefits

16 SEC. 6021. EXPANSION OF STATE LONG-TERM CARE PART17 NERSHIP PROGRAM.

18 (a) EXPANSION AUTHORITY.—

19 (1) IN GENERAL.—Section 1917(b) of the Social

20 Security Act (42 U.S.C. 1396p(b)) is amended—

21 (A) in paragraph (1)(C)—

22 (i) in clause (ii), by inserting ‘‘and

23 which satisfies clause (iv), or which has a

24 State plan amendment that provides for a

25 qualified State long-term care insurance
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1 partnership (as defined in clause (iii))’’

2 after ‘‘1993,’’; and

3 (ii) by adding at the end the following

4 new clauses:

5 ‘‘(iii) For purposes of this paragraph, the term

6 ‘qualified State long-term care insurance partnership’

7 means an approved State plan amendment under this

8 title that provides for the disregard of any assets or

9 resources in an amount equal to the insurance benefit

10 payments that are made to or on behalf of an indi11 vidual who is a beneficiary under a long-term care

12 insurance policy if the following requirements are

13 met:

14 ‘‘(I) The policy covers an insured who was

15 a resident of such State when coverage first be16 came effective under the policy.

17 ‘‘(II) The policy is a qualified long-term

18 care insurance policy (as defined in section

19 7702B(b) of the Internal Revenue Code of 1986)

20 issued not earlier than the effective date of the

21 State plan amendment.

22 ‘‘(III) The policy meets the model regula23 tions and the requirements of the model Act spec24 ified in paragraph (5).
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1 ‘‘(IV) If the policy is sold to an individual

2 who—

3 ‘‘(aa) has not attained age 61 as of the

4 date of purchase, the policy provides com5 pound annual inflation protection;

6 ‘‘(bb) has attained age 61 but has not

7 attained age 76 as of such date, the policy

8 provides some level of inflation protection;

9 and

10 ‘‘(cc) has attained age 76 as of such

11 date, the policy may (but is not required to)

12 provide some level of inflation protection.

13 ‘‘(V) The State Medicaid agency under sec14 tion 1902(a)(5) provides information and tech15 nical assistance to the State insurance depart16 ment on the insurance department’s role of as17 suring that any individual who sells a long-term

18 care insurance policy under the partnership re19 ceives training and demonstrates evidence of an

20 understanding of such policies and how they re21 late to other public and private coverage of long22 term care.

23 ‘‘(VI) The issuer of the policy provides reg24 ular reports to the Secretary, in accordance with

25 regulations of the Secretary, that include notifi-
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1 cation regarding when benefits provided under

2 the policy have been paid and the amount of

3 such benefits paid, notification regarding when

4 the policy otherwise terminates, and such other

5 information as the Secretary determines may be

6 appropriate to the administration of such part7 nerships.

8 ‘‘(VII) The State does not impose any re9 quirement affecting the terms or benefits of such

10 a policy unless the State imposes such require11 ment on long-term care insurance policies with12 out regard to whether the policy is covered under

13 the partnership or is offered in connection with

14 such a partnership.

15 In the case of a long-term care insurance policy

16 which is exchanged for another such policy, subclause

17 (I) shall be applied based on the coverage of the first

18 such policy that was exchanged. For purposes of this

19 clause and paragraph (5), the term ‘long-term care

20 insurance policy’ includes a certificate issued under a

21 group insurance contract.

22 ‘‘(iv) With respect to a State which had a State

23 plan amendment approved as of May 14, 1993, such

24 a State satisfies this clause for purposes of clause (ii)

25 if the Secretary determines that the State plan
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1 amendment provides for consumer protection stand2 ards which are no less stringent than the consumer

3 protection standards which applied under such State

4 plan amendment as of December 31, 2005.

5 ‘‘(v) The regulations of the Secretary required

6 under clause (iii)(VI) shall be promulgated after con7 sultation with the National Association of Insurance

8 Commissioners, issuers of long-term care insurance

9 policies, States with experience with long-term care

10 insurance partnership plans, other States, and rep11 resentatives of consumers of long-term care insurance

12 policies, and shall specify the type and format of the

13 data and information to be reported and the fre14 quency with which such reports are to be made. The

15 Secretary, as appropriate, shall provide copies of the

16 reports provided in accordance with that clause to the

17 State involved.

18 ‘‘(vi) The Secretary, in consultation with other

19 appropriate Federal agencies, issuers of long-term

20 care insurance, the National Association of Insurance

21 Commissioners, State insurance commissioners,

22 States with experience with long-term care insurance

23 partnership plans, other States, and representatives of

24 consumers of long-term care insurance policies, shall

25 develop recommendations for Congress to authorize
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1 and fund a uniform minimum data set to be reported

2 electronically by all issuers of long-term care insur3 ance policies under qualified State long-term care in4 surance partnerships to a secure, centralized elec5 tronic query and report-generating mechanism that

6 the State, the Secretary, and other Federal agencies

7 can access.’’; and

8 (B) by adding at the end the following:

9 ‘‘(5)(A) For purposes of clause (iii)(III), the model reg10 ulations and the requirements of the model Act specified in

11 this paragraph are:

12 ‘‘(i) In the case of the model regulation, the fol13 lowing requirements:

14 ‘‘(I) Section 6A (relating to guaranteed re15 newal or noncancellability), other than para16 graph (5) thereof, and the requirements of section

17 6B of the model Act relating to such section 6A.

18 ‘‘(II) Section 6B (relating to prohibitions

19 on limitations and exclusions) other than para20 graph (7) thereof.

21 ‘‘(III) Section 6C (relating to extension of

22 benefits).

23 ‘‘(IV) Section 6D (relating to continuation

24 or conversion of coverage).
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1 ‘‘(V) Section 6E (relating to discontinuance

2 and replacement of policies).

3 ‘‘(VI) Section 7 (relating to unintentional

4 lapse).

5 ‘‘(VII) Section 8 (relating to disclosure),

6 other than sections 8F, 8G, 8H, and 8I thereof.

7 ‘‘(VIII) Section 9 (relating to required dis8 closure of rating practices to consumer).

9 ‘‘(IX) Section 11 (relating to prohibitions

10 against post-claims underwriting).

11 ‘‘(X) Section 12 (relating to minimum

12 standards).

13 ‘‘(XI) Section 14 (relating to application

14 forms and replacement coverage).

15 ‘‘(XII) Section 15 (relating to reporting re16 quirements).

17 ‘‘(XIII) Section 22 (relating to filing re18 quirements for marketing).

19 ‘‘(XIV) Section 23 (relating to standards for

20 marketing), including inaccurate completion of

21 medical histories, other than paragraphs (1), (6),

22 and (9) of section 23C.

23 ‘‘(XV) Section 24 (relating to suitability).
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1 ‘‘(XVI) Section 25 (relating to prohibition

2 against preexisting conditions and probationary

3 periods in replacement policies or certificates).

4 ‘‘(XVII) The provisions of section 26 relat5 ing to contingent nonforfeiture benefits, if the

6 policyholder declines the offer of a nonforfeiture

7 provision described in paragraph (4).

8 ‘‘(XVIII) Section 29 (relating to standard

9 format outline of coverage).

10 ‘‘(XIX) Section 30 (relating to requirement

11 to deliver shopper’s guide).

12 ‘‘(ii) In the case of the model Act, the following:

13 ‘‘(I) Section 6C (relating to preexisting con14 ditions).

15 ‘‘(II) Section 6D (relating to prior hos16 pitalization).

17 ‘‘(III) The provisions of section 8 relating

18 to contingent nonforfeiture benefits.

19 ‘‘(IV) Section 6F (relating to right to re20 turn).

21 ‘‘(V) Section 6G (relating to outline of cov22 erage).

23 ‘‘(VI) Section 6H (relating to requirements

24 for certificates under group plans).
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1 ‘‘(VII) Section 6J (relating to policy sum2 mary).

3 ‘‘(VIII) Section 6K (relating to monthly re4 ports on accelerated death benefits).

5 ‘‘(IX) Section 7 (relating to incontestability

6 period).

7 ‘‘(B) For purposes of this paragraph and paragraph

8 (1)(C)—

9 ‘‘(i) the terms ‘model regulation’ and ‘model Act’

10 mean the long-term care insurance model regulation,

11 and the long-term care insurance model Act, respec12 tively, promulgated by the National Association of In13 surance Commissioners (as adopted as of October

14 2000);

15 ‘‘(ii) any provision of the model regulation or

16 model Act listed under subparagraph (A) shall be

17 treated as including any other provision of such regu18 lation or Act necessary to implement the provision;

19 and

20 ‘‘(iii) with respect to a long-term care insurance

21 policy issued in a State, the policy shall be deemed

22 to meet applicable requirements of the model regula23 tion or the model Act if the State plan amendment

24 under paragraph (1)(C)(iii) provides that the State

25 insurance commissioner for the State certifies (in a
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1 manner satisfactory to the Secretary) that the policy

2 meets such requirements.

3 ‘‘(C) Not later than 12 months after the National Asso4 ciation of Insurance Commissioners issues a revision, up5 date, or other modification of a model regulation or model

6 Act provision specified in subparagraph (A), or of any pro7 vision of such regulation or Act that is substantively related

8 to a provision specified in such subparagraph, the Secretary

9 shall review the changes made to the provision, determine

10 whether incorporating such changes into the corresponding

11 provision specified in such subparagraph would improve

12 qualified State long-term care insurance partnerships, and

13 if so, shall incorporate the changes into such provision.’’.

14 (2) STATE REPORTING REQUIREMENTS.—Noth15 ing in clauses (iii)(VI) and (v) of section

16 1917(b)(1)(C) of the Social Security Act (as added by

17 paragraph (1)) shall be construed as prohibiting a

18 State from requiring an issuer of a long-term care in19 surance policy sold in the State (regardless of whether

20 the policy is issued under a qualified State long-term

21 care insurance partnership under section

22 1917(b)(1)(C)(iii) of such Act) to require the issuer to

23 report information or data to the State that is in ad24 dition to the information or data required under such

25 clauses.
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1 (3) EFFECTIVE DATE.—A State plan amendment

2 that provides for a qualified State long-term care in3 surance partnership under the amendments made by

4 paragraph (1) may provide that such amendment is

5 effective for long-term care insurance policies issued

6 on or after a date, specified in the amendment, that

7 is not earlier than the first day of the first calendar

8 quarter in which the plan amendment was submitted

9 to the Secretary of Health and Human Services.

10 (b) STANDARDS FOR RECIPROCAL RECOGNITION

11 AMONG PARTNERSHIP STATES.—In order to permit port12 ability in long-term care insurance policies purchased

13 under State long-term care insurance partnerships, the Sec14 retary of Health and Human Services shall develop, not

15 later than January 1, 2007, and in consultation with the

16 National Association of Insurance Commissioners, issuers

17 of long-term care insurance policies, States with experience

18 with long-term care insurance partnership plans, other

19 States, and representatives of consumers of long-term care

20 insurance policies, standards for uniform reciprocal rec21 ognition of such policies among States with qualified State

22 long-term care insurance partnerships under which—

23 (1) benefits paid under such policies will be

24 treated the same by all such States; and
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1 (2) States with such partnerships shall be subject

2 to such standards unless the State notifies the Sec3 retary in writing of the State’s election to be exempt

4 from such standards.

5 (c) ANNUAL REPORTS TO CONGRESS.—

6 (1) IN GENERAL.—The Secretary of Health and

7 Human Services shall annually report to Congress on

8 the long-term care insurance partnerships established

9 in accordance with section 1917(b)(1)(C)(ii) of the

10 Social Security Act (42 U.S.C. 1396p(b)(1)(C)(ii))

11 (as amended by subsection (a)(1)). Such reports shall

12 include analyses of the extent to which such partner13 ships expand or limit access of individuals to long14 term care and the impact of such partnerships on

15 Federal and State expenditures under the Medicare

16 and Medicaid programs. Nothing in this section shall

17 be construed as requiring the Secretary to conduct an

18 independent review of each long-term care insurance

19 policy offered under or in connection with such a

20 partnership.

21 (2) APPROPRIATION.—Out of any funds in the

22 Treasury not otherwise appropriated, there is appro23 priated to the Secretary of Health and Human Serv24 ices, $1,000,000 for the period of fiscal years 2006

25 through 2010 to carry out paragraph (1).
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1 (d) NATIONAL CLEARINGHOUSE FOR LONG-TERM

2 CARE INFORMATION.—

3 (1) ESTABLISHMENT.—The Secretary of Health

4 and Human Services shall establish a National Clear5 inghouse for Long-Term Care Information. The Clear6 inghouse may be established through a contract or

7 interagency agreement.

8 (2) DUTIES.—

9 (A) IN GENERAL.—The National Clearing10 house for Long-Term Care Information shall—

11 (i) educate consumers with respect to

12 the availability and limitations of coverage

13 for long-term care under the Medicaid pro14 gram and provide contact information for

15 obtaining State-specific information on

16 long-term care coverage, including eligi17 bility and estate recovery requirements

18 under State Medicaid programs;

19 (ii) provide objective information to

20 assist consumers with the decisionmaking

21 process for determining whether to purchase

22 long-term care insurance or to pursue other

23 private market alternatives for purchasing

24 long-term care and provide contact infor-
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1 mation for additional objective resources on

2 planning for long-term care needs; and

3 (iii) maintain a list of States with

4 State long-term care insurance partnerships

5 under the Medicaid program that provide

6 reciprocal recognition of long-term care in7 surance policies issued under such partner8 ships.

9 (B) REQUIREMENT.—In providing informa10 tion to consumers on long-term care in accord11 ance with this subsection, the National Clearing12 house for Long-Term Care Information shall not

13 advocate in favor of a specific long-term care in14 surance provider or a specific long-term care in15 surance policy.

16 (3) APPROPRIATION.—Out of any funds in the

17 Treasury not otherwise appropriated, there is appro18 priated to carry out this subsection, $3,000,000 for

19 each of fiscal years 2006 through 2010.
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1 CHAPTER 3—ELIMINATING FRAUD, WASTE,

2 AND ABUSE IN MEDICAID

3 SEC. 6031. ENCOURAGING THE ENACTMENT OF STATE

4 FALSE CLAIMS ACTS.

5 (a) IN GENERAL.—Title XIX of the Social Security

6 Act (42 U.S.C. 1396 et seq.) is amended by inserting after

7 section 1908A the following:

8 ‘‘STATE FALSE CLAIMS ACT REQUIREMENTS FOR

9 INCREASED STATE SHARE OF RECOVERIES

10 ‘‘SEC. 1909. (a) IN GENERAL.—Notwithstanding sec11 tion 1905(b), if a State has in effect a law relating to false

12 or fraudulent claims that meets the requirements of sub13 section (b), the Federal medical assistance percentage with

14 respect to any amounts recovered under a State action

15 brought under such law, shall be decreased by 10 percentage

16 points.

17 ‘‘(b) REQUIREMENTS.—For purposes of subsection (a),

18 the requirements of this subsection are that the Inspector

19 General of the Department of Health and Human Services,

20 in consultation with the Attorney General, determines that

21 the State has in effect a law that meets the following re22 quirements:

23 ‘‘(1) The law establishes liability to the State for

24 false or fraudulent claims described in section 3729 of

25 title 31, United States Code, with respect to any ex26 penditure described in section 1903(a).
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1 ‘‘(2) The law contains provisions that are at

2 least as effective in rewarding and facilitating qui

3 tam actions for false or fraudulent claims as those de4 scribed in sections 3730 through 3732 of title 31,

5 United States Code.

6 ‘‘(3) The law contains a requirement for filing

7 an action under seal for 60 days with review by the

8 State Attorney General.

9 ‘‘(4) The law contains a civil penalty that is not

10 less than the amount of the civil penalty authorized

11 under section 3729 of title 31, United States Code.

12 ‘‘(c) DEEMED COMPLIANCE.—A State that, as of Janu13 ary 1, 2007, has a law in effect that meets the requirements

14 of subsection (b) shall be deemed to be in compliance with

15 such requirements for so long as the law continues to meet

16 such requirements.

17 ‘‘(d) NO PRECLUSION OF BROADER LAWS.—Nothing

18 in this section shall be construed as prohibiting a State that

19 has in effect a law that establishes liability to the State

20 for false or fraudulent claims described in section 3729 of

21 title 31, United States Code, with respect to programs in

22 addition to the State program under this title, or with re23 spect to expenditures in addition to expenditures described

24 in section 1903(a), from being considered to be in compli-
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1 ance with the requirements of subsection (a) so long as the

2 law meets such requirements.’’.

3 (b) EFFECTIVE DATE.—Except as provided in section

4 6035(e), the amendments made by this section take effect

5 on January 1, 2007.

6 SEC. 6032. EMPLOYEE EDUCATION ABOUT FALSE CLAIMS

7 RECOVERY.

8 (a) IN GENERAL.—Section 1902(a) of the Social Secu9 rity Act (42 U.S.C. 1396a(a)) is amended—

10 (1) in paragraph (66), by striking ‘‘and’’ at the

11 end;

12 (2) in paragraph (67) by striking the period at

13 the end and inserting ‘‘; and’’; and

14 (3) by inserting after paragraph (67) the fol15 lowing:

16 ‘‘(68) provide that any entity that receives or

17 makes annual payments under the State plan of at

18 least $5,000,000, as a condition of receiving such pay19 ments, shall—

20 ‘‘(A) establish written policies for all em21 ployees of the entity (including management),

22 and of any contractor or agent of the entity, that

23 provide detailed information about the False

24 Claims Act established under sections 3729

25 through 3733 of title 31, United States Code, ad-
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1 ministrative remedies for false claims and state2 ments established under chapter 38 of title 31,

3 United States Code, any State laws pertaining

4 to civil or criminal penalties for false claims and

5 statements, and whistleblower protections under

6 such laws, with respect to the role of such laws

7 in preventing and detecting fraud, waste, and

8 abuse in Federal health care programs (as de9 fined in section 1128B(f));

10 ‘‘(B) include as part of such written poli11 cies, detailed provisions regarding the entity’s

12 policies and procedures for detecting and pre13 venting fraud, waste, and abuse; and

14 ‘‘(C) include in any employee handbook for

15 the entity, a specific discussion of the laws de16 scribed in subparagraph (A), the rights of em17 ployees to be protected as whistleblowers, and the

18 entity’s policies and procedures for detecting and

19 preventing fraud, waste, and abuse.’’.

20 (b) EFFECTIVE DATE.—Except as provided in section

21 6035(e), the amendments made by subsection (a) take effect

22 on January 1, 2007.
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1 SEC. 6033. PROHIBITION ON RESTOCKING AND DOUBLE

2 BILLING OF PRESCRIPTION DRUGS.

3 (a) IN GENERAL.—Section 1903(i)(10) of the Social

4 Security Act (42 U.S.C. 1396b(i)), as amended by section

5 6002(b), is amended—

6 (1) in subparagraph (B), by striking ‘‘and’’ at

7 the end;

8 (2) in subparagraph (C), by striking ‘‘; or’’ at

9 the end and inserting ‘‘, and’’; and

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

11 ‘‘(D) with respect to any amount expended for

12 reimbursement to a pharmacy under this title for the

13 ingredient cost of a covered outpatient drug for which

14 the pharmacy has already received payment under

15 this title (other than with respect to a reasonable re16 stocking fee for such drug); or’’.

17 (b) EFFECTIVE DATE.—The amendments made by sub18 section (a) take effect on the first day of the first fiscal year

19 quarter that begins after the date of enactment of this Act.

20 SEC. 6034. MEDICAID INTEGRITY PROGRAM.

21 (a) ESTABLISHMENT OF MEDICAID INTEGRITY PRO22 GRAM.—Title XIX of the Social Security Act (42 U.S.C.

23 1396 et seq.) is amended—

24 (1) by redesignating section 1936 as section

25 1937; and

26 (2) by inserting after section 1935 the following:
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1 ‘‘MEDICAID INTEGRITY PROGRAM

2 ‘‘SEC. 1936. (a) IN GENERAL.—There is hereby estab3 lished the Medicaid Integrity Program (in this section re4 ferred to as the ‘Program’) under which the Secretary shall

5 promote the integrity of the program under this title by

6 entering into contracts in accordance with this section with

7 eligible entities to carry out the activities described in sub8 section (b).

9 ‘‘(b) ACTIVITIES DESCRIBED—Activities described in

10 this subsection are as follows:

11 ‘‘(1) Review of the actions of individuals or enti12 ties furnishing items or services (whether on a fee-for13 service, risk, or other basis) for which payment may

14 be made under a State plan approved under this title

15 (or under any waiver of such plan approved under

16 section 1115) to determine whether fraud, waste, or

17 abuse has occurred, is likely to occur, or whether such

18 actions have any potential for resulting in an expend19 iture of funds under this title in a manner which is

20 not intended under the provisions of this title.

21 ‘‘(2) Audit of claims for payment for items or

22 services furnished, or administrative services ren23 dered, under a State plan under this title,

24 including—

25 ‘‘(A) cost reports;
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1 ‘‘(B) consulting contracts; and

2 ‘‘(C) risk contracts under section 1903(m).

3 ‘‘(3) Identification of overpayments to individ4 uals or entities receiving Federal funds under this

5 title.

6 ‘‘(4) Education of providers of services, managed

7 care entities, beneficiaries, and other individuals with

8 respect to payment integrity and quality of care.

9 ‘‘(c) ELIGIBLE ENTITY AND CONTRACTING REQUIRE10 MENTS.—

11 ‘‘(1) IN GENERAL.—An entity is eligible to enter

12 into a contract under the Program to carry out any

13 of the activities described in subsection (b) if the enti14 ty satisfies the requirements of paragraphs (2) and

15 (3).

16 ‘‘(2) ELIGIBILITY REQUIREMENTS.—The require17 ments of this paragraph are the following:

18 ‘‘(A) The entity has demonstrated capa19 bility to carry out the activities described in sub20 section (b).

21 ‘‘(B) In carrying out such activities, the en22 tity agrees to cooperate with the Inspector Gen23 eral of the Department of Health and Human

24 Services, the Attorney General, and other law en25 forcement agencies, as appropriate, in the inves-
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1 tigation and deterrence of fraud and abuse in re2 lation to this title and in other cases arising out

3 of such activities.

4 ‘‘(C) The entity complies with such conflict

5 of interest standards as are generally applicable

6 to Federal acquisition and procurement.

7 ‘‘(D) The entity meets such other require8 ments as the Secretary may impose.

9 ‘‘(3) CONTRACTING REQUIREMENTS.—The entity

10 has contracted with the Secretary in accordance with

11 such procedures as the Secretary shall by regulation

12 establish, except that such procedures shall include the

13 following:

14 ‘‘(A) Procedures for identifying, evaluating,

15 and resolving organizational conflicts of interest

16 that are generally applicable to Federal acquisi17 tion and procurement.

18 ‘‘(B) Competitive procedures to be used—

19 ‘‘(i) when entering into new contracts

20 under this section;

21 ‘‘(ii) when entering into contracts that

22 may result in the elimination of respon23 sibilities under section 202(b) of the Health

24 Insurance Portability and Accountability

25 Act of 1996; and
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1 ‘‘(iii) at any other time considered ap2 propriate by the Secretary.

3 ‘‘(C) Procedures under which a contract

4 under this section may be renewed without re5 gard to any provision of law requiring competi6 tion if the contractor has met or exceeded the

7 performance requirements established in the cur8 rent contract.

9 The Secretary may enter into such contracts without

10 regard to final rules having been promulgated.

11 ‘‘(4) LIMITATION ON CONTRACTOR LIABILITY.—

12 The Secretary shall by regulation provide for the lim13 itation of a contractor’s liability for actions taken to

14 carry out a contract under the Program, and such

15 regulation shall, to the extent the Secretary finds ap16 propriate, employ the same or comparable standards

17 and other substantive and procedural provisions as

18 are contained in section 1157.

19 ‘‘(d) COMPREHENSIVE PLAN FOR PROGRAM INTEG20 RITY.—

21 ‘‘(1) 5-YEAR PLAN.—With respect to the 5-fiscal

22 year period beginning with fiscal year 2006, and each

23 such 5-fiscal year period that begins thereafter, the

24 Secretary shall establish a comprehensive plan for en-
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1 suring the integrity of the program established under

2 this title by combatting fraud, waste, and abuse.

3 ‘‘(2) CONSULTATION.—Each 5-fiscal year plan

4 established under paragraph (1) shall be developed by

5 the Secretary in consultation with the Attorney Gen6 eral, the Director of the Federal Bureau of Investiga7 tion, the Comptroller General of the United States,

8 the Inspector General of the Department of Health

9 and Human Services, and State officials with respon10 sibility for controlling provider fraud and abuse

11 under State plans under this title.

12 ‘‘(e) APPROPRIATION.—

13 ‘‘(1) IN GENERAL.—Out of any money in the

14 Treasury of the United States not otherwise appro15 priated, there are appropriated to carry out the Med16 icaid Integrity Program under this section, without

17 further appropriation—

18 ‘‘(A) for fiscal year 2006, $5,000,000;

19 ‘‘(B) for each of fiscal years 2007 and 2008,

20 $50,000,000; and

21 ‘‘(C) for each fiscal year thereafter,

22 $75,000,000.

23 ‘‘(2) AVAILABILITY.—Amounts appropriated

24 pursuant to paragraph (1) shall remain available

25 until expended.
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1 ‘‘(3) INCREASE IN CMS STAFFING DEVOTED TO

2 PROTECTING MEDICAID PROGRAM INTEGRITY.—From

3 the amounts appropriated under paragraph (1), the

4 Secretary shall increase by 100 the number of full5 time equivalent employees whose duties consist solely

6 of protecting the integrity of the Medicaid program

7 established under this section by providing effective

8 support and assistance to States to combat provider

9 fraud and abuse.

10 ‘‘(4) ANNUAL REPORT.—Not later than 180 days

11 after the end of each fiscal year (beginning with fiscal

12 year 2006), the Secretary shall submit a report to

13 Congress which identifies—

14 ‘‘(A) the use of funds appropriated pursu15 ant to paragraph (1); and

16 ‘‘(B) the effectiveness of the use of such

17 funds.’’.

18 (b) STATE REQUIREMENT TO COOPERATE WITH IN19 TEGRITY PROGRAM EFFORTS.—Section 1902(a) of such Act

20 (42 U.S.C. 1396a(a)), as amended by section 6033(a), is

21 amended—

22 (1) in paragraph (67), by striking ‘‘and’’ at the

23 end;

24 (2) in paragraph (68), by striking the period at

25 the end and inserting ‘‘; and’’; and
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1 (3) by inserting after paragraph (68), the fol2 lowing:

3 ‘‘(69) provide that the State must comply with

4 any requirements determined by the Secretary to be

5 necessary for carrying out the Medicaid Integrity

6 Program established under section 1936.’’.

7 (c) INCREASED FUNDING FOR MEDICAID FRAUD AND

8 ABUSE CONTROL ACTIVITIES.—

9 (1) IN GENERAL.—Out of any money in the

10 Treasury of the United States not otherwise appro11 priated, there are appropriated to the Office of the In12 spector General of the Department of Health and

13 Human Services, without further appropriation,

14 $25,000,000 for each of fiscal years 2006 through

15 2010, for activities of such Office with respect to the

16 Medicaid program under title XIX of the Social Secu17 rity Act (42 U.S.C. 1396 et seq.).

18 (2) AVAILABILITY; AMOUNTS IN ADDITION TO

19 OTHER AMOUNTS APPROPRIATED FOR SUCH ACTIVI20 TIES.—Amounts appropriated pursuant to paragraph

21 (1) shall—

22 (A) remain available until expended; and

23 (B) be in addition to any other amounts

24 appropriated or made available to the Office of

25 the Inspector General of the Department of
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1 Health and Human Services for activities of

2 such Office with respect to the Medicaid pro3 gram.

4 (3) ANNUAL REPORT.—Not later than 180 days

5 after the end of each fiscal year (beginning with fiscal

6 year 2006), the Inspector General of the Department

7 of Health and Human Services shall submit a report

8 to Congress which identifies—

9 (A) the use of funds appropriated pursuant

10 to paragraph (1); and

11 (B) the effectiveness of the use of such funds.

12 (d) NATIONAL EXPANSION OF THE MEDICARE-MED13 ICAID (MEDI-MEDI) DATA MATCH PILOT PROGRAM.—

14 (1) REQUIREMENT OF THE MEDICARE INTEGRITY

15 PROGRAM.—Section 1893 of the Social Security Act

16 (42 U.S.C. 1395ddd) is amended—

17 (A) in subsection (b), by adding at the end

18 the following:

19 ‘‘(6) The Medicare-Medicaid Data Match Pro20 gram in accordance with subsection (g).’’; and

21 (B) by adding at the end the following:

22 ‘‘(g) MEDICARE-MEDICAID DATA MATCH PROGRAM.—

23 ‘‘(1) EXPANSION OF PROGRAM.—

24 ‘‘(A) IN GENERAL.—The Secretary shall

25 enter into contracts with eligible entities for the
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1 purpose of ensuring that, beginning with 2006,

2 the Medicare-Medicaid Data Match Program

3 (commonly referred to as the ‘Medi-Medi Pro4 gram’) is conducted with respect to the program

5 established under this title and State Medicaid

6 programs under title XIX for the purpose of—

7 ‘‘(i) identifying program

8 vulnerabilities in the program established

9 under this title and the Medicaid program

10 established under title XIX through the use

11 of computer algorithms to look for payment

12 anomalies (including billing or billing pat13 terns identified with respect to service, time,

14 or patient that appear to be suspect or oth15 erwise implausible);

16 ‘‘(ii) working with States, the Attorney

17 General, and the Inspector General of the

18 Department of Health and Human Services

19 to coordinate appropriate actions to protect

20 the Federal and State share of expenditures

21 under the Medicaid program under title

22 XIX, as well as the program established

23 under this title; and

24 ‘‘(iii) increasing the effectiveness and

25 efficiency of both such programs through
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1 cost avoidance, savings, and recoupments of

2 fraudulent, wasteful, or abusive expendi3 tures.

4 ‘‘(B) REPORTING REQUIREMENTS.—The

5 Secretary shall make available in a timely man6 ner any data and statistical information col7 lected by the Medi-Medi Program to the Attorney

8 General, the Director of the Federal Bureau of

9 Investigation, the Inspector General of the De10 partment of Health and Human Services, and

11 the States (including a Medicaid fraud and

12 abuse control unit described in section 1903(q)).

13 Such information shall be disseminated no less

14 frequently than quarterly.

15 ‘‘(2) LIMITED WAIVER AUTHORITY.—The Sec16 retary shall waive only such requirements of this sec17 tion and of titles XI and XIX as are necessary to

18 carry out paragraph (1).’’.

19 (2) FUNDING.—Section 1817(k)(4) of such Act

20 (42 U.S.C. 1395i(k)(4)), as amended by section 5204

21 of this Act, is amended—

22 (A) in subparagraph (A), by striking ‘‘sub23 paragraph (B)’’ and inserting ‘‘subparagraphs

24 (B), (C), and (D)’’; and

25 (B) by adding at the end the following:
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1 ‘‘(D) EXPANSION OF THE MEDICARE-MED2 ICAID DATA MATCH PROGRAM.—The amount ap3 propriated under subparagraph (A) for a fiscal

4 year is further increased as follows for purposes

5 of carrying out section 1893(b)(6) for the respec6 tive fiscal year:

7 ‘‘(i) $12,000,000 for fiscal year 2006.

8 ‘‘(ii) $24,000,000 for fiscal year 2007.

9 ‘‘(iii) $36,000,000 for fiscal year 2008.

10 ‘‘(iv) $48,000,000 for fiscal year 2009.

11 ‘‘(v) $60,000,000 for fiscal year 2010

12 and each fiscal year thereafter.’’.

13 (e) DELAYED EFFECTIVE DATE FOR CHAPTER.—Ex14 cept as otherwise provided in this chapter, in the case of

15 a State plan under title XIX of the Social Security Act

16 which the Secretary determines requires State legislation in

17 order for the plan to meet the additional requirements im18 posed by the amendments made by a provision of this chap19 ter, the State plan shall not be regarded as failing to comply

20 with the requirements of such Act solely on the basis of its

21 failure to meet these additional requirements before the first

22 day of the first calendar quarter beginning after the close

23 of the first regular session of the State legislature that be24 gins after the date of enactment of this Act. For purposes

25 of the previous sentence, in the case of a State that has a
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1 2-year legislative session, each year of the session shall be

2 considered to be a separate regular session of the State legis3 lature.

4 SEC. 6035. ENHANCING THIRD PARTY IDENTIFICATION AND

5 PAYMENT.

6 (a) CLARIFICATION OF THIRD PARTIES LEGALLY RE7 SPONSIBLE FOR PAYMENT OF A CLAIM FOR A HEALTH

8 CARE ITEM OR SERVICE.—Section 1902(a)(25) of the So9 cial Security Act (42 U.S.C. 1396a(a)(25)) is amended—

10 (1) in subparagraph (A), in the matter preceding

11 clause (i)—

12 (A) by inserting ‘‘, self-insured plans’’ after

13 ‘‘health insurers’’; and

14 (B) by striking ‘‘and health maintenance

15 organizations’’ and inserting ‘‘managed care or16 ganizations, pharmacy benefit managers, or

17 other parties that are, by statute, contract, or

18 agreement, legally responsible for payment of a

19 claim for a health care item or service’’; and

20 (2) in subparagraph (G)—

21 (A) by inserting ‘‘a self-insured plan,’’ after

22 ‘‘1974,’’; and

23 (B) by striking ‘‘and a health maintenance

24 organization’’ and inserting ‘‘a managed care

25 organization, a pharmacy benefit manager, or
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1 other party that is, by statute, contract, or agree2 ment, legally responsible for payment of a claim

3 for a health care item or service’’.

4 (b) REQUIREMENT FOR THIRD PARTIES TO PROVIDE

5 THE STATE WITH COVERAGE ELIGIBILITY AND CLAIMS

6 DATA.—Section 1902(a)(25) of such Act (42 U.S.C.

7 1396a(a)(25)) is amended—

8 (1) in subparagraph (G), by striking ‘‘and’’ at

9 the end;

10 (2) in subparagraph (H), by adding ‘‘and’’ after

11 the semicolon at the end; and

12 (3) by inserting after subparagraph (H), the fol13 lowing:

14 ‘‘(I) that the State shall provide assurances

15 satisfactory to the Secretary that the State has

16 in effect laws requiring health insurers, includ17 ing self-insured plans, group health plans (as de18 fined in section 607(1) of the Employee Retire19 ment Income Security Act of 1974), service ben20 efit plans, managed care organizations, phar21 macy benefit managers, or other parties that are,

22 by statute, contract, or agreement, legally respon23 sible for payment of a claim for a health care

24 item or service, as a condition of doing business

25 in the State, to—
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1 ‘‘(i) provide, with respect to individ2 uals who are eligible for, or are provided,

3 medical assistance under the State plan,

4 upon the request of the State, information

5 to determine during what period the indi6 vidual or their spouses or their dependents

7 may be (or may have been) covered by a

8 health insurer and the nature of the cov9 erage that is or was provided by the health

10 insurer (including the name, address, and

11 identifying number of the plan) in a man12 ner prescribed by the Secretary;

13 ‘‘(ii) accept the State’s right of recov14 ery and the assignment to the State of any

15 right of an individual or other entity to

16 payment from the party for an item or

17 service for which payment has been made

18 under the State plan;

19 ‘‘(iii) respond to any inquiry by the

20 State regarding a claim for payment for

21 any health care item or service that is sub22 mitted not later than 3 years after the date

23 of the provision of such health care item or

24 service; and
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1 ‘‘(iv) agree not to deny a claim sub2 mitted by the State solely on the basis of the

3 date of submission of the claim, the type or

4 format of the claim form, or a failure to

5 present proper documentation at the point6 of-sale that is the basis of the claim, if—

7 ‘‘(I) the claim is submitted by the

8 State within the 3-year period begin9 ning on the date on which the item or

10 service was furnished; and

11 ‘‘(II) any action by the State to

12 enforce its rights with respect to such

13 claim is commenced within 6 years of

14 the State’s submission of such claim;’’.

15 (c) EFFECTIVE DATE.—Except as provided in section

16 6035(e), the amendments made by this section take effect

17 on January 1, 2006.

18 SEC. 6036. IMPROVED ENFORCEMENT OF DOCUMENTATION

19 REQUIREMENTS.

20 (a) IN GENERAL.—Section 1903 of the Social Security

21 Act (42 U.S.C. 1396b) is amended—

22 (1) in subsection (i), as amended by section 104

23 of Public Law 109–91—

24 (A) by striking ‘‘or’’ at the end of para25 graph (20);
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1 (B) by striking the period at the end of

2 paragraph (21) and inserting ‘‘; or’’; and

3 (C) by inserting after paragraph (21) the

4 following new paragraph:

5 ‘‘(22) with respect to amounts expended for med6 ical assistance for an individual who declares under

7 section 1137(d)(1)(A) to be a citizen or national of

8 the United States for purposes of establishing eligi9 bility for benefits under this title, unless the require10 ment of subsection (x) is met.’’; and

11 (2) by adding at the end the following new sub12 section:

13 ‘‘(x)(1) For purposes of subsection (i)(23), the require14 ment of this subsection is, with respect to an individual

15 declaring to be a citizen or national of the United States,

16 that, subject to paragraph (2), there is presented satisfac17 tory documentary evidence of citizenship or nationality (as

18 defined in paragraph (3)) of the individual.

19 ‘‘(2) The requirement of paragraph (1) shall not apply

20 to an alien who is eligible for medical assistance under this

21 title—

22 ‘‘(A) and is entitled to or enrolled for benefits

23 under any part of title XVIII;

24 ‘‘(B) on the basis of receiving supplemental secu25 rity income benefits under title XVI; or
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1 ‘‘(C) on such other basis as the Secretary may

2 specify under which satisfactory documentary evi3 dence of citizenship or nationality had been pre4 viously presented.

5 ‘‘(3)(A) For purposes of this subsection, the term ‘satis6 factory documentary evidence of citizenship or nationality’

7 means—

8 ‘‘(i) any document described in subparagraph

9 (B); or

10 ‘‘(ii) a document described in subparagraph (C)

11 and a document described in subparagraph (D).

12 ‘‘(B) The following are documents described in this

13 subparagraph:

14 ‘‘(i) A United States passport.

15 ‘‘(ii) Form N–550 or N–570 (Certificate of Natu16 ralization).

17 ‘‘(iii) Form N–560 or N–561 (Certificate of

18 United States Citizenship).

19 ‘‘(iv) A valid State-issued driver’s license or

20 other identity document described in section

21 274A(b)(1)(D) of the Immigration and Nationality

22 Act, but only if the State issuing the license or such

23 document requires proof of United States citizenship

24 before issuance of such license or document or obtains

25 a social security number from the applicant and
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1 verifies before certification that such number is valid

2 and assigned to the applicant who is a citizen.

3 ‘‘(v) Such other document as the Secretary may

4 specify, by regulation, that provides proof of United

5 States citizenship or nationality and that provides a

6 reliable means of documentation of personal identity.

7 ‘‘(C) The following are documents described in this

8 subparagraph:

9 ‘‘(i) A certificate of birth in the United States.

10 ‘‘(ii) Form FS–545 or Form DS–1350 (Certifi11 cation of Birth Abroad).

12 ‘‘(iii) Form I–97 (United States Citizen Identi13 fication Card).

14 ‘‘(iv) Form FS–240 (Report of Birth Abroad of

15 a Citizen of the United States).

16 ‘‘(v) Such other document (not described in sub17 paragraph (B)(iv)) as the Secretary may specify that

18 provides proof of United States citizenship or nation19 ality.

20 ‘‘(D) The following are documents described in this

21 subparagraph:

22 ‘‘(i) Any identity document described in section

23 274A(b)(1)(D) of the Immigration and Nationality

24 Act.
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1 ‘‘(ii) Any other documentation of personal iden2 tity of such other type as the Secretary finds, by regu3 lation, provides a reliable means of identification.

4 ‘‘(E) A reference in this paragraph to a form includes

5 a reference to any successor form.’’.

6 (b) EFFECTIVE DATE.—The amendments made by sub7 section (a) shall apply to determinations of initial eligi8 bility for medical assistance made on or after July 1, 2006,

9 and to redeterminations of eligibility made on or after such

10 date in the case of individuals for whom the requirement

11 of section 1903(z) of the Social Security Act, as added by

12 such amendments, was not previously met.

13 (c) IMPLEMENTATION REQUIREMENT.—As soon as

14 practicable after the date of enactment of this Act, the Sec15 retary of Health and Human Services shall establish an

16 outreach program that is designed to educate individuals

17 who are likely to be affected by the requirements of sub18 sections (i)(23) and (x) of section 1903 of the Social Secu19 rity Act (as added by subsection (a)) about such require20 ments and how they may be satisfied.
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1 CHAPTER 4—FLEXIBILITY IN COST

2 SHARING AND BENEFITS

3 SEC. 6041. STATE OPTION FOR ALTERNATIVE MEDICAID

4 PREMIUMS AND COST SHARING.

5 (a) IN GENERAL.—Title XIX of the Social Security

6 Act is amended by inserting after section 1916 the following

7 new section:

8 ‘‘STATE OPTION FOR ALTERNATIVE PREMIUMS AND COST

9 SHARING

10 ‘‘SEC. 1916A. (a) STATE FLEXIBILITY.—

11 ‘‘(1) IN GENERAL.—Notwithstanding sections

12 1916 and 1902(a)(10)(B), a State, at its option and

13 through a State plan amendment, may impose pre14 miums and cost sharing for any group of individuals

15 (as specified by the State) and for any type of services

16 (other than drugs for which cost sharing may be im17 posed under subsection (c)), and may vary such pre18 miums and cost sharing among such groups or types,

19 consistent with the limitations established under this

20 section. Nothing in this section shall be construed as

21 superseding (or preventing the application of) section

22 1916(g).

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

24 ‘‘(A) PREMIUM.—The term ‘premium’ in25 cludes any enrollment fee or similar charge.
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1 ‘‘(B) COST SHARING.—The term ‘cost shar2 ing’ includes any deduction, copayment, or simi3 lar charge.

4 ‘‘(b) LIMITATIONS ON EXERCISE OF AUTHORITY.—

5 ‘‘(1) INDIVIDUALS WITH FAMILY INCOME BE6 TWEEN 100 AND 150 PERCENT OF THE POVERTY

7 LINE.—In the case of an individual whose family in8 come exceeds 100 percent, but does not exceed 150 per9 cent, of the poverty line applicable to a family of the

10 size involved, subject to subsections (c)(2) and

11 (e)(2)(A)—

12 ‘‘(A) no premium may be imposed under

13 the plan; and

14 ‘‘(B) with respect to cost sharing—

15 ‘‘(i) the cost sharing imposed under

16 subsection (a) with respect to any item or

17 service may not exceed 10 percent of the cost

18 of such item or service; and

19 ‘‘(ii) the total aggregate amount of cost

20 sharing imposed under this section (includ21 ing any cost sharing imposed under sub22 section (c) or (e)) for all individuals in the

23 family may not exceed 5 percent of the fam24 ily income of the family involved, as ap-
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1 plied on a quarterly or monthly basis (as

2 specified by the State).

3 ‘‘(2) INDIVIDUALS WITH FAMILY INCOME ABOVE

4 150 PERCENT OF THE POVERTY LINE.—In the case of

5 an individual whose family income exceeds 150 per6 cent of the poverty line applicable to a family of the

7 size involved, subject to subsections (c)(2) and

8 (e)(2)(A)—

9 ‘‘(A) the total aggregate amount of pre10 miums and cost sharing imposed under this sec11 tion (including any cost sharing imposed under

12 subsection (c) or (e)) for all individuals in the

13 family may not exceed 5 percent of the family

14 income of the family involved, as applied on a

15 quarterly or monthly basis (as specified by the

16 State); and

17 ‘‘(B) with respect to cost sharing, the cost

18 sharing imposed with respect to any item or

19 service under subsection (a) may not exceed 20

20 percent of the cost of such item or service.

21 ‘‘(3) ADDITIONAL LIMITATIONS.—

22 ‘‘(A) PREMIUMS.—No premiums shall be

23 imposed under this section with respect to the

24 following:
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1 ‘‘(i) Individuals under 18 years of age

2 that are required to be provided medical as3 sistance under section 1902(a)(10)(A)(i),

4 and including individuals with respect to

5 whom aid or assistance is made available

6 under part B of title IV to children in foster

7 care and individuals with respect to whom

8 adoption or foster care assistance is made

9 available under part E of such title, without

10 regard to age.

11 ‘‘(ii) Pregnant women.

12 ‘‘(iii) Any terminally ill individual

13 who is receiving hospice care (as defined in

14 section 1905(o)).

15 ‘‘(iv) Any individual who is an inpa16 tient in a hospital, nursing facility, inter17 mediate care facility for the mentally re18 tarded, or other medical institution, if such

19 individual is required, as a condition of re20 ceiving services in such institution under

21 the State plan, to spend for costs of medical

22 care all but a minimal amount of the indi23 vidual’s income required for personal needs.

24 ‘‘(v) Women who are receiving medical

25 assistance by virtue of the application of
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1 sections 1902(a)(10)(A)(ii)(XVIII) and

2 1902(aa).

3 ‘‘(B) COST SHARING.—Subject to the suc4 ceeding provisions of this section, no cost sharing

5 shall be imposed under subsection (a) with re6 spect to the following:

7 ‘‘(i) Services furnished to individuals

8 under 18 years of age that are required to

9 be provided medical assistance under sec10 tion 1902(a)(10)(A)(i), and including serv11 ices furnished to individuals with respect to

12 whom aid or assistance is made available

13 under part B of title IV to children in foster

14 care and individuals with respect to whom

15 adoption or foster care assistance is made

16 available under part E of such title, without

17 regard to age.

18 ‘‘(ii) Preventive services (such as well

19 baby and well child care and immuniza20 tions) provided to children under 18 years

21 of age regardless of family income.

22 ‘‘(iii) Services furnished to pregnant

23 women, if such services relate to the preg24 nancy or to any other medical condition

25 which may complicate the pregnancy.
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1 ‘‘(iv) Services furnished to a termi2 nally ill individual who is receiving hospice

3 care (as defined in section 1905(o)).

4 ‘‘(v) Services furnished to any indi5 vidual who is an inpatient in a hospital,

6 nursing facility, intermediate care facility

7 for the mentally retarded, or other medical

8 institution, if such individual is required,

9 as a condition of receiving services in such

10 institution under the State plan, to spend

11 for costs of medical care all but a minimal

12 amount of the individual’s income required

13 for personal needs.

14 ‘‘(vi) Emergency services (as defined

15 by the Secretary for purposes of section

16 1916(a)(2)(D)).

17 ‘‘(vii) Family planning services and

18 supplies described in section 1905(a)(4)(C).

19 ‘‘(viii) Services furnished to women

20 who are receiving medical assistance by vir21 tue of the application of sections

22 1902(a)(10)(A)(ii)(XVIII) and 1902(aa).

23 ‘‘(C) CONSTRUCTION.—Nothing in this

24 paragraph shall be construed as preventing a

25 State from exempting additional classes of indi-
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1 viduals from premiums under this section or

2 from exempting additional individuals or serv3 ices from cost sharing under subsection (a).

4 ‘‘(4) DETERMINATIONS OF FAMILY INCOME.—In

5 applying this subsection, family income shall be de6 termined in a manner specified by the State for pur7 poses of this subsection, including the use of such dis8 regards as the State may provide. Family income

9 shall be determined for such period and at such perio10 dicity as the State may provide under this title.

11 ‘‘(5) POVERTY LINE DEFINED.—For purposes of

12 this section, the term ‘poverty line’ has the meaning

13 given such term in section 673(2) of the Community

14 Services Block Grant Act (42 U.S.C. 9902(2)), includ15 ing any revision required by such section.

16 ‘‘(6) CONSTRUCTION.—Nothing in this section

17 shall be construed—

18 ‘‘(A) as preventing a State from further

19 limiting the premiums and cost sharing imposed

20 under this section beyond the limitations pro21 vided under this section;

22 ‘‘(B) as affecting the authority of the Sec23 retary through waiver to modify limitations on

24 premiums and cost sharing under this section; or
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1 ‘‘(C) as affecting any such waiver of re2 quirements in effect under this title before the

3 date of the enactment of this section with regard

4 to the imposition of premiums and cost sharing.

5 ‘‘(d) ENFORCEABILITY OF PREMIUMS AND OTHER

6 COST SHARING.—

7 ‘‘(1) PREMIUMS.—Notwithstanding section

8 1916(c)(3) and section 1902(a)(10)(B), a State may,

9 at its option, condition the provision of medical as10 sistance for an individual upon prepayment of a pre11 mium authorized to be imposed under this section, or

12 may terminate eligibility for such medical assistance

13 on the basis of failure to pay such a premium but

14 shall not terminate eligibility of an individual for

15 medical assistance under this title on the basis of fail16 ure to pay any such premium until such failure con17 tinues for a period of not less than 60 days. A State

18 may apply the previous sentence for some or all

19 groups of beneficiaries as specified by the State and

20 may waive payment of any such premium in any

21 case where the State determines that requiring such

22 payment would create an undue hardship.

23 ‘‘(2) COST SHARING.—Notwithstanding section

24 1916(e) or any other provision of law, a State may

25 permit a provider participating under the State plan
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1 to require, as a condition for the provision of care,

2 items, or services to an individual entitled to medical

3 assistance under this title for such care, items, or

4 services, the payment of any cost sharing authorized

5 to be imposed under this section with respect to such

6 care, items, or services. Nothing in this paragraph

7 shall be construed as preventing a provider from re8 ducing or waiving the application of such cost shar9 ing on a case-by-case basis.’’.

10 (b) INDEXING NOMINAL COST SHARING AND CON11 FORMING AMENDMENT.—Section 1916 of such Act (42

12 U.S.C. 1396o) is amended—

13 (1) in subsection (f), by inserting ‘‘and section

14 1916A’’ after ‘‘(b)(3)’’; and

15 (2) by adding at the end the following new sub16 section:

17 ‘‘(h) In applying this section and subsections (c) and

18 (e) of section 1916A, with respect to cost sharing that is

19 ‘nominal’ in amount, the Secretary shall increase such

20 ‘nominal’ amounts for each year (beginning with 2006) by

21 the annual percentage increase in the medical care compo22 nent of the consumer price index for all urban consumers

23 (U.S. city average) as rounded up in an appropriate man24 ner.’’.
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1 (c) EFFECTIVE DATE.—The amendments made by this

2 section shall apply to cost sharing imposed for items and

3 services furnished on or after March 31, 2006.

4 SEC. 6042. SPECIAL RULES FOR COST SHARING FOR PRE5 SCRIPTION DRUGS.

6 (a) IN GENERAL.—Section 1916A of the Social Secu7 rity Act, as inserted by section 6041(a), is amended by in8 serting after subsection (b) the following new subsection:

9 ‘‘(c) SPECIAL RULES FOR COST SHARING FOR PRE10 SCRIPTION DRUGS.—

11 ‘‘(1) IN GENERAL.—In order to encourage bene12 ficiaries to use drugs (in this subsection referred to as

13 ‘preferred drugs’) identified by the State as the least

14 (or less) costly effective prescription drugs within a

15 class of drugs (as defined by the State), with respect

16 to one or more groups of beneficiaries specified by the

17 State, subject to paragraph (2), the State may—

18 ‘‘(A) provide cost sharing (instead of the

19 level of cost sharing otherwise permitted under

20 section 1916, but subject to paragraphs (2) and

21 (3)) with respect to drugs that are not preferred

22 drugs within a class; and

23 ‘‘(B) waive or reduce the cost sharing other24 wise applicable for preferred drugs within such

25 class and shall not apply any such cost sharing
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1 for such preferred drugs for individuals for

2 whom cost sharing may not otherwise be imposed

3 under subsection (b)(3)(B).

4 ‘‘(2) LIMITATIONS.—

5 ‘‘(A) BY INCOME GROUP.—In no case may

6 the cost sharing under paragraph (1)(A) with re7 spect to a non-preferred drug exceed—

8 ‘‘(i) in the case of an individual whose

9 family income does not exceed 150 percent

10 of the poverty line applicable to a family of

11 the size involved, the amount of nominal

12 cost sharing (as otherwise determined under

13 section 1916); or

14 ‘‘(ii) in the case of an individual

15 whose family income exceeds 150 percent of

16 the poverty line applicable to a family of

17 the size involved, 20 percent of the cost of

18 the drug.

19 ‘‘(B) LIMITATION TO NOMINAL FOR EXEMPT

20 POPULATIONS.—In the case of an individual who

21 is otherwise not subject to cost sharing due to the

22 application of subsection (b)(3)(B), any cost

23 sharing under paragraph (1)(A) with respect to

24 a non-preferred drug may not exceed a nominal
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1 amount (as otherwise determined under section

2 1916).

3 ‘‘(C) CONTINUED APPLICATION OF AGGRE4 GATE CAP.—In addition to the limitations im5 posed under subparagraphs (A) and (B), any

6 cost sharing under paragraph (1)(A) continues

7 to be subject to the aggregate cap on cost sharing

8 applied under paragraph (1) or (2) of subsection

9 (b), as the case may be.

10 ‘‘(3) WAIVER.—In carrying out paragraph (1), a

11 State shall provide for the application of cost sharing

12 levels applicable to a preferred drug in the case of a

13 drug that is not a preferred drug if the prescribing

14 physician determines that the preferred drug for

15 treatment of the same condition either would not be

16 as effective for the individual or would have adverse

17 effects for the individual or both.

18 ‘‘(4) EXCLUSION AUTHORITY.—Nothing in this

19 subsection shall be construed as preventing a State

20 from excluding specified drugs or classes of drugs

21 from the application of paragraph (1).’’.

22 (b) EFFECTIVE DATE.—The amendment made by sub23 section (a) shall apply to cost sharing imposed for items

24 and services furnished on or after March 31, 2006.
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1 SEC. 6043. EMERGENCY ROOM COPAYMENTS FOR NON2 EMERGENCY CARE.

3 (a) IN GENERAL.—Section 1916A of the Social Secu4 rity Act, as inserted by section 6041 and as amended by

5 section 6042, is further amended by adding at the end the

6 following new subsection:

7 ‘‘(e) STATE OPTION FOR PERMITTING HOSPITALS TO

8 IMPOSE COST SHARING FOR NON-EMERGENCY CARE FUR9 NISHED IN AN EMERGENCY DEPARTMENT.—

10 ‘‘(1) IN GENERAL.—Notwithstanding section

11 1916 and section 1902(a)(1) or the previous provi12 sions of this section, but subject to the limitations of

13 paragraph (2), a State may, by amendment to its

14 State plan under this title, permit a hospital to im15 pose cost sharing for non-emergency services furnished

16 to an individual (within one or more groups of indi17 viduals specified by the State) in the hospital emer18 gency department under this subsection if the fol19 lowing conditions are met:

20 ‘‘(A) ACCESS TO NON-EMERGENCY ROOM

21 PROVIDER.—The individual has actually avail22 able and accessible (as such terms are applied by

23 the Secretary under section 1916(b)(3)) an alter24 nate non-emergency services provider with re25 spect to such services.
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1 ‘‘(B) NOTICE.—The hospital must inform

2 the beneficiary after receiving an appropriate

3 medical screening examination under section

4 1867 and after a determination has been made

5 that the individual does not have an emergency

6 medical condition, but before providing the non7 emergency services, of the following:

8 ‘‘(i) The hospital may require the pay9 ment of the State specified cost sharing be10 fore the service can be provided.

11 ‘‘(ii) The name and location of an al12 ternate non-emergency services provider (de13 scribed in subparagraph (A)) that is actu14 ally available and accessible (as described

15 in such subparagraph).

16 ‘‘(iii) The fact that such alternate pro17 vider can provide the services without the

18 imposition of cost sharing described in

19 clause (i).

20 ‘‘(iv) The hospital provides a referral

21 to coordinate scheduling of this treatment.

22 Nothing in this subsection shall be construed as

23 preventing a State from applying (or waiving)

24 cost sharing otherwise permissible under this sec25 tion to services described in clause (iii).
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1 ‘‘(2) LIMITATIONS.—

2 ‘‘(A) FOR POOREST BENEFICIARIES.—In the

3 case of an individual described in subsection

4 (b)(1), the cost sharing imposed under this sub5 section may not exceed twice the amount deter6 mined to be nominal under section 1916, subject

7 to the percent of income limitation otherwise ap8 plicable under subsection (b)(1).

9 ‘‘(B) APPLICATION TO EXEMPT POPU10 LATIONS.—In the case of an individual who is

11 otherwise not subject to cost sharing under sub12 section (b)(3), a State may impose cost sharing

13 under paragraph (1) for care in an amount that

14 does not exceed a nominal amount (as otherwise

15 determined under section 1916) so long as no

16 cost sharing is imposed to receive such care

17 through an outpatient department or other alter18 native health care provider in the geographic

19 area of the hospital emergency department in20 volved.

21 ‘‘(C) CONTINUED APPLICATION OF AGGRE22 GATE CAP; RELATION TO OTHER COST SHAR23 ING.—In addition to the limitations imposed

24 under subparagraphs (A) and (B), any cost

25 sharing under paragraph (1) is subject to the ag-
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1 gregate cap on cost sharing applied under para2 graph (1) or (2) of subsection (b), as the case

3 may be. Cost sharing imposed for services under

4 this subsection shall be instead of any cost shar5 ing that may be imposed for such services under

6 subsection (a).

7 ‘‘(3) CONSTRUCTION.—Nothing in this section

8 shall be construed—

9 ‘‘(A) to limit a hospital’s obligations with

10 respect to screening and stabilizing treatment of

11 an emergency medical condition under section

12 1867; or

13 ‘‘(B) to modify any obligations under either

14 State or Federal standards relating to the appli15 cation of a prudent-layperson standard with re16 spect to payment or coverage of emergency serv17 ices by any managed care organization.

18 ‘‘(4) DEFINITIONS.—For purposes of this sub19 section:

20 ‘‘(A) NON-EMERGENCY SERVICES.—The

21 term ‘non-emergency services’ means any care or

22 services furnished in an emergency department

23 of a hospital that the physician determines do

24 not constitute an appropriate medical screening

25 examination or stabilizing examination and
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1 treatment required to be provided by the hospital

2 under section 1867.

3 ‘‘(B) ALTERNATE NON-EMERGENCY SERV4 ICES PROVIDER.—The term ‘alternative non5 emergency services provider’ means, with respect

6 to non-emergency services for the diagnosis or

7 treatment of a condition, a health care provider,

8 such as a physician’s office, health care clinic,

9 community health center, hospital outpatient de10 partment, or similar health care provider, that

11 can provide clinically appropriate services for

12 the diagnosis or treatment of a condition contem13 poraneously with the provision of the non-emer14 gency services that would be provided in an

15 emergency department of a hospital for the diag16 nosis or treatment of a condition, and that is

17 participating in the program under this title.’’.

18 (b) GRANT FUNDS FOR ESTABLISHMENT OF ALTER19 NATE NON-EMERGENCY SERVICES PROVIDERS.—Section

20 1903 of the Social Security Act (42 U.S.C. 1396b), as

21 amended by section 6037(a)(2), is amended by adding at

22 the end the following new subsection:

23 ‘‘(y) PAYMENTS FOR ESTABLISHMENT OF ALTERNATE

24 NON-EMERGENCY SERVICES PROVIDERS.—
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1 ‘‘(1) PAYMENTS.—In addition to the payments

2 otherwise provided under subsection (a), subject to

3 paragraph (2), the Secretary shall provide for pay4 ments to States under such subsection for the estab5 lishment of alternate non-emergency service providers

6 (as defined in section 1916A(e)(5)(B)), or networks of

7 such providers.

8 ‘‘(2) LIMITATION.—The total amount of pay9 ments under this subsection shall not exceed

10 $50,000,000 during the 4-year period beginning with

11 2006. This subsection constitutes budget authority in

12 advance of appropriations Acts and represents the ob13 ligation of the Secretary to provide for the payment

14 of amounts provided under this subsection.

15 ‘‘(3) PREFERENCE.—In providing for payments

16 to States under this subsection, the Secretary shall

17 provide preference to States that establish, or provide

18 for, alternate non-emergency services providers or net19 works of such providers that—

20 ‘‘(A) serve rural or underserved areas where

21 beneficiaries under this title may not have reg22 ular access to providers of primary care services;

23 or

24 ‘‘(B) are in partnership with local commu25 nity hospitals.
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1 ‘‘(4) FORM AND MANNER OF PAYMENT.—Pay2 ment to a State under this subsection shall be made

3 only upon the filing of such application in such form

4 and in such manner as the Secretary shall specify.

5 Payment to a State under this subsection shall be

6 made in the same manner as other payments under

7 section 1903(a).’’.

8 (c) EFFECTIVE DATE.—The amendments made by this

9 section shall apply to non-emergency services furnished on

10 or after January 1, 2007.

11 SEC. 6044. USE OF BENCHMARK BENEFIT PACKAGES.

12 (a) IN GENERAL.—Title XIX of the Social Security

13 Act, as amended by section 6035, is amended by redesig14 nating section 1937 as section 1938 and by inserting after

15 section 1936 the following new section:

16 ‘‘STATE FLEXIBILITY IN BENEFIT PACKAGES

17 ‘‘SEC. 1937. (a) STATE OPTION OF PROVIDING BENCH18 MARK BENEFITS.—

19 ‘‘(1) AUTHORITY.—

20 ‘‘(A) IN GENERAL.—Notwithstanding any

21 other provision of this title, a State, at its option

22 as a State plan amendment, may provide for

23 medical assistance under this title to individuals

24 within one or more groups of individuals speci25 fied by the State through enrollment in coverage

26 that provides—
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1 ‘‘(i) benchmark coverage described in

2 subsection (b)(1) or benchmark equivalent

3 coverage described in subsection (b)(2); and

4 ‘‘(ii) for any child under 19 years of

5 age who is covered under the State plan

6 under section 1902(a)(10)(A), wrap-around

7 benefits to the benchmark coverage or bench8 mark equivalent coverage consisting of early

9 and periodic screening, diagnostic, and

10 treatment services defined in section

11 1905(r).

12 ‘‘(B) LIMITATION.—The State may only ex13 ercise the option under subparagraph (A) for an

14 individual eligible under an eligibility category

15 that had been established under the State plan

16 on or before the date of the enactment of this sec17 tion.

18 ‘‘(C) OPTION OF WRAP-AROUND BENE19 FITS.—In the case of coverage described in sub20 paragraph (A), a State, at its option, may pro21 vide such wrap-around or additional benefits as

22 the State may specify.

23 ‘‘(D) TREATMENT AS MEDICAL ASSIST24 ANCE.—Payment of premiums for such coverage

25 under this subsection shall be treated as payment
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1 of other insurance premiums described in the

2 third sentence of section 1905(a).

3 ‘‘(2) APPLICATION.—

4 ‘‘(A) IN GENERAL.—Except as provided in

5 subparagraph (B), a State may require that a

6 full-benefit eligible individual (as defined in sub7 paragraph (C)) within a group obtain benefits

8 under this title through enrollment in coverage

9 described in paragraph (1)(A). A State may

10 apply the previous sentence to individuals with11 in 1 or more groups of such individuals.

12 ‘‘(B) LIMITATION ON APPLICATION.—A

13 State may not require under subparagraph (A)

14 an individual to obtain benefits through enroll15 ment described in paragraph (1)(A) if the indi16 vidual is within one of the following categories

17 of individuals:

18 ‘‘(i) MANDATORY PREGNANT WOMEN.—

19 The individual is a pregnant woman who is

20 required to be covered under the State plan

21 under section 1902(a)(10)(A)(i).

22 ‘‘(ii) BLIND OR DISABLED INDIVID23 UALS.—The individual qualifies for medical

24 assistance under the State plan on the basis

25 of being blind or disabled (or being treated
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1 as being blind or disabled) without regard

2 to whether the individual is eligible for sup3 plemental security income benefits under

4 title XVI on the basis of being blind or dis5 abled and including an individual who is

6 eligible for medical assistance on the basis

7 of section 1902(e)(3).

8 ‘‘(iii) DUAL ELIGIBLES.—The indi9 vidual is entitled to benefits under any part

10 of title XVIII.

11 ‘‘(iv) TERMINALLY ILL HOSPICE PA12 TIENTS.—The individual is terminally ill

13 and is receiving benefits for hospice care

14 under this title.

15 ‘‘(v) ELIGIBLE ON BASIS OF INSTITU16 TIONALIZATION.—The individual is an in17 patient in a hospital, nursing facility, in18 termediate care facility for the mentally re19 tarded, or other medical institution, and is

20 required, as a condition of receiving services

21 in such institution under the State plan, to

22 spend for costs of medical care all but a

23 minimal amount of the individual’s income

24 required for personal needs.
 †

230

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1 ‘‘(vi) MEDICALLY FRAIL AND SPECIAL

2 MEDICAL NEEDS INDIVIDUALS.—The indi3 vidual is medically frail or otherwise an in4 dividual with special medical needs (as

5 identified in accordance with regulations of

6 the Secretary).

7 ‘‘(vii) BENEFICIARIES QUALIFYING FOR

8 LONG-TERM CARE SERVICES.—The indi9 vidual qualifies based on medical condition

10 for medical assistance for long-term care

11 services described in section 1917(c)(1)(C).

12 ‘‘(viii) CHILDREN IN FOSTER CARE RE13 CEIVING CHILD WELFARE SERVICES AND

14 CHILDREN RECEIVING FOSTER CARE OR

15 ADOPTION ASSISTANCE.—The individual is

16 an individual with respect to whom aid or

17 assistance is made available under part B

18 of title IV to children in foster care and in19 dividuals with respect to whom adoption or

20 foster care assistance is made available

21 under part E of such title, without regard

22 to age.

23 ‘‘(ix) TANF AND SECTION 1931 PAR24 ENTS.—The individual qualifies for medical

25 assistance on the basis of eligibility to re-
 †

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1 ceive assistance under a State plan funded

2 under part A of title IV (as in effect on or

3 after the welfare reform effective date de4 fined in section 1931(i)).

5 ‘‘(x) WOMEN IN THE BREAST OR CER6 VICAL CANCER PROGRAM.—The individual

7 is a woman who is receiving medical assist8 ance by virtue of the application of sections

9 1902(a)(10)(A)(ii)(XVIII) and 1902(aa).

10 ‘‘(xi) LIMITED SERVICES BENE11 FICIARIES.—The individual—

12 ‘‘(I) qualifies for medical assist13 ance on the basis of section

14 1902(a)(10)(A)(ii)(XII); or

15 ‘‘(II) is not a qualified alien (as

16 defined in section 431 of the Personal

17 Responsibility and Work Opportunity

18 Reconciliation Act of 1996) and re19 ceives care and services necessary for

20 the treatment of an emergency medical

21 condition in accordance with section

22 1903(v).

23 ‘‘(C) FULL-BENEFIT ELIGIBLE INDIVID24 UALS.—
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1 ‘‘(i) IN GENERAL.—For purposes of

2 this paragraph, subject to clause (ii), the

3 term ‘full-benefit eligible individual’ means

4 for a State for a month an individual who

5 is determined eligible by the State for med6 ical assistance for all services defined in sec7 tion 1905(a) which are covered under the

8 State plan under this title for such month

9 under section 1902(a)(10)(A) or under any

10 other category of eligibility for medical as11 sistance for all such services under this title,

12 as determined by the Secretary.

13 ‘‘(ii) EXCLUSION OF MEDICALLY NEEDY

14 AND SPEND-DOWN POPULATIONS.—Such

15 term shall not include an individual deter16 mined to be eligible by the State for medical

17 assistance under section 1902(a)(10)(C) or

18 by reason of section 1902(f) or otherwise eli19 gible based on a reduction of income based

20 on costs incurred for medical or other reme21 dial care.

22 ‘‘(b) BENCHMARK BENEFIT PACKAGES.—

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

24 (a)(1), each of the following coverages shall be consid25 ered to be benchmark coverage:
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1 ‘‘(A) FEHBP-EQUIVALENT HEALTH INSUR2 ANCE COVERAGE.—The standard Blue Cross/Blue

3 Shield preferred provider option service benefit

4 plan, described in and offered under section

5 8903(1) of title 5, United States Code.

6 ‘‘(B) STATE EMPLOYEE COVERAGE.—A

7 health benefits coverage plan that is offered and

8 generally available to State employees in the

9 State involved.

10 ‘‘(C) COVERAGE OFFERED THROUGH

11 HMO.—The health insurance coverage plan

12 that—

13 ‘‘(i) is offered by a health maintenance

14 organization (as defined in section

15 2791(b)(3) of the Public Health Service

16 Act), and

17 ‘‘(ii) has the largest insured commer18 cial, non-medicaid enrollment of covered

19 lives of such coverage plans offered by such

20 a health maintenance organization in the

21 State involved.

22 ‘‘(D) SECRETARY-APPROVED COVERAGE.—

23 Any other health benefits coverage that the Sec24 retary determines, upon application by a State,
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1 provides appropriate coverage for the population

2 proposed to be provided such coverage.

3 ‘‘(2) BENCHMARK-EQUIVALENT COVERAGE.—For

4 purposes of subsection (a)(1), coverage that meets the

5 following requirement shall be considered to be bench6 mark-equivalent coverage:

7 ‘‘(A) INCLUSION OF BASIC SERVICES.—The

8 coverage includes benefits for items and services

9 within each of the following categories of basic

10 services:

11 ‘‘(i) Inpatient and outpatient hospital

12 services.

13 ‘‘(ii) Physicians’ surgical and medical

14 services.

15 ‘‘(iii) Laboratory and x-ray services.

16 ‘‘(iv) Well-baby and well-child care, in17 cluding age-appropriate immunizations.

18 ‘‘(v) Other appropriate preventive serv19 ices, as designated by the Secretary.

20 ‘‘(B) AGGREGATE ACTUARIAL VALUE EQUIV21 ALENT TO BENCHMARK PACKAGE.—The coverage

22 has an aggregate actuarial value that is at least

23 actuarially equivalent to one of the benchmark

24 benefit packages described in paragraph (1).
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1 ‘‘(C) SUBSTANTIAL ACTUARIAL VALUE FOR

2 ADDITIONAL SERVICES INCLUDED IN BENCHMARK

3 PACKAGE.—With respect to each of the following

4 categories of additional services for which cov5 erage is provided under the benchmark benefit

6 package used under subparagraph (B), the cov7 erage has an actuarial value that is equal to at

8 least 75 percent of the actuarial value of the cov9 erage of that category of services in such pack10 age:

11 ‘‘(i) Coverage of prescription drugs.

12 ‘‘(ii) Mental health services.

13 ‘‘(iii) Vision services.

14 ‘‘(iv) Hearing services.

15 ‘‘(3) DETERMINATION OF ACTUARIAL VALUE.—

16 The actuarial value of coverage of benchmark benefit

17 packages shall be set forth in an actuarial opinion in

18 an actuarial report that has been prepared—

19 ‘‘(A) by an individual who is a member of

20 the American Academy of Actuaries;

21 ‘‘(B) using generally accepted actuarial

22 principles and methodologies;

23 ‘‘(C) using a standardized set of utilization

24 and price factors;
 †

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1 ‘‘(D) using a standardized population that

2 is representative of the population involved;

3 ‘‘(E) applying the same principles and fac4 tors in comparing the value of different coverage

5 (or categories of services);

6 ‘‘(F) without taking into account any dif7 ferences in coverage based on the method of deliv8 ery or means of cost control or utilization used;

9 and

10 ‘‘(G) taking into account the ability of a

11 State to reduce benefits by taking into account

12 the increase in actuarial value of benefits cov13 erage offered under this title that results from the

14 limitations on cost sharing under such coverage.

15 The actuary preparing the opinion shall select and

16 specify in the memorandum the standardized set and

17 population to be used under subparagraphs (C) and

18 (D).

19 ‘‘(4) COVERAGE OF RURAL HEALTH CLINIC AND

20 FQHC SERVICES.—Notwithstanding the previous pro21 visions of this section, a State may not provide for

22 medical assistance through enrollment of an indi23 vidual with benchmark coverage or benchmark equiva24 lent coverage under this section unless—
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1 ‘‘(A) the individual has access, through such

2 coverage or otherwise, to services described in

3 subparagraphs (B) and (C) of section

4 1905(a)(2); and

5 ‘‘(B) payment for such services is made in

6 accordance with the requirements of section

7 1902(bb).’’.

8 (b) EFFECTIVE DATE.—The amendment made by sub9 section (a) takes effect on March 31, 2006.

10 CHAPTER 5—STATE FINANCING UNDER

11 MEDICAID

12 SEC. 6051. MANAGED CARE ORGANIZATION PROVIDER TAX

13 REFORM.

14 (a) IN GENERAL.—Section 1903(w)(7)(A)(viii) of the

15 Social Security Act (42 U.S.C. 1396b(w)(7)(A)(viii)) is

16 amended to read as follows:

17 ‘‘(viii) Services of managed care organiza18 tions (including health maintenance organiza19 tions, preferred provider organizations, and such

20 other similar organizations as the Secretary may

21 specify by regulation).’’.

22 (b) EFFECTIVE DATE.—

23 (1) IN GENERAL.—Subject to paragraph (2), the

24 amendment made by subsection (a) shall be effective

25 as of the date of the enactment of this Act.
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1 (2) DELAY IN EFFECTIVE DATE.—

2 (A) IN GENERAL.—Subject to subparagraph

3 (B), in the case of a State specified in subpara4 graph (B), the amendment made by subsection

5 (a) shall be effective as of October 1, 2009.

6 (B) SPECIFIED STATES.—For purposes of

7 subparagraph (A), the States specified in this

8 subparagraph are States that have enacted a law

9 providing for a tax on the services of a Medicaid

10 managed care organization with a contract

11 under section 1903(m) of the Social Security Act

12 as of December 8, 2005.

13 (c) CLARIFICATION REGARDING NON-REGULATION OF

14 TRANSFERS.—

15 (1) IN GENERAL.—Nothing in section 1903(w) of

16 the Social Security Act (42 U.S.C. 1396b(w)) shall be

17 construed by the Secretary of Health and Human

18 Services as prohibiting a State’s use of funds as the

19 non-Federal share of expenditures under title XIX of

20 such Act where such funds are transferred from or

21 certified by a publicly-owned regional medical center

22 located in another State and described in paragraph

23 (2), so long as the Secretary determines that such use

24 of funds is proper and in the interest of the program

25 under title XIX.
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1 (2) CENTER DESCRIBED.—A center described in

2 this paragraph is a publicly-owned regional medical

3 center that—

4 (A) provides level 1 trauma and burn care

5 services;

6 (B) provides level 3 neonatal care services;

7 (C) is obligated to serve all patients, regard8 less of State of origin;

9 (D) is located within a Standard Metropoli10 tan Statistical Area (SMSA) that includes at

11 least 3 States, including the States described in

12 paragraph (1);

13 (E) serves as a tertiary care provider for

14 patients residing within a 125-mile radius; and

15 (F) meets the criteria for a disproportionate

16 share hospital under section 1923 of such Act in

17 at least one State other than the one in which

18 the center is located.

19 (3) EFFECTIVE PERIOD.—This subsection shall

20 apply through December 31, 2006.

21 SEC. 6052. REFORMS OF CASE MANAGEMENT AND TAR22 GETED CASE MANAGEMENT.

23 (a) IN GENERAL.—Section 1915(g) of the Social Secu24 rity Act (42 U.S.C. 1396n(g)(2)) is amended by striking

25 paragraph (2) and inserting the following:
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1 ‘‘(2) For purposes of this subsection:

2 ‘‘(A)(i) The term ‘case management services’

3 means services which will assist individuals eligible

4 under the plan in gaining access to needed medical,

5 social, educational, and other services.

6 ‘‘(ii) Such term includes the following:

7 ‘‘(I) Assessment of an eligible individual to

8 determine service needs, including activities that

9 focus on needs identification, to determine the

10 need for any medical, educational, social, or

11 other services. Such assessment activities include

12 the following:

13 ‘‘(aa) Taking client history.

14 ‘‘(bb) Identifying the needs of the indi15 vidual, and completing related documenta16 tion.

17 ‘‘(cc) Gathering information from other

18 sources such as family members, medical

19 providers, social workers, and educators, if

20 necessary, to form a complete assessment of

21 the eligible individual.

22 ‘‘(II) Development of a specific care plan

23 based on the information collected through an as24 sessment, that specifies the goals and actions to

25 address the medical, social, educational, and
 †

241

S 1932 EAS

1 other services needed by the eligible individual,

2 including activities such as ensuring the active

3 participation of the eligible individual and

4 working with the individual (or the individual’s

5 authorized health care decision maker) and oth6 ers to develop such goals and identify a course

7 of action to respond to the assessed needs of the

8 eligible individual.

9 ‘‘(III) Referral and related activities to help

10 an individual obtain needed services, including

11 activities that help link eligible individuals with

12 medical, social, educational providers or other

13 programs and services that are capable of pro14 viding needed services, such as making referrals

15 to providers for needed services and scheduling

16 appointments for the individual.

17 ‘‘(IV) Monitoring and followup activities,

18 including activities and contacts that are nec19 essary to ensure the care plan is effectively im20 plemented and adequately addressing the needs

21 of the eligible individual, and which may be

22 with the individual, family members, providers,

23 or other entities and conducted as frequently as

24 necessary to help determine such matters as—
 †

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1 ‘‘(aa) whether services are being fur2 nished in accordance with an individual’s

3 care plan;

4 ‘‘(bb) whether the services in the care

5 plan are adequate; and

6 ‘‘(cc) whether there are changes in the

7 needs or status of the eligible individual,

8 and if so, making necessary adjustments in

9 the care plan and service arrangements

10 with providers.

11 ‘‘(iii) Such term does not include the direct de12 livery of an underlying medical, educational, social,

13 or other service to which an eligible individual has

14 been referred, including, with respect to the direct de15 livery of foster care services, services such as (but not

16 limited to) the following:

17 ‘‘(I) Research gathering and completion of

18 documentation required by the foster care pro19 gram.

20 ‘‘(II) Assessing adoption placements.

21 ‘‘(III) Recruiting or interviewing potential

22 foster care parents.

23 ‘‘(IV) Serving legal papers.

24 ‘‘(V) Home investigations.

25 ‘‘(VI) Providing transportation.
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1 ‘‘(VII) Administering foster care subsidies.

2 ‘‘(VIII) Making placement arrangements.

3 ‘‘(B) The term ‘targeted case management serv4 ices’ are case management services that are furnished

5 without regard to the requirements of section

6 1902(a)(1) and section 1902(a)(10)(B) to specific

7 classes of individuals or to individuals who reside in

8 specified areas.

9 ‘‘(3) With respect to contacts with individuals who are

10 not eligible for medical assistance under the State plan or,

11 in the case of targeted case management services, individ12 uals who are eligible for such assistance but are not part

13 of the target population specified in the State plan, such

14 contacts—

15 ‘‘(A) are considered an allowable case manage16 ment activity, when the purpose of the contact is di17 rectly related to the management of the eligible indi18 vidual’s care; and

19 ‘‘(B) are not considered an allowable case man20 agement activity if such contacts relate directly to the

21 identification and management of the noneligible or

22 nontargeted individual’s needs and care.

23 ‘‘(4)(A) In accordance with section 1902(a)(25), Fed24 eral financial participation only is available under this

25 title for case management services or targeted case manage-
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1 ment services if there are no other third parties liable to

2 pay for such services, including as reimbursement under a

3 medical, social, educational, or other program.

4 ‘‘(B) A State shall allocate the costs of any part of

5 such services which are reimbursable under another feder6 ally funded program in accordance with OMB Circular A–

7 87 (or any related or successor guidance or regulations re8 garding allocation of costs among federally funded pro9 grams) under an approved cost allocation program.

10 ‘‘(5) Nothing in this subsection shall be construed as

11 affecting the application of rules with respect to third party

12 liability under programs, or activities carried out under

13 title XXVI of the Public Health Service Act or by the Indian

14 Health Service.’’.

15 (b) REGULATIONS.—The Secretary shall promulgate

16 regulations to carry out the amendment made by subsection

17 (a) which may be effective and final immediately on an

18 interim basis as of the date of publication of the interim

19 final regulation. If the Secretary provides for an interim

20 final regulation, the Secretary shall provide for a period

21 of public comments on such regulation after the date of pub22 lication. The Secretary may change or revise such regula23 tion after completion of the period of public comment.

24 (c) EFFECTIVE DATE.—The amendment made by sub25 section (a) shall take effect on January 1, 2006.
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1 SEC. 6053. ADDITIONAL FMAP ADJUSTMENTS.

2 (a) HOLD HARMLESS FOR CERTAIN DECREASE.—Not3 withstanding the first sentence of section 1905(b) of the So4 cial Security Act (42 U.S.C. 1396d(b)), if, for purposes of

5 titles XIX and XXI of the Social Security Act (42 U.S.C.

6 1396 et seq., 1397aa et seq.), the Federal medical assistance

7 percentage determined for the State specified in section

8 4725(a) of Public Law 105–33 for fiscal year 2006 or fiscal

9 year 2007 is less than the Federal medical assistance per10 centage determined for such State for fiscal year 2005, the

11 Federal medical assistance percentage determined for such

12 State for fiscal year 2005 shall be substituted for the Federal

13 medical assistance percentage otherwise determined for such

14 State for fiscal year 2006 or fiscal year 2007, as the case

15 may be.

16 (b) HOLD HARMLESS FOR KATRINA IMPACT.—Not17 withstanding any other provision of law, for purposes of

18 titles XIX and XXI of the Social Security Act, the Secretary

19 of Health and Human Services, in computing the Federal

20 medical assistance percentage under section 1905(b) of such

21 Act (42 U.S.C. 1396d(b)) for any year after 2006 for a

22 State that the Secretary determines has a significant num23 ber of evacuees who were evacuated to, and live in, the State

24 as a result of Hurricane Katrina as of October 1, 2005,

25 shall disregard such evacuees (and income attributable to

26 such evacuees) from such computation.
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1 SEC. 6054. DSH ALLOTMENT FOR THE DISTRICT OF COLUM2 BIA.

3 (a) IN GENERAL.—For purposes of determining the

4 DSH allotment for the District of Columbia under section

5 1923 of the Social Security Act (42 U.S.C. 1396r–4) for

6 fiscal year 2006 and each subsequent fiscal year, the table

7 in subsection (f)(2) of such section is amended under each

8 of the columns for fiscal year 2000, fiscal year 2001, and

9 fiscal year 2002, in the entry for the District of Columbia

10 by striking ‘‘32’’ and inserting ‘‘49’’.

11 (b) EFFECTIVE DATE.—The amendments made by sub12 section (a) shall take effect as if enacted on October 1, 2005,

13 and shall only apply to disproportionate share hospital ad14 justment expenditures applicable to fiscal year 2006 and

15 subsequent fiscal years made on or after that date.

16 SEC. 6055. INCREASE IN MEDICAID PAYMENTS TO INSULAR

17 AREAS.

18 Section 1108(g) of the Social Security Act (42 U.S.C.

19 1308(g)) is amended—

20 (1) in paragraph (2), by inserting ‘‘and subject

21 to paragraph (3)’’ after ‘‘subsection (f)’’; and

22 (2) by adding at the end the following new para23 graph:

24 ‘‘(3) FISCAL YEARS 2006 AND 2007 FOR CERTAIN

25 INSULAR AREAS.—The amounts otherwise determined

26 under this subsection for Puerto Rico, the Virgin Is-
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1 lands, Guam, the Northern Mariana Islands, and

2 American Samoa for fiscal year 2006 and fiscal year

3 2007 shall be increased by the following amounts:

4 ‘‘(A) For Puerto Rico, $12,000,000 for fiscal

5 year 2006 and $12,000,000 for fiscal year 2007.

6 ‘‘(B) For the Virgin Islands, $2,500,000 for

7 fiscal year 2006 and $5,000,000 for fiscal year

8 2007.

9 ‘‘(C) For Guam, $2,500,000 for fiscal year

10 2006 and $5,000,000 for fiscal year 2007.

11 ‘‘(D) For the Northern Mariana Islands,

12 $1,000,000 for fiscal year 2006 and $2,000,000

13 for fiscal year 2007.

14 ‘‘(E) For American Samoa, $2,000,000 for

15 fiscal year 2006 and $4,000,000 for fiscal year

16 2007.

17 Such amounts shall not be taken into account in ap18 plying paragraph (2) for fiscal year 2007 but shall be

19 taken into account in applying such paragraph for

20 fiscal year 2008 and subsequent fiscal years.’’.

21 CHAPTER 6—OTHER PROVISIONS

22 Subchapter A—Family Opportunity Act

23 SEC. 6061. SHORT TITLE OF SUBCHAPTER.

24 This subchapter may be cited as the ‘‘Family Oppor25 tunity Act of 2005’’ or the ‘‘Dylan Lee James Act’’.
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1 SEC. 6062. OPPORTUNITY FOR FAMILIES OF DISABLED

2 CHILDREN TO PURCHASE MEDICAID COV3 ERAGE FOR SUCH CHILDREN.

4 (a) STATE OPTION TO ALLOW FAMILIES OF DISABLED

5 CHILDREN TO PURCHASE MEDICAID COVERAGE FOR SUCH

6 CHILDREN.—

7 (1) IN GENERAL.—Section 1902 of the Social Se8 curity Act (42 U.S.C. 1396a) is amended—

9 (A) in subsection (a)(10)(A)(ii)—

10 (i) by striking ‘‘or’’ at the end of sub11 clause (XVII);

12 (ii) by adding ‘‘or’’ at the end of sub13 clause (XVIII); and

14 (iii) by adding at the end the following

15 new subclause:

16 ‘‘(XIX) who are disabled children

17 described in subsection (cc)(1);’’; and

18 (B) by adding at the end the following new

19 subsection:

20 ‘‘(cc)(1) Individuals described in this paragraph are

21 individuals—

22 ‘‘(A) who are children who have not attained 19

23 years of age and are born—

24 ‘‘(i) on or after January 1, 2001 (or, at the

25 option of a State, on or after an earlier date),
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1 in the case of the second, third, and fourth quar2 ters of fiscal year 2007;

3 ‘‘(ii) on or after October 1, 1995 (or, at the

4 option of a State, on or after an earlier date),

5 in the case of each quarter of fiscal year 2008;

6 and

7 ‘‘(iii) after October 1, 1989, in the case of

8 each quarter of fiscal year 2009 and each quarter

9 of any fiscal year thereafter;

10 ‘‘(B) who would be considered disabled under

11 section 1614(a)(3)(C) (as determined under title XVI

12 for children but without regard to any income or

13 asset eligibility requirements that apply under such

14 title with respect to children); and

15 ‘‘(C) whose family income does not exceed such

16 income level as the State establishes and does not

17 exceed—

18 ‘‘(i) 300 percent of the poverty line (as de19 fined in section 2110(c)(5)) applicable to a fam20 ily of the size involved; or

21 ‘‘(ii) such higher percent of such poverty

22 line as a State may establish, except that—

23 ‘‘(I) any medical assistance provided

24 to an individual whose family income ex-
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1 ceeds 300 percent of such poverty line may

2 only be provided with State funds; and

3 ‘‘(II) no Federal financial participa4 tion shall be provided under section 1903(a)

5 for any medical assistance provided to such

6 an individual.’’.

7 (2) INTERACTION WITH EMPLOYER-SPONSORED

8 FAMILY COVERAGE.—Section 1902(cc) of such Act (42

9 U.S.C. 1396a(cc)), as added by paragraph (1)(B), is

10 amended by adding at the end the following new

11 paragraph:

12 ‘‘(2)(A) If an employer of a parent of an individual

13 described in paragraph (1) offers family coverage under a

14 group health plan (as defined in section 2791(a) of the Pub15 lic Health Service Act), the State shall—

16 ‘‘(i) notwithstanding section 1906, require such

17 parent to apply for, enroll in, and pay premiums for

18 such coverage as a condition of such parent’s child

19 being or remaining eligible for medical assistance

20 under subsection (a)(10)(A)(ii)(XIX) if the parent is

21 determined eligible for such coverage and the em22 ployer contributes at least 50 percent of the total cost

23 of annual premiums for such coverage; and

24 ‘‘(ii) if such coverage is obtained—
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1 ‘‘(I) subject to paragraph (2) of section

2 1916(h), reduce the premium imposed by the

3 State under that section in an amount that rea4 sonably reflects the premium contribution made

5 by the parent for private coverage on behalf of a

6 child with a disability; and

7 ‘‘(II) treat such coverage as a third party

8 liability under subsection (a)(25).

9 ‘‘(B) In the case of a parent to which subparagraph

10 (A) applies, a State, notwithstanding section 1906 but sub11 ject to paragraph (1)(C)(ii), may provide for payment of

12 any portion of the annual premium for such family cov13 erage that the parent is required to pay. Any payments

14 made by the State under this subparagraph shall be consid15 ered, for purposes of section 1903(a), to be payments for

16 medical assistance.’’.

17 (b) STATE OPTION TO IMPOSE INCOME-RELATED PRE18 MIUMS.—Section 1916 of such Act (42 U.S.C. 1396o) is

19 amended—

20 (1) in subsection (a), by striking ‘‘subsection (g)’’

21 and inserting ‘‘subsections (g) and (i)’’; and

22 (2) by adding at the end, as amended by section

23 6041(b)(2), the following new subsection:

24 ‘‘(i)(1) With respect to disabled children provided med25 ical assistance under section 1902(a)(10)(A)(ii)(XIX), sub-
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1 ject to paragraph (2), a State may (in a uniform manner

2 for such children) require the families of such children to

3 pay monthly premiums set on a sliding scale based on fam4 ily income.

5 ‘‘(2) A premium requirement imposed under para6 graph (1) may only apply to the extent that—

7 ‘‘(A) in the case of a disabled child described in

8 that paragraph whose family income—

9 ‘‘(i) does not exceed 200 percent of the pov10 erty line, the aggregate amount of such premium

11 and any premium that the parent is required to

12 pay for family coverage under section

13 1902(cc)(2)(A)(i) and other cost-sharing charges

14 do not exceed 5 percent of the family’s income;

15 and

16 ‘‘(ii) exceeds 200, but does not exceed 300,

17 percent of the poverty line, the aggregate amount

18 of such premium and any premium that the par19 ent is required to pay for family coverage under

20 section 1902(cc)(2)(A)(i) and other cost-sharing

21 charges do not exceed 7.5 percent of the family’s

22 income; and

23 ‘‘(B) the requirement is imposed consistent with

24 section 1902(cc)(2)(A)(ii)(I).
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1 ‘‘(3) A State shall not require prepayment of a pre2 mium imposed pursuant to paragraph (1) and shall not

3 terminate eligibility of a child under section

4 1902(a)(10)(A)(ii)(XIX) for medical assistance under this

5 title on the basis of failure to pay any such premium until

6 such failure continues for a period of at least 60 days from

7 the date on which the premium became past due. The State

8 may waive payment of any such premium in any case

9 where the State determines that requiring such payment

10 would create an undue hardship.’’.

11 (c) CONFORMING AMENDMENTS.—(1) Section

12 1903(f)(4) of such Act (42 U.S.C. 1396b(f)(4)) is amended

13 in the matter preceding subparagraph (A), by inserting

14 ‘‘1902(a)(10)(A)(ii)(XIX),’’ after

15 ‘‘1902(a)(10)(A)(ii)(XVIII),’’.

16 (2) Section 1905(u)(2)(B) of such Act (42 U.S.C.

17 1396d(u)(2)(B)) is amended by adding at the end the fol18 lowing sentence: ‘‘Such term excludes any child eligible for

19 medical assistance only by reason of section

20 1902(a)(10)(A)(ii)(XIX).’’.

21 (d) EFFECTIVE DATE.—The amendments made by this

22 section shall apply to medical assistance for items and serv23 ices furnished on or after January 1, 2007.
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1 SEC. 6063. DEMONSTRATION PROJECTS REGARDING HOME

2 AND COMMUNITY-BASED ALTERNATIVES TO

3 PSYCHIATRIC RESIDENTIAL TREATMENT FA4 CILITIES FOR CHILDREN.

5 (a) IN GENERAL.—The Secretary is authorized to con6 duct, during each of fiscal years 2007 through 2011, dem7 onstration projects (each in the section referred to as a

8 ‘‘demonstration project’’) in accordance with this section

9 under which up to 10 States (as defined for purposes of

10 title XIX of the Social Security Act) are awarded grants,

11 on a competitive basis, to test the effectiveness in improving

12 or maintaining a child’s functional level and cost-effective13 ness of providing coverage of home and community-based

14 alternatives to psychiatric residential treatment for chil15 dren enrolled in the Medicaid program under title XIX of

16 such Act.

17 (b) APPLICATION OF TERMS AND CONDITIONS.—

18 (1) IN GENERAL.—Subject to the provisions of

19 this section, for the purposes of the demonstration

20 projects, and only with respect to children enrolled

21 under such demonstration projects, a psychiatric resi22 dential treatment facility (as defined in section

23 483.352 of title 42 of the Code of Federal Regulations)

24 shall be deemed to be a facility specified in section

25 1915(c) of the Social Security Act (42 U.S.C.

26 1396n(c)), and to be included in each reference in
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1 such section 1915(c) to hospitals, nursing facilities,

2 and intermediate care facilities for the mentally re3 tarded.

4 (2) STATE OPTION TO ASSURE CONTINUITY OF

5 MEDICAID COVERAGE.—Upon the termination of a

6 demonstration project under this section, the State

7 that conducted the project may elect, only with respect

8 to a child who is enrolled in such project on the ter9 mination date, to continue to provide medical assist10 ance for coverage of home and community-based alter11 natives to psychiatric residential treatment for the

12 child in accordance with section 1915(c) of the Social

13 Security Act (42 U.S.C. 1396n(c)), as modified

14 through the application of paragraph (1). Expendi15 tures incurred for providing such medical assistance

16 shall be treated as a home and community-based

17 waiver program under section 1915(c) of the Social

18 Security Act (42 U.S.C. 1396n(c)) for purposes of

19 payment under section 1903 of such Act (42 U.S.C.

20 1396b).

21 (c) TERMS OF DEMONSTRATION PROJECTS.—

22 (1) IN GENERAL.—Except as otherwise provided

23 in this section, a demonstration project shall be sub24 ject to the same terms and conditions as apply to a

25 waiver under section 1915(c) of the Social Security
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1 Act (42 U.S.C. 1396n(c)), including the waiver of cer2 tain requirements under the first sentence of para3 graph (3) of such section but not applying the second

4 sentence of such paragraph.

5 (2) BUDGET NEUTRALITY.—In conducting the

6 demonstration projects under this section, the Sec7 retary shall ensure that the aggregate payments made

8 by the Secretary under title XIX of the Social Secu9 rity Act (42 U.S.C. 1396 et seq.) do not exceed the

10 amount which the Secretary estimates would have

11 been paid under that title if the demonstration

12 projects under this section had not been implemented.

13 (3) EVALUATION.—The application for a dem14 onstration project shall include an assurance to pro15 vide for such interim and final evaluations of the

16 demonstration project by independent third parties,

17 and for such interim and final reports to the Sec18 retary, as the Secretary may require.

19 (d) PAYMENTS TO STATES; LIMITATIONS TO SCOPE

20 AND FUNDING.—

21 (1) IN GENERAL.—Subject to paragraph (2), a

22 demonstration project approved by the Secretary

23 under this section shall be treated as a home and

24 community-based waiver program under section

25 1915(c) of the Social Security Act (42 U.S.C.
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1 1396n(c)) for purposes of payment under section 1903

2 of such Act (42 U.S.C. 1396b).

3 (2) LIMITATION.—In no case may the amount of

4 payments made by the Secretary under this section

5 for State demonstration projects for a fiscal year ex6 ceed the amount available under subsection (f)(2)(A)

7 for such fiscal year.

8 (e) SECRETARY’S EVALUATION AND REPORT.—The

9 Secretary shall conduct an interim and final evaluation of

10 State demonstration projects under this section and shall

11 report to the President and Congress the conclusions of such

12 evaluations within 12 months of completing such evalua13 tions.

14 (f) FUNDING.—

15 (1) IN GENERAL.—For the purpose of carrying

16 out this section, there are appropriated, from amounts

17 in the Treasury not otherwise appropriated, for fiscal

18 years 2007 through 2011, a total of $218,000,000, of

19 which—

20 (A) the amount specified in paragraph (2)

21 shall be available for each of fiscal years 2007

22 through 2011; and

23 (B) a total of $1,000,000 shall be available

24 to the Secretary for the evaluations and report

25 under subsection (e).
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1 (2) FISCAL YEAR LIMIT.—

2 (A) IN GENERAL.—For purposes of para3 graph (1), the amount specified in this para4 graph for a fiscal year is the amount specified

5 in subparagraph (B) for the fiscal year plus the

6 difference, if any, between the total amount

7 available under this paragraph for prior fiscal

8 years and the total amount previously expended

9 under paragraph (1)(A) for such prior fiscal

10 years.

11 (B) FISCAL YEAR AMOUNTS.—The amount

12 specified in this subparagraph for—

13 (i) fiscal year 2007 is $21,000,000;

14 (ii) fiscal year 2008 is $37,000,000;

15 (iii) fiscal year 2009 is $49,000,000;

16 (iv) fiscal year 2010 is $53,000,000;

17 and

18 (v) fiscal year 2011 is $57,000,000.

19 SEC. 6064. DEVELOPMENT AND SUPPORT OF FAMILY-TO20 FAMILY HEALTH INFORMATION CENTERS.

21 Section 501 of the Social Security Act (42 U.S.C. 701)

22 is amended by adding at the end the following new sub23 section:

24 ‘‘(c)(1)(A) For the purpose of enabling the Secretary

25 (through grants, contracts, or otherwise) to provide for spe-
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1 cial projects of regional and national significance for the

2 development and support of family-to-family health infor3 mation centers described in paragraph (2), there is appro4 priated to the Secretary, out of any money in the Treasury

5 not otherwise appropriated—

6 ‘‘(i) $3,000,000 for fiscal year 2007;

7 ‘‘(ii) $4,000,000 for fiscal year 2008; and

8 ‘‘(iii) $5,000,000 for fiscal year 2009.

9 ‘‘(B) Funds appropriated or authorized to be appro10 priated under subparagraph (A) shall—

11 ‘‘(i) be in addition to amounts appropriated

12 under subsection (a) and retained under section

13 502(a)(1) for the purpose of carrying out activities

14 described in subsection (a)(2); and

15 ‘‘(ii) remain available until expended.

16 ‘‘(2) The family-to-family health information centers

17 described in this paragraph are centers that—

18 ‘‘(A) assist families of children with disabilities

19 or special health care needs to make informed choices

20 about health care in order to promote good treatment

21 decisions, cost-effectiveness, and improved health out22 comes for such children;

23 ‘‘(B) provide information regarding the health

24 care needs of, and resources available for, such chil25 dren;
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1 ‘‘(C) identify successful health delivery models

2 for such children;

3 ‘‘(D) develop with representatives of health care

4 providers, managed care organizations, health care

5 purchasers, and appropriate State agencies, a model

6 for collaboration between families of such children

7 and health professionals;

8 ‘‘(E) provide training and guidance regarding

9 caring for such children;

10 ‘‘(F) conduct outreach activities to the families of

11 such children, health professionals, schools, and other

12 appropriate entities and individuals; and

13 ‘‘(G) are staffed—

14 ‘‘(i) by such families who have expertise in

15 Federal and State public and private health care

16 systems; and

17 ‘‘(ii) by health professionals.

18 ‘‘(3) The Secretary shall develop family-to-family

19 health information centers described in paragraph (2) in

20 accordance with the following:

21 ‘‘(A) With respect to fiscal year 2007, such cen22 ters shall be developed in not less than 25 States.

23 ‘‘(B) With respect to fiscal year 2008, such cen24 ters shall be developed in not less than 40 States.
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1 ‘‘(C) With respect to fiscal year 2009 and each

2 fiscal year thereafter, such centers shall be developed

3 in all States.

4 ‘‘(4) The provisions of this title that are applicable to

5 the funds made available to the Secretary under section

6 502(a)(1) apply in the same manner to funds made avail7 able to the Secretary under paragraph (1)(A).

8 ‘‘(5) For purposes of this subsection, the term ‘State’

9 means each of the 50 States and the District of Columbia.’’.

10 SEC. 6065. RESTORATION OF MEDICAID ELIGIBILITY FOR

11 CERTAIN SSI BENEFICIARIES.

12 (a) IN GENERAL.—Section 1902(a)(10)(A)(i)(II) of the

13 Social Security Act (42 U.S.C. 1396a(a)(10)(A)(i)(II)) is

14 amended—

15 (1) by inserting ‘‘(aa)’’ after ‘‘(II)’’;

16 (2) by striking ‘‘) and’’ and inserting ‘‘and’’;

17 (3) by striking ‘‘section or who are’’ and insert18 ing ‘‘section), (bb) who are’’; and

19 (4) by inserting before the comma at the end the

20 following: ‘‘, or (cc) who are under 21 years of age

21 and with respect to whom supplemental security in22 come benefits would be paid under title XVI if sub23 paragraphs (A) and (B) of section 1611(c)(7) were

24 applied without regard to the phrase ‘the first day of

25 the month following’ ’’.
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1 (b) EFFECTIVE DATE.—The amendments made by sub2 section (a) shall apply to medical assistance for items and

3 services furnished on or after the date that is 1 year after

4 the date of enactment of this Act.

5 Subchapter B—Money Follows the Person

6 Rebalancing Demonstration

7 SEC. 6071. MONEY FOLLOWS THE PERSON REBALANCING

8 DEMONSTRATION.

9 (a) PROGRAM PURPOSE AND AUTHORITY.—The Sec10 retary is authorized to award, on a competitive basis,

11 grants to States in accordance with this section for dem12 onstration projects (each in this section referred to as an

13 ‘‘MFP demonstration project’’) designed to achieve the fol14 lowing objectives with respect to institutional and home and

15 community-based long-term care services under State Med16 icaid programs:

17 (1) REBALANCING.—Increase the use of home

18 and community-based, rather than institutional,

19 long-term care services.

20 (2) MONEY FOLLOWS THE PERSON.—Eliminate

21 barriers or mechanisms, whether in the State law, the

22 State Medicaid plan, the State budget, or otherwise,

23 that prevent or restrict the flexible use of Medicaid

24 funds to enable Medicaid-eligible individuals to re-
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1 ceive support for appropriate and necessary long-term

2 services in the settings of their choice.

3 (3) CONTINUITY OF SERVICE.—Increase the abil4 ity of the State Medicaid program to assure continued

5 provision of home and community-based long-term

6 care services to eligible individuals who choose to

7 transition from an institutional to a community set8 ting.

9 (4) QUALITY ASSURANCE AND QUALITY IMPROVE10 MENT.—Ensure that procedures are in place (at least

11 comparable to those required under the qualified HCB

12 program) to provide quality assurance for eligible in13 dividuals receiving Medicaid home and community14 based long-term care services and to provide for con15 tinuous quality improvement in such services.

16 (b) DEFINITIONS.—For purposes of this section:

17 (1) HOME AND COMMUNITY-BASED LONG-TERM

18 CARE SERVICES.—The term ‘‘home and community19 based long-term care services’’ means, with respect to

20 a State Medicaid program, home and community21 based services (including home health and personal

22 care services) that are provided under the State’s

23 qualified HCB program or that could be provided

24 under such a program but are otherwise provided

25 under the Medicaid program.
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1 (2) ELIGIBLE INDIVIDUAL.—The term ‘‘eligible

2 individual’’ means, with respect to an MFP dem3 onstration project of a State, an individual in the

4 State—

5 (A) who, immediately before beginning par6 ticipation in the MFP demonstration project—

7 (i) resides (and has resided, for a pe8 riod of not less than 6 months or for such

9 longer minimum period, not to exceed 2

10 years, as may be specified by the State) in

11 an inpatient facility;

12 (ii) is receiving Medicaid benefits for

13 inpatient services furnished by such inpa14 tient facility; and

15 (iii) with respect to whom a deter16 mination has been made that, but for the

17 provision of home and community-based

18 long-term care services, the individual

19 would continue to require the level of care

20 provided in an inpatient facility and, in

21 any case in which the State applies a more

22 stringent level of care standard as a result

23 of implementing the State plan option per24 mitted under section 1915(i) of the Social

25 Security Act, the individual must continue
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1 to require at least the level of care which

2 had resulted in admission to the institution;

3 and

4 (B) who resides in a qualified residence be5 ginning on the initial date of participation in

6 the demonstration project.

7 (3) INPATIENT FACILITY.—The term ‘‘inpatient

8 facility’’ means a hospital, nursing facility, or inter9 mediate care facility for the mentally retarded. Such

10 term includes an institution for mental diseases, but

11 only, with respect to a State, to the extent medical as12 sistance is available under the State Medicaid plan

13 for services provided by such institution.

14 (4) MEDICAID.—The term ‘‘Medicaid’’ means,

15 with respect to a State, the State program under title

16 XIX of the Social Security Act (including any waiver

17 or demonstration under such title or under section

18 1115 of such Act relating to such title).

19 (5) QUALIFIED HCB PROGRAM.—The term

20 ‘‘qualified HCB program’’ means a program pro21 viding home and community-based long-term care

22 services operating under Medicaid, whether or not op23 erating under waiver authority.
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1 (6) QUALIFIED RESIDENCE.—The term ‘‘quali2 fied residence’’ means, with respect to an eligible

3 individual—

4 (A) a home owned or leased by the indi5 vidual or the individual’s family member;

6 (B) an apartment with an individual lease,

7 with lockable access and egress, and which in8 cludes living, sleeping, bathing, and cooking

9 areas over which the individual or the individ10 ual’s family has domain and control; and

11 (C) a residence, in a community-based resi12 dential setting, in which no more than 4 unre13 lated individuals reside.

14 (7) QUALIFIED EXPENDITURES.—The term

15 ‘‘qualified expenditures’’ means expenditures by the

16 State under its MFP demonstration project for home

17 and community-based long-term care services for an

18 eligible individual participating in the MFP dem19 onstration project, but only with respect to services

20 furnished during the 12-month period beginning on

21 the date the individual is discharged from an inpa22 tient facility referred to in paragraph (2)(A)(i).

23 (8) SELF-DIRECTED SERVICES.—The term ‘‘self24 directed’’ means, with respect to home and commu25 nity-based long-term care services for an eligible indi-
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1 vidual, such services for the individual which are

2 planned and purchased under the direction and con3 trol of such individual or the individual’s authorized

4 representative (as defined by the Secretary), including

5 the amount, duration, scope, provider, and location of

6 such services, under the State Medicaid program con7 sistent with the following requirements:

8 (A) ASSESSMENT.—There is an assessment

9 of the needs, capabilities, and preferences of the

10 individual with respect to such services.

11 (B) SERVICE PLAN.—Based on such assess12 ment, there is developed jointly with such indi13 vidual or the individual’s authorized representa14 tive a plan for such services for such individual

15 that is approved by the State and that—

16 (i) specifies those services, if any,

17 which the individual or the individual’s au18 thorized representative would be responsible

19 for directing;

20 (ii) identifies the methods by which the

21 individual or the individual’s authorized

22 representative or an agency designated by

23 an individual or representative will select,

24 manage, and dismiss providers of such serv25 ices;
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1 (iii) specifies the role of family mem2 bers and others whose participation is

3 sought by the individual or the individual’s

4 authorized representative with respect to

5 such services;

6 (iv) is developed through a person-cen7 tered process that—

8 (I) is directed by the individual

9 or the individual’s authorized rep10 resentative;

11 (II) builds upon the individual’s

12 capacity to engage in activities that

13 promote community life and that re14 spects the individual’s preferences,

15 choices, and abilities; and

16 (III) involves families, friends,

17 and professionals as desired or re18 quired by the individual or the indi19 vidual’s authorized representative;

20 (v) includes appropriate risk manage21 ment techniques that recognize the roles and

22 sharing of responsibilities in obtaining serv23 ices in a self-directed manner and assure

24 the appropriateness of such plan based upon

25 the resources and capabilities of the indi-
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1 vidual or the individual’s authorized rep2 resentative; and

3 (vi) may include an individualized

4 budget which identifies the dollar value of

5 the services and supports under the control

6 and direction of the individual or the indi7 vidual’s authorized representative.

8 (C) BUDGET PROCESS.—With respect to in9 dividualized budgets described in subparagraph

10 (B)(vi), the State application under subsection

11 (c)—

12 (i) describes the method for calculating

13 the dollar values in such budgets based on

14 reliable costs and service utilization;

15 (ii) defines a process for making ad16 justments in such dollar values to reflect

17 changes in individual assessments and serv18 ice plans; and

19 (iii) provides a procedure to evaluate

20 expenditures under such budgets.

21 (9) STATE.—The term ‘‘State’’ has the meaning

22 given such term for purposes of title XIX of the Social

23 Security Act.

24 (c) STATE APPLICATION.—A State seeking approval of

25 an MFP demonstration project shall submit to the Sec-
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1 retary, at such time and in such format as the Secretary

2 requires, an application meeting the following requirements

3 and containing such additional information, provisions,

4 and assurances, as the Secretary may require:

5 (1) ASSURANCE OF A PUBLIC DEVELOPMENT

6 PROCESS.—The application contains an assurance

7 that the State has engaged, and will continue to en8 gage, in a public process for the design, development,

9 and evaluation of the MFP demonstration project that

10 allows for input from eligible individuals, the families

11 of such individuals, authorized representatives of such

12 individuals, providers, and other interested parties.

13 (2) OPERATION IN CONNECTION WITH QUALIFIED

14 HCB PROGRAM TO ASSURE CONTINUITY OF SERV15 ICES.—The State will conduct the MFP demonstra16 tion project for eligible individuals in conjunction

17 with the operation of a qualified HCB program that

18 is in operation (or approved) in the State for such in19 dividuals in a manner that assures continuity of

20 Medicaid coverage for such individuals so long as

21 such individuals continue to be eligible for medical

22 assistance.

23 (3) DEMONSTRATION PROJECT PERIOD.—The ap24 plication shall specify the period of the MFP dem25 onstration project, which shall include at least 2 con-
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1 secutive fiscal years in the 5-fiscal-year period begin2 ning with fiscal year 2007.

3 (4) SERVICE AREA.—The application shall speci4 fy the service area or areas of the MFP demonstration

5 project, which may be a statewide area or 1 or more

6 geographic areas of the State.

7 (5) TARGETED GROUPS AND NUMBERS OF INDI8 VIDUALS SERVED.—The application shall specify—

9 (A) the target groups of eligible individuals

10 to be assisted to transition from an inpatient fa11 cility to a qualified residence during each fiscal

12 year of the MFP demonstration project;

13 (B) the projected numbers of eligible indi14 viduals in each targeted group of eligible indi15 viduals to be so assisted during each such year;

16 and

17 (C) the estimated total annual qualified ex18 penditures for each fiscal year of the MFP dem19 onstration project.

20 (6) INDIVIDUAL CHOICE, CONTINUITY OF CARE.—

21 The application shall contain assurances that—

22 (A) each eligible individual or the individ23 ual’s authorized representative will be provided

24 the opportunity to make an informed choice re-
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1 garding whether to participate in the MFP dem2 onstration project;

3 (B) each eligible individual or the individ4 ual’s authorized representative will choose the

5 qualified residence in which the individual will

6 reside and the setting in which the individual

7 will receive home and community-based long8 term care services;

9 (C) the State will continue to make avail10 able, so long as the State operates its qualified

11 HCB program consistent with applicable re12 quirements, home and community-based long13 term care services to each individual who com14 pletes participation in the MFP demonstration

15 project for as long as the individual remains eli16 gible for medical assistance for such services

17 under such qualified HCB program (including

18 meeting a requirement relating to requiring a

19 level of care provided in an inpatient facility

20 and continuing to require such services, and, if

21 the State applies a more stringent level of care

22 standard as a result of implementing the State

23 plan option permitted under section 1915(i) of

24 the Social Security Act, meeting the requirement
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1 for at least the level of care which had resulted

2 in the individual’s admission to the institution).

3 (7) REBALANCING.—The application shall—

4 (A) provide such information as the Sec5 retary may require concerning the dollar

6 amounts of State Medicaid expenditures for the

7 fiscal year, immediately preceding the first fiscal

8 year of the State’s MFP demonstration project,

9 for long-term care services and the percentage of

10 such expenditures that were for institutional

11 long-term care services or were for home and

12 community-based long-term care services;

13 (B)(i) specify the methods to be used by the

14 State to increase, for each fiscal year during the

15 MFP demonstration project, the dollar amount of

16 such total expenditures for home and commu17 nity-based long-term care services and the per18 centage of such total expenditures for long-term

19 care services that are for home and community20 based long-term care services; and

21 (ii) describe the extent to which the MFP

22 demonstration project will contribute to accom23 plishment of objectives described in subsection

24 (a).
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1 (8) MONEY FOLLOWS THE PERSON.—The appli2 cation shall describe the methods to be used by the

3 State to eliminate any legal, budgetary, or other bar4 riers to flexibility in the availability of Medicaid

5 funds to pay for long-term care services for eligible

6 individuals participating in the project in the appro7 priate settings of their choice, including costs to tran8 sition from an institutional setting to a qualified res9 idence.

10 (9) MAINTENANCE OF EFFORT AND COST-EFFEC11 TIVENESS.—The application shall contain or be ac12 companied by such information and assurances as

13 may be required to satisfy the Secretary that—

14 (A) total expenditures under the State Med15 icaid program for home and community-based

16 long-term care services will not be less for any

17 fiscal year during the MFP demonstration

18 project than for the greater of such expenditures

19 for—

20 (i) fiscal year 2005; or

21 (ii) any succeeding fiscal year before

22 the first year of the MFP demonstration

23 project; and

24 (B) in the case of a qualified HCB program

25 operating under a waiver under subsection (c) or
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1 (d) of section 1915 of the Social Security Act (42

2 U.S.C. 1396n), but for the amount awarded

3 under a grant under this section, the State pro4 gram would continue to meet the cost-effective5 ness requirements of subsection (c)(2)(D) of such

6 section or comparable requirements under sub7 section (d)(5) of such section, respectively.

8 (10) WAIVER REQUESTS.—The application shall

9 contain or be accompanied by requests for any modi10 fication or adjustment of waivers of Medicaid require11 ments described in subsection (d)(3), including ad12 justments to the maximum numbers of individuals in13 cluded and package of benefits, including one-time

14 transitional services, provided.

15 (11) QUALITY ASSURANCE AND QUALITY IM16 PROVEMENT.—The application shall include—

17 (A) a plan satisfactory to the Secretary for

18 quality assurance and quality improvement for

19 home and community-based long-term care serv20 ices under the State Medicaid program, includ21 ing a plan to assure the health and welfare of in22 dividuals participating in the MFP demonstra23 tion project; and

24 (B) an assurance that the State will cooper25 ate in carrying out activities under subsection
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1 (f) to develop and implement continuous quality

2 assurance and quality improvement systems for

3 home and community-based long-term care serv4 ices.

5 (12) OPTIONAL PROGRAM FOR SELF-DIRECTED

6 SERVICES.—If the State elects to provide for any

7 home and community-based long-term care services as

8 self-directed services (as defined in subsection (b)(8))

9 under the MFP demonstration project, the application

10 shall provide the following:

11 (A) MEETING REQUIREMENTS.—A descrip12 tion of how the project will meet the applicable

13 requirements of such subsection for the provision

14 of self-directed services.

15 (B) VOLUNTARY ELECTION.—A description

16 of how eligible individuals will be provided with

17 the opportunity to make an informed election to

18 receive self-directed services under the project

19 and after the end of the project.

20 (C) STATE SUPPORT IN SERVICE PLAN DE21 VELOPMENT.—Satisfactory assurances that the

22 State will provide support to eligible individuals

23 who self-direct in developing and implementing

24 their service plans.
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1 (D) OVERSIGHT OF RECEIPT OF SERV2 ICES.—Satisfactory assurances that the State

3 will provide oversight of eligible individual’s re4 ceipt of such self-directed services, including

5 steps to assure the quality of services provided

6 and that the provision of such services are con7 sistent with the service plan under such sub8 section.

9 Nothing in this section shall be construed as requiring

10 a State to make an election under the project to pro11 vide for home and community-based long-term care

12 services as self-directed services, or as requiring an

13 individual to elect to receive self-directed services

14 under the project.

15 (13) REPORTS AND EVALUATION.—The applica16 tion shall provide that—

17 (A) the State will furnish to the Secretary

18 such reports concerning the MFP demonstration

19 project, on such timetable, in such uniform for20 mat, and containing such information as the

21 Secretary may require, as will allow for reliable

22 comparisons of MFP demonstration projects

23 across States; and
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1 (B) the State will participate in and co2 operate with the evaluation of the MFP dem3 onstration project.

4 (d) SECRETARY’S AWARD OF COMPETITIVE GRANTS.—

5 (1) IN GENERAL.—The Secretary shall award

6 grants under this section on a competitive basis to

7 States selected from among those with applications

8 meeting the requirements of subsection (c), in accord9 ance with the provisions of this subsection.

10 (2) SELECTION AND MODIFICATION OF STATE AP11 PLICATIONS.—In selecting State applications for the

12 awarding of such a grant, the Secretary—

13 (A) shall take into consideration the man14 ner in which, and extent to which, the State pro15 poses to achieve the objectives specified in sub16 section (a);

17 (B) shall seek to achieve an appropriate na18 tional balance in the numbers of eligible individ19 uals, within different target groups of eligible in20 dividuals, who are assisted to transition to

21 qualified residences under MFP demonstration

22 projects, and in the geographic distribution of

23 States operating MFP demonstration projects;

24 (C) shall give preference to State applica25 tions proposing—
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1 (i) to provide transition assistance to

2 eligible individuals within multiple target

3 groups; and

4 (ii) to provide eligible individuals with

5 the opportunity to receive home and com6 munity-based long-term care services as self7 directed services, as defined in subsection

8 (b)(8); and

9 (D) shall take such objectives into consider10 ation in setting the annual amounts of State

11 grant awards under this section.

12 (3) WAIVER AUTHORITY.—The Secretary is au13 thorized to waive the following provisions of title XIX

14 of the Social Security Act, to the extent necessary to

15 enable a State initiative to meet the requirements and

16 accomplish the purposes of this section:

17 (A) STATEWIDENESS.—Section 1902(a)(1),

18 in order to permit implementation of a State

19 initiative in a selected area or areas of the State.

20 (B) COMPARABILITY.—Section

21 1902(a)(10)(B), in order to permit a State ini22 tiative to assist a selected category or categories

23 of individuals described in subsection (b)(2)(A).

24 (C) INCOME AND RESOURCES ELIGI25 BILITY.—Section 1902(a)(10)(C)(i)(III), in order
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1 to permit a State to apply institutional eligi2 bility rules to individuals transitioning to com3 munity-based care.

4 (D) PROVIDER AGREEMENTS.—Section

5 1902(a)(27), in order to permit a State to imple6 ment self-directed services in a cost-effective

7 manner.

8 (4) CONDITIONAL APPROVAL OF OUTYEAR

9 GRANT.—In awarding grants under this section, the

10 Secretary shall condition the grant for the second and

11 any subsequent fiscal years of the grant period on the

12 following:

13 (A) NUMERICAL BENCHMARKS.—The State

14 must demonstrate to the satisfaction of the Sec15 retary that it is meeting numerical benchmarks

16 specified in the grant agreement for—

17 (i) increasing State Medicaid support

18 for home and community-based long-term

19 care services under subsection (c)(5); and

20 (ii) numbers of eligible individuals as21 sisted to transition to qualified residences.

22 (B) QUALITY OF CARE.—The State must

23 demonstrate to the satisfaction of the Secretary

24 that it is meeting the requirements under sub-
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1 section (c)(11) to assure the health and welfare

2 of MFP demonstration project participants.

3 (e) PAYMENTS TO STATES; CARRYOVER OF UNUSED

4 GRANT AMOUNTS.—

5 (1) PAYMENTS.—For each calendar quarter in a

6 fiscal year during the period a State is awarded a

7 grant under subsection (d), the Secretary shall pay to

8 the State from its grant award for such fiscal year an

9 amount equal to the lesser of—

10 (A) the MFP-enhanced FMAP (as defined

11 in paragraph (5)) of the amount of qualified ex12 penditures made during such quarter; or

13 (B) the total amount remaining in such

14 grant award for such fiscal year (taking into ac15 count the application of paragraph (2)).

16 (2) CARRYOVER OF UNUSED AMOUNTS.—Any

17 portion of a State grant award for a fiscal year

18 under this section remaining at the end of such fiscal

19 year shall remain available to the State for the next

20 4 fiscal years, subject to paragraph (3).

21 (3) REAWARDING OF CERTAIN UNUSED

22 AMOUNTS.—In the case of a State that the Secretary

23 determines pursuant to subsection (d)(4) has failed to

24 meet the conditions for continuation of a MFP dem25 onstration project under this section in a succeeding
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1 year or years, the Secretary shall rescind the grant

2 awards for such succeeding year or years, together

3 with any unspent portion of an award for prior

4 years, and shall add such amounts to the appropria5 tion for the immediately succeeding fiscal year for

6 grants under this section.

7 (4) PREVENTING DUPLICATION OF PAYMENT.—

8 The payment under a MFP demonstration project

9 with respect to qualified expenditures shall be in lieu

10 of any payment with respect to such expenditures

11 that could otherwise be paid under Medicaid, includ12 ing under section 1903(a) of the Social Security Act.

13 Nothing in the previous sentence shall be construed as

14 preventing the payment under Medicaid for such ex15 penditures in a grant year after amounts available to

16 pay for such expenditures under the MFP demonstra17 tion project have been exhausted.

18 (5) MFP-ENHANCED FMAP.—For purposes of

19 paragraph (1)(A), the ‘‘MFP-enhanced FMAP’’, for a

20 State for a fiscal year, is equal to the Federal medical

21 assistance percentage (as defined in the first sentence

22 of section 1905(b)) for the State increased by a num23 ber of percentage points equal to 50 percent of the

24 number of percentage points by which (A) such Fed25 eral medical assistance percentage for the State, is
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1 less than (B) 100 percent; but in no case shall the

2 MFP-enhanced FMAP for a State exceed 90 percent.

3 (f) QUALITY ASSURANCE AND IMPROVEMENT; TECH4 NICAL ASSISTANCE; OVERSIGHT.—

5 (1) IN GENERAL.—The Secretary, either directly

6 or by grant or contract, shall provide for technical as7 sistance to, and oversight of, States for purposes of

8 upgrading quality assurance and quality improve9 ment systems under Medicaid home and community10 based waivers, including—

11 (A) dissemination of information on prom12 ising practices;

13 (B) guidance on system design elements ad14 dressing the unique needs of participating bene15 ficiaries;

16 (C) ongoing consultation on quality, includ17 ing assistance in developing necessary tools, re18 sources, and monitoring systems; and

19 (D) guidance on remedying programmatic

20 and systemic problems.

21 (2) FUNDING.—From the amounts appropriated

22 under subsection (h)(1) for the portion of fiscal year

23 2007 that begins on January 1, 2007, and ends on

24 September 30, 2007, and for fiscal year 2008, not

25 more than $2,400,000 shall be available to the Sec-
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1 retary to carry out this subsection during the period

2 that begins on January 1, 2007, and ends on Sep3 tember 30, 2011.

4 (g) RESEARCH AND EVALUATION.—

5 (1) IN GENERAL.—The Secretary, directly or

6 through grant or contract, shall provide for research

7 on, and a national evaluation of, the program under

8 this section, including assistance to the Secretary in

9 preparing the final report required under paragraph

10 (2). The evaluation shall include an analysis of pro11 jected and actual savings related to the transition of

12 individuals to qualified residences in each State con13 ducting an MFP demonstration project.

14 (2) FINAL REPORT.—The Secretary shall make a

15 final report to the President and Congress, not later

16 than September 30, 2011, reflecting the evaluation de17 scribed in paragraph (1) and providing findings and

18 conclusions on the conduct and effectiveness of MFP

19 demonstration projects.

20 (3) FUNDING.—From the amounts appropriated

21 under subsection (h)(1) for each of fiscal years 2008

22 through 2011, not more than $1,100,000 per year

23 shall be available to the Secretary to carry out this

24 subsection.

25 (h) APPROPRIATIONS.—
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1 (1) IN GENERAL.—There are appropriated, from

2 any funds in the Treasury not otherwise appro3 priated, for grants to carry out this section—

4 (A) $250,000,000 for the portion of fiscal

5 year 2007 beginning on January 1, 2007, and

6 ending on September 30, 2007;

7 (B) $300,000,000 for fiscal year 2008;

8 (C) $350,000,000 for fiscal year 2009;

9 (D) $400,000,000 for fiscal year 2010; and

10 (E) $450,000,000 for fiscal year 2011.

11 (2) AVAILABILITY.—Amounts made available

12 under paragraph (1) for a fiscal year shall remain

13 available for the awarding of grants to States by not

14 later than September 30, 2011.

15 Subchapter C—Miscellaneous

16 SEC. 6081. MEDICAID TRANSFORMATION GRANTS.

17 (a) IN GENERAL.—Section 1903 of the Social Security

18 Act (42 U.S.C. 1396b), as amended by sections 6037(a)(2)

19 and 6043(b), is amended by adding at the end the following

20 new subsection:

21 ‘‘(z) MEDICAID TRANSFORMATION PAYMENTS.—

22 ‘‘(1) IN GENERAL.—In addition to the payments

23 provided under subsection (a), subject to paragraph

24 (4), the Secretary shall provide for payments to

25 States for the adoption of innovative methods to im-
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1 prove the effectiveness and efficiency in providing

2 medical assistance under this title.

3 ‘‘(2) PERMISSIBLE USES OF FUNDS.—The fol4 lowing are examples of innovative methods for which

5 funds provided under this subsection may be used:

6 ‘‘(A) Methods for reducing patient error

7 rates through the implementation and use of elec8 tronic health records, electronic clinical decision

9 support tools, or e-prescribing programs.

10 ‘‘(B) Methods for improving rates of collec11 tion from estates of amounts owed under this

12 title.

13 ‘‘(C) Methods for reducing waste, fraud, and

14 abuse under the program under this title, such as

15 reducing improper payment rates as measured

16 by annual payment error rate measurement

17 (PERM) project rates.

18 ‘‘(D) Implementation of a medication risk

19 management program as part of a drug use re20 view program under section 1927(g).

21 ‘‘(E) Methods in reducing, in clinically ap22 propriate ways, expenditures under this title for

23 covered outpatient drugs, particularly in the cat24 egories of greatest drug utilization, by increasing

25 the utilization of generic drugs through the use
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1 of education programs and other incentives to

2 promote greater use of generic drugs.

3 ‘‘(F) Methods for improving access to pri4 mary and specialty physician care for the unin5 sured using integrated university-based hospital

6 and clinic systems.

7 ‘‘(3) APPLICATION; TERMS AND CONDITIONS.—

8 ‘‘(A) IN GENERAL.—No payments shall be

9 made to a State under this subsection unless the

10 State applies to the Secretary for such payments

11 in a form, manner, and time specified by the

12 Secretary.

13 ‘‘(B) TERMS AND CONDITIONS.—Such pay14 ments are made under such terms and conditions

15 consistent with this subsection as the Secretary

16 prescribes.

17 ‘‘(C) ANNUAL REPORT.—Payment to a

18 State under this subsection is conditioned on the

19 State submitting to the Secretary an annual re20 port on the programs supported by such pay21 ment. Such report shall include information

22 on—

23 ‘‘(i) the specific uses of such payment;
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1 ‘‘(ii) an assessment of quality improve2 ments and clinical outcomes under such

3 programs; and

4 ‘‘(iii) estimates of cost savings result5 ing from such programs.

6 ‘‘(4) FUNDING.—

7 ‘‘(A) LIMITATION ON FUNDS.—The total

8 amount of payments under this subsection shall

9 be equal to, and shall not exceed—

10 ‘‘(i) $75,000,000 for fiscal year 2007;

11 and

12 ‘‘(ii) $75,000,000 for fiscal year 2008.

13 This subsection constitutes budget authority in

14 advance of appropriations Acts and represents

15 the obligation of the Secretary to provide for the

16 payment of amounts provided under this sub17 section.

18 ‘‘(B) ALLOCATION OF FUNDS.—The Sec19 retary shall specify a method for allocating the

20 funds made available under this subsection

21 among States. Such method shall provide pref22 erence for States that design programs that tar23 get health providers that treat significant num24 bers of Medicaid beneficiaries. Such method shall

25 provide that not less than 25 percent of such
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1 funds shall be allocated among States the popu2 lation of which (as determined according to data

3 collected by the United States Census Bureau) as

4 of July 1, 2004, was more than 105 percent of

5 the population of the respective State (as so de6 termined) as of April 1, 2000.

7 ‘‘(C) FORM AND MANNER OF PAYMENT.—

8 Payment to a State under this subsection shall

9 be made in the same manner as other payments

10 under section 1903(a). There is no requirement

11 for State matching funds to receive payments

12 under this subsection.

13 ‘‘(5) MEDICATION RISK MANAGEMENT PRO14 GRAM.—

15 ‘‘(A) IN GENERAL.—For purposes of this

16 subsection, the term ‘medication risk manage17 ment program’ means a program for targeted

18 beneficiaries that ensures that covered outpatient

19 drugs are appropriately used to optimize thera20 peutic outcomes through improved medication

21 use and to reduce the risk of adverse events.

22 ‘‘(B) ELEMENTS.—Such program may in23 clude the following elements:

24 ‘‘(i) The use of established principles

25 and standards for drug utilization review
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1 and best practices to analyze prescription

2 drug claims of targeted beneficiaries and

3 identify outlier physicians.

4 ‘‘(ii) On an ongoing basis provide

5 outlier physicians—

6 ‘‘(I) a comprehensive pharmacy

7 claims history for each targeted bene8 ficiary under their care;

9 ‘‘(II) information regarding the

10 frequency and cost of relapses and hos11 pitalizations of targeted beneficiaries

12 under the physician’s care; and

13 ‘‘(III) applicable best practice

14 guidelines and empirical references.

15 ‘‘(iii) Monitor outlier physician’s pre16 scribing, such as failure to refill, dosage

17 strengths, and provide incentives and infor18 mation to encourage the adoption of best

19 clinical practices.

20 ‘‘(C) TARGETED BENEFICIARIES.—For pur21 poses of this paragraph, the term ‘targeted bene22 ficiaries’ means Medicaid eligible beneficiaries

23 who are identified as having high prescription

24 drug costs and medical costs, such as individuals
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1 with behavioral disorders or multiple chronic

2 diseases who are taking multiple medications.’’.

3 SEC. 6082. HEALTH OPPORTUNITY ACCOUNTS.

4 Title XIX of the Social Security Act, as amended by

5 sections 6035 and 6044, is amended—

6 (1) by redesignating section 1938 as section

7 1939; and

8 (2) by inserting after section 1937 the following

9 new section:

10 ‘‘HEALTH OPPORTUNITY ACCOUNTS

11 ‘‘SEC. 1938. (a) AUTHORITY.—

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

13 provision of this title, the Secretary shall establish a

14 demonstration program under which States may pro15 vide under their State plans under this title (includ16 ing such a plan operating under a statewide waiver

17 under section 1115) in accordance with this section

18 for the provision of alternative benefits consistent

19 with subsection (c) for eligible population groups in

20 one or more geographic areas of the State specified by

21 the State. An amendment under the previous sentence

22 is referred to in this section as a ‘State demonstration

23 program’.

24 ‘‘(2) INITIAL DEMONSTRATION.—

25 ‘‘(A) IN GENERAL.—The demonstration pro26 gram under this section shall begin on January
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1 1, 2007. During the first 5 years of such pro2 gram, the Secretary shall not approve more than

3 10 States to conduct demonstration programs

4 under this section, with each State demonstra5 tion program covering 1 or more geographic

6 areas specified by the State. After such 5-year

7 period—

8 ‘‘(i) unless the Secretary finds, taking

9 into account cost-effectiveness, quality of

10 care, and other criteria that the Secretary

11 specifies, that a State demonstration pro12 gram previously implemented has been un13 successful, such a demonstration program

14 may be extended or made permanent in the

15 State; and

16 ‘‘(ii) unless the Secretary finds, taking

17 into account cost-effectiveness, quality of

18 care, and other criteria that the Secretary

19 specifies, that all State demonstration pro20 grams previously implemented were unsuc21 cessful, other States may implement State

22 demonstration programs.

23 ‘‘(B) GAO REPORT.—

24 ‘‘(i) IN GENERAL.—Not later than 3

25 months after the end of the 5-year period
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1 described in subparagraph (A), the Comp2 troller General of the United States shall

3 submit a report to Congress evaluating the

4 demonstration programs conducted under

5 this section during such period.

6 ‘‘(ii) APPROPRIATION.—Out of any

7 funds in the Treasury not otherwise appro8 priated, there is appropriated to the Comp9 troller General of the United States,

10 $550,000 for the period of fiscal years 2007

11 through 2010 to carry out clause (i).

12 ‘‘(3) APPROVAL.—The Secretary shall not ap13 prove a State demonstration program under para14 graph (1) unless the program includes the following:

15 ‘‘(A) Creating patient awareness of the high

16 cost of medical care.

17 ‘‘(B) Providing incentives to patients to

18 seek preventive care services.

19 ‘‘(C) Reducing inappropriate use of health

20 care services.

21 ‘‘(D) Enabling patients to take responsi22 bility for health outcomes.

23 ‘‘(E) Providing enrollment counselors and

24 ongoing education activities.
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1 ‘‘(F) Providing transactions involving

2 health opportunity accounts to be conducted elec3 tronically and without cash.

4 ‘‘(G) Providing access to negotiated pro5 vider payment rates consistent with this section.

6 Nothing in this section shall be construed as pre7 venting a State demonstration program from pro8 viding incentives for patients obtaining appropriate

9 preventive care (as defined for purposes of section

10 223(c)(2)(C) of the Internal Revenue Code of 1986),

11 such as additional account contributions for an indi12 vidual demonstrating healthy prevention practices.

13 ‘‘(4) NO REQUIREMENT FOR STATEWIDENESS.—

14 Nothing in this section or any other provision of law

15 shall be construed to require that a State must pro16 vide for the implementation of a State demonstration

17 program on a Statewide basis.

18 ‘‘(b) ELIGIBLE POPULATION GROUPS.—

19 ‘‘(1) IN GENERAL.—A State demonstration pro20 gram under this section shall specify the eligible pop21 ulation groups consistent with paragraphs (2) and

22 (3).

23 ‘‘(2) ELIGIBILITY LIMITATIONS DURING INITIAL

24 DEMONSTRATION PERIOD.—During the initial 5 years

25 of the demonstration program under this section, a
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1 State demonstration program shall not apply to any

2 of the following individuals:

3 ‘‘(A) Individuals who are 65 years of age or

4 older.

5 ‘‘(B) Individuals who are disabled, regard6 less of whether or not their eligibility for medical

7 assistance under this title is based on such dis8 ability.

9 ‘‘(C) Individuals who are eligible for med10 ical assistance under this title only because they

11 are (or were within the previous 60 days) preg12 nant.

13 ‘‘(D) Individuals who have been eligible for

14 medical assistance for a continuous period of less

15 than 3 months.

16 ‘‘(3) ADDITIONAL LIMITATIONS.—A State dem17 onstration program shall not apply to any individual

18 within a category of individuals described in section

19 1937(a)(2)(B).

20 ‘‘(4) LIMITATIONS.—

21 ‘‘(A) STATE OPTION.—This subsection shall

22 not be construed as preventing a State from fur23 ther limiting eligibility.

24 ‘‘(B) ON ENROLLEES IN MEDICAID MAN25 AGED CARE ORGANIZATIONS.—Insofar as the
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1 State provides for eligibility of individuals who

2 are enrolled in Medicaid managed care organiza3 tions, such individuals may participate in the

4 State demonstration program only if the State

5 provides assurances satisfactory to the Secretary

6 that the following conditions are met with re7 spect to any such organization:

8 ‘‘(i) In no case may the number of

9 such individuals enrolled in the organiza10 tion who participate in the program exceed

11 5 percent of the total number of individuals

12 enrolled in such organization.

13 ‘‘(ii) The proportion of enrollees in the

14 organization who so participate is not sig15 nificantly disproportionate to the propor16 tion of such enrollees in other such organi17 zations who participate.

18 ‘‘(iii) The State has provided for an

19 appropriate adjustment in the per capita

20 payments to the organization to account for

21 such participation, taking into account dif22 ferences in the likely use of health services

23 between enrollees who so participate and en24 rollees who do not so participate.
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1 ‘‘(5) VOLUNTARY PARTICIPATION.—An eligible

2 individual shall be enrolled in a State demonstration

3 program only if the individual voluntarily enrolls.

4 Except in such hardship cases as the Secretary shall

5 specify, such an enrollment shall be effective for a pe6 riod of 12 months, but may be extended for additional

7 periods of 12 months each with the consent of the in8 dividual.

9 ‘‘(6) 1-YEAR MORATORIUM FOR REENROLL10 MENT.—An eligible individual who, for any reason, is

11 disenrolled from a State demonstration program con12 ducted under this section shall not be permitted to re13 enroll in such program before the end of the 1-year

14 period that begins on the effective date of such

15 disenrollment.

16 ‘‘(c) ALTERNATIVE BENEFITS.—

17 ‘‘(1) IN GENERAL.—The alternative benefits pro18 vided under this section shall consist, consistent with

19 this subsection, of at least—

20 ‘‘(A) coverage for medical expenses in a

21 year for items and services for which benefits are

22 otherwise provided under this title after an an23 nual deductible described in paragraph (2) has

24 been met; and
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1 ‘‘(B) contribution into a health opportunity

2 account.

3 Nothing in subparagraph (A) shall be construed as

4 preventing a State from providing for coverage of pre5 ventive care (referred to in subsection (a)(3)) within

6 the alternative benefits without regard to the annual

7 deductible.

8 ‘‘(2) ANNUAL DEDUCTIBLE.—The amount of the

9 annual deductible described in paragraph (1)(A) shall

10 be at least 100 percent, but no more than 110 percent,

11 of the annualized amount of contributions to the

12 health opportunity account under subsection

13 (d)(2)(A)(i), determined without regard to any limi14 tation described in subsection (d)(2)(C)(i)(II).

15 ‘‘(3) ACCESS TO NEGOTIATED PROVIDER PAY16 MENT RATES.—

17 ‘‘(A) FEE-FOR-SERVICE ENROLLEES.—In

18 the case of an individual who is participating in

19 a State demonstration program and who is not

20 enrolled with a Medicaid managed care organi21 zation, the State shall provide that the indi22 vidual may obtain demonstration program Med23 icaid services from—

24 ‘‘(i) any participating provider under

25 this title at the same payment rates that
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1 would be applicable to such services if the

2 deductible described in paragraph (1)(A)

3 was not applicable; or

4 ‘‘(ii) any other provider at payment

5 rates that do not exceed 125 percent of the

6 payment rate that would be applicable to

7 such services furnished by a participating

8 provider under this title if the deductible

9 described in paragraph (1)(A) was not ap10 plicable.

11 ‘‘(B) TREATMENT UNDER MEDICAID MAN12 AGED CARE PLANS.—In the case of an individual

13 who is participating in a State demonstration

14 program and is enrolled with a Medicaid man15 aged care organization, the State shall enter into

16 an arrangement with the organization under

17 which the individual may obtain demonstration

18 program Medicaid services from any provider

19 described in clause (ii) of subparagraph (A) at

20 payment rates that do not exceed the payment

21 rates that may be imposed under that clause.

22 ‘‘(C) COMPUTATION.—The payment rates

23 described in subparagraphs (A) and (B) shall be

24 computed without regard to any cost sharing
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1 that would be otherwise applicable under sections

2 1916 and 1916A.

3 ‘‘(D) DEFINITIONS.—For purposes of this

4 paragraph:

5 ‘‘(i) The term ‘demonstration program

6 Medicaid services’ means, with respect to an

7 individual participating in a State dem8 onstration program, services for which the

9 individual would be provided medical as10 sistance under this title but for the applica11 tion of the deductible described in para12 graph (1)(A).

13 ‘‘(ii) The term ‘participating provider’

14 means—

15 ‘‘(I) with respect to an individual

16 described in subparagraph (A), a

17 health care provider that has entered

18 into a participation agreement with

19 the State for the provision of services

20 to individuals entitled to benefits

21 under the State plan; or

22 ‘‘(II) with respect to an indi23 vidual described in subparagraph (B)

24 who is enrolled in a Medicaid managed

25 care organization, a health care pro-
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1 vider that has entered into an arrange2 ment for the provision of services to en3 rollees of the organization under this

4 title.

5 ‘‘(4) NO EFFECT ON SUBSEQUENT BENEFITS.—

6 Except as provided under paragraphs (1) and (2), al7 ternative benefits for an eligible individual shall con8 sist of the benefits otherwise provided to the indi9 vidual, including cost sharing relating to such bene10 fits.

11 ‘‘(5) OVERRIDING COST SHARING AND COM12 PARABILITY REQUIREMENTS FOR ALTERNATIVE BENE13 FITS.—The provisions of this title relating to cost

14 sharing for benefits (including sections 1916 and

15 1916A) shall not apply with respect to benefits to

16 which the annual deductible under paragraph (1)(A)

17 applies. The provisions of section 1902(a)(10)(B) (re18 lating to comparability) shall not apply with respect

19 to the provision of alternative benefits (as described in

20 this subsection).

21 ‘‘(6) TREATMENT AS MEDICAL ASSISTANCE.—

22 Subject to subparagraphs (D) and (E) of subsection

23 (d)(2), payments for alternative benefits under this

24 section (including contributions into a health oppor-
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1 tunity account) shall be treated as medical assistance

2 for purposes of section 1903(a).

3 ‘‘(7) USE OF TIERED DEDUCTIBLE AND COST

4 SHARING.—

5 ‘‘(A) IN GENERAL.—A State—

6 ‘‘(i) may vary the amount of the an7 nual deductible applied under paragraph

8 (1)(A) based on the income of the family in9 volved so long as it does not favor families

10 with higher income over those with lower

11 income; and

12 ‘‘(ii) may vary the amount of the max13 imum out-of-pocket cost sharing (as defined

14 in subparagraph (B)) based on the income

15 of the family involved so long as it does not

16 favor families with higher income over those

17 with lower income.

18 ‘‘(B) MAXIMUM OUT-OF-POCKET COST SHAR19 ING.—For purposes of subparagraph (A)(ii), the

20 term ‘maximum out-of-pocket cost sharing’

21 means, for an individual or family, the amount

22 by which the annual deductible level applied

23 under paragraph (1)(A) to the individual or

24 family exceeds the balance in the health oppor25 tunity account for the individual or family.
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1 ‘‘(8) CONTRIBUTIONS BY EMPLOYERS.—Nothing

2 in this section shall be construed as preventing an

3 employer from providing health benefits coverage con4 sisting of the coverage described in paragraph (1)(A)

5 to individuals who are provided alternative benefits

6 under this section.

7 ‘‘(d) HEALTH OPPORTUNITY ACCOUNT.—

8 ‘‘(1) IN GENERAL.—For purposes of this section,

9 the term ‘health opportunity account’ means an ac10 count that meets the requirements of this subsection.

11 ‘‘(2) CONTRIBUTIONS.—

12 ‘‘(A) IN GENERAL.—No contribution may be

13 made into a health opportunity account except—

14 ‘‘(i) contributions by the State under

15 this title; and

16 ‘‘(ii) contributions by other persons

17 and entities, such as charitable organiza18 tions, as permitted under section 1903(w).

19 ‘‘(B) STATE CONTRIBUTION.—A State shall

20 specify the contribution amount that shall be de21 posited under subparagraph (A)(i) into a health

22 opportunity account.

23 ‘‘(C) LIMITATION ON ANNUAL STATE CON24 TRIBUTION PROVIDED AND PERMITTING IMPOSI25 TION OF MAXIMUM ACCOUNT BALANCE.—
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1 ‘‘(i) IN GENERAL.—A State—

2 ‘‘(I) may impose limitations on

3 the maximum contributions that may

4 be deposited under subparagraph

5 (A)(i) into a health opportunity ac6 count in a year;

7 ‘‘(II) may limit contributions into

8 such an account once the balance in

9 the account reaches a level specified by

10 the State; and

11 ‘‘(III) subject to clauses (ii) and

12 (iii) and subparagraph (D)(i), may

13 not provide contributions described in

14 subparagraph (A)(i) to a health oppor15 tunity account on behalf of an indi16 vidual or family to the extent the

17 amount of such contributions (includ18 ing both State and Federal shares) ex19 ceeds, on an annual basis, $2,500 for

20 each individual (or family member)

21 who is an adult and $1,000 for each

22 individual (or family member) who is

23 a child.

24 ‘‘(ii) INDEXING OF DOLLAR LIMITA25 TIONS.—For each year after 2006, the dol-
 †

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1 lar amounts specified in clause (i)(III) shall

2 be annually increased by the Secretary by a

3 percentage that reflects the annual percent4 age increase in the medical care component

5 of the consumer price index for all urban

6 consumers.

7 ‘‘(iii) BUDGET NEUTRAL ADJUST8 MENT.—A State may provide for dollar

9 limitations in excess of those specified in

10 clause (i)(III) (as increased under clause

11 (ii)) for specified individuals if the State

12 provides assurances satisfactory to the Sec13 retary that contributions otherwise made to

14 other individuals will be reduced in a man15 ner so as to provide for aggregate contribu16 tions that do not exceed the aggregate con17 tributions that would otherwise be permitted

18 under this subparagraph.

19 ‘‘(D) LIMITATIONS ON FEDERAL MATCH20 ING.—

21 ‘‘(i) STATE CONTRIBUTION.—A State

22 may contribute under subparagraph (A)(i)

23 amounts to a health opportunity account in

24 excess of the limitations provided under sub25 paragraph (C)(i)(III), but no Federal fi-
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S 1932 EAS

1 nancial participation shall be provided

2 under section 1903(a) with respect to con3 tributions in excess of such limitations.

4 ‘‘(ii) NO FFP FOR PRIVATE CONTRIBU5 TIONS.—No Federal financial participation

6 shall be provided under section 1903(a)

7 with respect to any contributions described

8 in subparagraph (A)(ii) to a health oppor9 tunity account.

10 ‘‘(E) APPLICATION OF DIFFERENT MATCH11 ING RATES.—The Secretary shall provide a

12 method under which, for expenditures made from

13 a health opportunity account for medical care

14 for which the Federal matching rate under sec15 tion 1903(a) exceeds the Federal medical assist16 ance percentage, a State may obtain payment

17 under such section at such higher matching rate

18 for such expenditures.

19 ‘‘(3) USE.—

20 ‘‘(A) GENERAL USES.—

21 ‘‘(i) IN GENERAL.—Subject to the suc22 ceeding provisions of this paragraph,

23 amounts in a health opportunity account

24 may be used for payment of such health

25 care expenditures as the State specifies.
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1 ‘‘(ii) GENERAL LIMITATION.—Subject

2 to subparagraph (B)(ii), in no case shall

3 such account be used for payment for health

4 care expenditures that are not payment of

5 medical care (as defined by section 213(d)

6 of the Internal Revenue Code of 1986).

7 ‘‘(iii) STATE RESTRICTIONS.—In ap8 plying clause (i), a State may restrict pay9 ment for—

10 ‘‘(I) providers of items and serv11 ices to providers that are licensed or

12 otherwise authorized under State law

13 to provide the item or service and may

14 deny payment for such a provider on

15 the basis that the provider has been

16 found, whether with respect to this title

17 or any other health benefit program, to

18 have failed to meet quality standards

19 or to have committed 1 or more acts of

20 fraud or abuse; and

21 ‘‘(II) items and services insofar as

22 the State finds they are not medically

23 appropriate or necessary.

24 ‘‘(iv) ELECTRONIC WITHDRAWALS.—

25 The State demonstration program shall pro-
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1 vide for a method whereby withdrawals may

2 be made from the account for such purposes

3 using an electronic system and shall not

4 permit withdrawals from the account in

5 cash.

6 ‘‘(B) MAINTENANCE OF HEALTH OPPOR7 TUNITY ACCOUNT AFTER BECOMING INELIGIBLE

8 FOR PUBLIC BENEFIT.—

9 ‘‘(i) IN GENERAL.—Notwithstanding

10 any other provision of law, if an account

11 holder of a health opportunity account be12 comes ineligible for benefits under this title

13 because of an increase in income or assets—

14 ‘‘(I) no additional contribution

15 shall be made into the account under

16 paragraph (2)(A)(i);

17 ‘‘(II) subject to clause (iii), the

18 balance in the account shall be reduced

19 by 25 percent; and

20 ‘‘(III) subject to the succeeding

21 provisions of this subparagraph, the

22 account shall remain available to the

23 account holder for 3 years after the

24 date on which the individual becomes

25 ineligible for such benefits for with-
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1 drawals under the same terms and

2 conditions as if the account holder re3 mained eligible for such benefits, and

4 such withdrawals shall be treated as

5 medical assistance in accordance with

6 subsection (c)(6).

7 ‘‘(ii) SPECIAL RULES.—Withdrawals

8 under this subparagraph from an account—

9 ‘‘(I) shall be available for the pur10 chase of health insurance coverage; and

11 ‘‘(II) may, subject to clause (iv),

12 be made available (at the option of the

13 State) for such additional expenditures

14 (such as job training and tuition ex15 penses) specified by the State (and ap16 proved by the Secretary) as the State

17 may specify.

18 ‘‘(iii) EXCEPTION FROM 25 PERCENT

19 SAVINGS TO GOVERNMENT FOR PRIVATE

20 CONTRIBUTIONS.—Clause (i)(II) shall not

21 apply to the portion of the account that is

22 attributable to contributions described in

23 paragraph (2)(A)(ii). For purposes of ac24 counting for such contributions, with25 drawals from a health opportunity account
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1 shall first be attributed to contributions de2 scribed in paragraph (2)(A)(i).

3 ‘‘(iv) CONDITION FOR NON-HEALTH

4 WITHDRAWALS.—No withdrawal may be

5 made from an account under clause (ii)(II)

6 unless the account holder has participated

7 in the program under this section for at

8 least 1 year.

9 ‘‘(v) NO REQUIREMENT FOR CONTINU10 ATION OF COVERAGE.—An account holder of

11 a health opportunity account, after becom12 ing ineligible for medical assistance under

13 this title, is not required to purchase high14 deductible or other insurance as a condition

15 of maintaining or using the account.

16 ‘‘(4) ADMINISTRATION.—A State may coordinate

17 administration of health opportunity accounts

18 through the use of a third party administrator and

19 reasonable expenditures for the use of such adminis20 trator shall be reimbursable to the State in the same

21 manner as other administrative expenditures under

22 section 1903(a)(7).

23 ‘‘(5) TREATMENT.—Amounts in, or contributed

24 to, a health opportunity account shall not be counted
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S 1932 EAS

1 as income or assets for purposes of determining eligi2 bility for benefits under this title.

3 ‘‘(6) UNAUTHORIZED WITHDRAWALS.—A State

4 may establish procedures—

5 ‘‘(A) to penalize or remove an individual

6 from the health opportunity account based on

7 nonqualified withdrawals by the individual from

8 such an account; and

9 ‘‘(B) to recoup costs that derive from such

10 nonqualified withdrawals.’’.

11 SEC. 6083. STATE OPTION TO ESTABLISH NON-EMERGENCY

12 MEDICAL TRANSPORTATION PROGRAM.

13 (a) IN GENERAL.—Section 1902(a) of the Social Secu14 rity Act (42 U.S.C. 1396a(a)), as amended by sections

15 6033(a) and 6035(b), is amended—

16 (1) in paragraph (68), by striking ‘‘and’’ at the

17 end;

18 (2) in paragraph (69) by striking the period at

19 the end and inserting ‘‘; and’’; and

20 (3) by inserting after paragraph (69) the fol21 lowing:

22 ‘‘(70) at the option of the State and notwith23 standing paragraphs (1), (10)(B), and (23), provide

24 for the establishment of a non-emergency medical

25 transportation brokerage program in order to more
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S 1932 EAS

1 cost-effectively provide transportation for individuals

2 eligible for medical assistance under the State plan

3 who need access to medical care or services and have

4 no other means of transportation which—

5 ‘‘(A) may include a wheelchair van, taxi,

6 stretcher car, bus passes and tickets, secured

7 transportation, and such other transportation as

8 the Secretary determines appropriate; and

9 ‘‘(B) may be conducted under contract with

10 a broker who—

11 ‘‘(i) is selected through a competitive

12 bidding process based on the State’s evalua13 tion of the broker’s experience, performance,

14 references, resources, qualifications, and

15 costs;

16 ‘‘(ii) has oversight procedures to mon17 itor beneficiary access and complaints and

18 ensure that transport personnel are licensed,

19 qualified, competent, and courteous;

20 ‘‘(iii) is subject to regular auditing

21 and oversight by the State in order to en22 sure the quality of the transportation serv23 ices provided and the adequacy of bene24 ficiary access to medical care and services;

25 and
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1 ‘‘(iv) complies with such requirements

2 related to prohibitions on referrals and con3 flict of interest as the Secretary shall estab4 lish (based on the prohibitions on physician

5 referrals under section 1877 and such other

6 prohibitions and requirements as the Sec7 retary determines to be appropriate).’’.

8 (b) EFFECTIVE DATE.—The amendments made by sub9 section (a) take effect on the date of the enactment of this

10 Act.

11 SEC. 6084. EXTENSION OF TRANSITIONAL MEDICAL ASSIST12 ANCE (TMA) AND ABSTINENCE EDUCATION

13 PROGRAM.

14 Effective as if enacted on December 31, 2005, activities

15 authorized by sections 510 and 1925 of the Social Security

16 Act shall continue through December 31, 2006, in the man17 ner authorized for fiscal year 2005, notwithstanding section

18 1902(e)(1)(A) of such Act, and out of any money in the

19 Treasury of the United States not otherwise appropriated,

20 there are hereby appropriated such sums as may be nec21 essary for such purpose. Grants and payments may be made

22 pursuant to this authority through the first quarter of fiscal

23 year 2007 at the level provided for such activities through

24 the first quarter of fiscal year 2006.
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1 SEC. 6085. EMERGENCY SERVICES FURNISHED BY NON-CON2 TRACT PROVIDERS FOR MEDICAID MANAGED

3 CARE ENROLLEES.

4 (a) IN GENERAL.—Section 1932(b)(2) of the Social Se5 curity Act (42 U.S.C. 1396u–2(b)(2)) is amended by adding

6 at the end the following new subparagraph:

7 ‘‘(D) EMERGENCY SERVICES FURNISHED BY

8 NON-CONTRACT PROVIDERS.—Any provider of

9 emergency services that does not have in effect a

10 contract with a Medicaid managed care entity

11 that establishes payment amounts for services

12 furnished to a beneficiary enrolled in the entity’s

13 Medicaid managed care plan must accept as

14 payment in full no more than the amounts (less

15 any payments for indirect costs of medical edu16 cation and direct costs of graduate medical edu17 cation) that it could collect if the beneficiary re18 ceived medical assistance under this title other

19 than through enrollment in such an entity. In a

20 State where rates paid to hospitals under the

21 State plan are negotiated by contract and not

22 publicly released, the payment amount applica23 ble under this subparagraph shall be the average

24 contract rate that would apply under the State

25 plan for general acute care hospitals or the aver-
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1 age contract rate that would apply under such

2 plan for tertiary hospitals.’’.

3 (b) EFFECTIVE DATE.—The amendment made by sub4 section (a) shall take effect on January 1, 2007.

5 SEC. 6086. EXPANDED ACCESS TO HOME AND COMMUNITY6 BASED SERVICES FOR THE ELDERLY AND DIS7 ABLED.

8 (a) HOME AND COMMUNITY-BASED SERVICES AS AN

9 OPTIONAL BENEFIT FOR ELDERLY AND DISABLED INDIVID10 UALS.—Section 1915 of the Social Security Act (42 U.S.C.

11 1396n) is amended by adding at the end the following new

12 subsection:

13 ‘‘(i) STATE PLAN AMENDMENT OPTION TO PROVIDE

14 HOME AND COMMUNITY-BASED SERVICES FOR ELDERLY

15 AND DISABLED INDIVIDUALS.—

16 ‘‘(1) IN GENERAL.—Subject to the succeeding

17 provisions of this subsection, a State may provide

18 through a State plan amendment for the provision of

19 medical assistance for home and community-based

20 services (within the scope of services described in

21 paragraph (4)(B) of subsection (c) for which the Sec22 retary has the authority to approve a waiver and not

23 including room and board or such other services re24 quested by the State as the Secretary may approve)

25 for individuals eligible for medical assistance under
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1 the State plan whose income does not exceed 150 per2 cent of the poverty line (as defined in section

3 2110(c)(5)), without determining that but for the pro4 vision of such services the individuals would require

5 the level of care provided in a hospital or a nursing

6 facility or intermediate care facility for the mentally

7 retarded, but only if the State meets the following re8 quirements:

9 ‘‘(A) NEEDS-BASED CRITERIA FOR ELIGI10 BILITY FOR, AND RECEIPT OF, HOME AND COM11 MUNITY-BASED SERVICES.—The State establishes

12 needs-based criteria for determining an individ13 ual’s eligibility under the State plan for medical

14 assistance for such home and community-based

15 services, and if the individual is eligible for such

16 services, the specific home and community-based

17 services that the individual will receive.

18 ‘‘(B) ESTABLISHMENT OF MORE STRINGENT

19 NEEDS-BASED ELIGIBILITY CRITERIA FOR INSTI20 TUTIONALIZED CARE.—The State establishes

21 needs-based criteria for determining whether an

22 individual requires the level of care provided in

23 a hospital, a nursing facility, or an intermediate

24 care facility for the mentally retarded under the

25 State plan or under any waiver of such plan
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1 that are more stringent than the needs-based cri2 teria established under subparagraph (A) for de3 termining eligibility for home and community4 based services.

5 ‘‘(C) PROJECTION OF NUMBER OF INDIVID6 UALS TO BE PROVIDED HOME AND COMMUNITY7 BASED SERVICES.—

8 ‘‘(i) IN GENERAL.—The State submits

9 to the Secretary, in such form and manner,

10 and upon such frequency as the Secretary

11 shall specify, the projected number of indi12 viduals to be provided home and commu13 nity-based services.

14 ‘‘(ii) AUTHORITY TO LIMIT NUMBER OF

15 ELIGIBLE INDIVIDUALS.—A State may limit

16 the number of individuals who are eligible

17 for such services and may establish waiting

18 lists for the receipt of such services.

19 ‘‘(D) CRITERIA BASED ON INDIVIDUAL AS20 SESSMENT.—

21 ‘‘(i) IN GENERAL.—The criteria estab22 lished by the State for purposes of subpara23 graphs (A) and (B) requires an assessment

24 of an individual’s support needs and capa25 bilities, and may take into account the in-
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1 ability of the individual to perform 2 or

2 more activities of daily living (as defined in

3 section 7702B(c)(2)(B) of the Internal Rev4 enue Code of 1986) or the need for signifi5 cant assistance to perform such activities,

6 and such other risk factors as the State de7 termines to be appropriate.

8 ‘‘(ii) ADJUSTMENT AUTHORITY.—The

9 State plan amendment provides the State

10 with the option to modify the criteria estab11 lished under subparagraph (A) (without

12 having to obtain prior approval from the

13 Secretary) in the event that the enrollment

14 of individuals eligible for home and commu15 nity-based services exceeds the projected en16 rollment submitted for purposes of subpara17 graph (C), but only if—

18 ‘‘(I) the State provides at least 60

19 days notice to the Secretary and the

20 public of the proposed modification;

21 ‘‘(II) the State deems an indi22 vidual receiving home and community23 based services on the basis of the most

24 recent version of the criteria in effect

25 prior to the effective date of the modi-
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1 fication to be eligible for such services

2 for a period of at least 12 months be3 ginning on the date the individual first

4 received medical assistance for such

5 services; and

6 ‘‘(III) after the effective date of

7 such modification, the State, at a min8 imum, applies the criteria for deter9 mining whether an individual requires

10 the level of care provided in a hospital,

11 a nursing facility, or an intermediate

12 care facility for the mentally retarded

13 under the State plan or under any

14 waiver of such plan which applied

15 prior to the application of the more

16 stringent criteria developed under sub17 paragraph (B).

18 ‘‘(E) INDEPENDENT EVALUATION AND AS19 SESSMENT.—

20 ‘‘(i) ELIGIBILITY DETERMINATION.—

21 The State uses an independent evaluation

22 for making the determinations described in

23 subparagraphs (A) and (B).

24 ‘‘(ii) ASSESSMENT.—In the case of an

25 individual who is determined to be eligible
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1 for home and community-based services, the

2 State uses an independent assessment, based

3 on the needs of the individual to—

4 ‘‘(I) determine a necessary level of

5 services and supports to be provided,

6 consistent with an individual’s phys7 ical and mental capacity;

8 ‘‘(II) prevent the provision of un9 necessary or inappropriate care; and

10 ‘‘(III) establish an individualized

11 care plan for the individual in accord12 ance with subparagraph (G).

13 ‘‘(F) ASSESSMENT.—The independent as14 sessment required under subparagraph (E)(ii)

15 shall include the following:

16 ‘‘(i) An objective evaluation of an indi17 vidual’s inability to perform 2 or more ac18 tivities of daily living (as defined in section

19 7702B(c)(2)(B) of the Internal Revenue

20 Code of 1986) or the need for significant as21 sistance to perform such activities.

22 ‘‘(ii) A face-to-face evaluation of the

23 individual by an individual trained in the

24 assessment and evaluation of individuals

25 whose physical or mental conditions trigger
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1 a potential need for home and community2 based services.

3 ‘‘(iii) Where appropriate, consultation

4 with the individual’s family, spouse, guard5 ian, or other responsible individual.

6 ‘‘(iv) Consultation with appropriate

7 treating and consulting health and support

8 professionals caring for the individual.

9 ‘‘(v) An examination of the individ10 ual’s relevant history, medical records, and

11 care and support needs, guided by best

12 practices and research on effective strategies

13 that result in improved health and quality

14 of life outcomes.

15 ‘‘(vi) If the State offers individuals the

16 option to self-direct the purchase of, or con17 trol the receipt of, home and community18 based service, an evaluation of the ability of

19 the individual or the individual’s represent20 ative to self-direct the purchase of, or con21 trol the receipt of, such services if the indi22 vidual so elects.

23 ‘‘(G) INDIVIDUALIZED CARE PLAN.—

24 ‘‘(i) IN GENERAL.—In the case of an

25 individual who is determined to be eligible
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1 for home and community-based services, the

2 State uses the independent assessment re3 quired under subparagraph (E)(ii) to estab4 lish a written individualized care plan for

5 the individual.

6 ‘‘(ii) PLAN REQUIREMENTS.—The

7 State ensures that the individualized care

8 plan for an individual—

9 ‘‘(I) is developed—

10 ‘‘(aa) in consultation with

11 the individual, the individual’s

12 treating physician, health care or

13 support professional, or other ap14 propriate individuals, as defined

15 by the State, and, where appro16 priate the individual’s family,

17 caregiver, or representative; and

18 ‘‘(bb) taking into account the

19 extent of, and need for, any fam20 ily or other supports for the indi21 vidual;

22 ‘‘(II) identifies the necessary home

23 and community-based services to be

24 furnished to the individual (or, if the

25 individual elects to self-direct the pur-
 †

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1 chase of, or control the receipt of, such

2 services, funded for the individual);

3 and

4 ‘‘(III) is reviewed at least annu5 ally and as needed when there is a sig6 nificant change in the individual’s cir7 cumstances.

8 ‘‘(iii) STATE OPTION TO OFFER ELEC9 TION FOR SELF-DIRECTED SERVICES.—

10 ‘‘(I) INDIVIDUAL CHOICE.—At the

11 option of the State, the State may

12 allow an individual or the individual’s

13 representative to elect to receive self-di14 rected home and community-based

15 services in a manner which gives them

16 the most control over such services con17 sistent with the individual’s abilities

18 and the requirements of subclauses (II)

19 and (III).

20 ‘‘(II) SELF-DIRECTED SERV21 ICES.—The term ‘self-directed’ means,

22 with respect to the home and commu23 nity-based services offered under the

24 State plan amendment, such services

25 for the individual which are planned
 †

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1 and purchased under the direction and

2 control of such individual or the indi3 vidual’s authorized representative, in4 cluding the amount, duration, scope,

5 provider, and location of such services,

6 under the State plan consistent with

7 the following requirements:

8 ‘‘(aa) ASSESSMENT.—There

9 is an assessment of the needs, ca10 pabilities, and preferences of the

11 individual with respect to such

12 services.

13 ‘‘(bb) SERVICE PLAN.—Based

14 on such assessment, there is devel15 oped jointly with such individual

16 or the individual’s authorized rep17 resentative a plan for such serv18 ices for such individual that is

19 approved by the State and that

20 satisfies the requirements of sub21 clause (III).

22 ‘‘(III) PLAN REQUIREMENTS.—

23 For purposes of subclause (II)(bb), the

24 requirements of this subclause are that

25 the plan—
 †

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1 ‘‘(aa) specifies those services

2 which the individual or the indi3 vidual’s authorized representative

4 would be responsible for directing;

5 ‘‘(bb) identifies the methods

6 by which the individual or the in7 dividual’s authorized representa8 tive will select, manage, and dis9 miss providers of such services;

10 ‘‘(cc) specifies the role of

11 family members and others whose

12 participation is sought by the in13 dividual or the individual’s au14 thorized representative with re15 spect to such services;

16 ‘‘(dd) is developed through a

17 person-centered process that is di18 rected by the individual or the in19 dividual’s authorized representa20 tive, builds upon the individual’s

21 capacity to engage in activities

22 that promote community life and

23 that respects the individual’s pref24 erences, choices, and abilities, and

25 involves families, friends, and
 †

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1 professionals as desired or re2 quired by the individual or the

3 individual’s authorized represent4 ative;

5 ‘‘(ee) includes appropriate

6 risk management techniques that

7 recognize the roles and sharing of

8 responsibilities in obtaining serv9 ices in a self-directed manner and

10 assure the appropriateness of such

11 plan based upon the resources and

12 capabilities of the individual or

13 the individual’s authorized rep14 resentative; and

15 ‘‘(ff) may include an individ16 ualized budget which identifies the

17 dollar value of the services and

18 supports under the control and di19 rection of the individual or the in20 dividual’s authorized representa21 tive.

22 ‘‘(IV) BUDGET PROCESS.—With

23 respect to individualized budgets de24 scribed in subclause (III)(ff), the State

25 plan amendment—
 †

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1 ‘‘(aa) describes the method

2 for calculating the dollar values

3 in such budgets based on reliable

4 costs and service utilization;

5 ‘‘(bb) defines a process for

6 making adjustments in such dol7 lar values to reflect changes in in8 dividual assessments and service

9 plans; and

10 ‘‘(cc) provides a procedure to

11 evaluate expenditures under such

12 budgets.

13 ‘‘(H) QUALITY ASSURANCE; CONFLICT OF

14 INTEREST STANDARDS.—

15 ‘‘(i) QUALITY ASSURANCE.—The State

16 ensures that the provision of home and com17 munity-based services meets Federal and

18 State guidelines for quality assurance.

19 ‘‘(ii) CONFLICT OF INTEREST STAND20 ARDS.—The State establishes standards for

21 the conduct of the independent evaluation

22 and the independent assessment to safe23 guard against conflicts of interest.

24 ‘‘(I) REDETERMINATIONS AND APPEALS.—

25 The State allows for at least annual redeter-
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1 minations of eligibility, and appeals in accord2 ance with the frequency of, and manner in

3 which, redeterminations and appeals of eligi4 bility are made under the State plan.

5 ‘‘(J) PRESUMPTIVE ELIGIBILITY FOR AS6 SESSMENT.—The State, at its option, elects to

7 provide for a period of presumptive eligibility

8 (not to exceed a period of 60 days) only for those

9 individuals that the State has reason to believe

10 may be eligible for home and community-based

11 services. Such presumptive eligibility shall be

12 limited to medical assistance for carrying out the

13 independent evaluation and assessment under

14 subparagraph (E) to determine an individual’s

15 eligibility for such services and if the individual

16 is so eligible, the specific home and community17 based services that the individual will receive.

18 ‘‘(2) DEFINITION OF INDIVIDUAL’S REPRESENTA19 TIVE.—In this section, the term ‘individual’s rep20 resentative’ means, with respect to an individual, a

21 parent, a family member, or a guardian of the indi22 vidual, an advocate for the individual, or any other

23 individual who is authorized to represent the indi24 vidual.
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1 ‘‘(3) NONAPPLICATION.—A State may elect in

2 the State plan amendment approved under this sec3 tion to not comply with the requirements of section

4 1902(a)(1) (relating to statewideness) and section

5 1902(a)(10)(C)(i)(III) (relating to income and re6 source rules applicable in the community), but only

7 for purposes of provided home and community-based

8 services in accordance with such amendment. Any

9 such election shall not be construed to apply to the

10 provision of services to an individual receiving med11 ical assistance in an institutionalized setting as a re12 sult of a determination that the individual requires

13 the level of care provided in a hospital or a nursing

14 facility or intermediate care facility for the mentally

15 retarded.

16 ‘‘(4) NO EFFECT ON OTHER WAIVER AUTHOR17 ITY.—Nothing in this subsection shall be construed as

18 affecting the option of a State to offer home and com19 munity-based services under a waiver under sub20 sections (c) or (d) of this section or under section

21 1115.

22 ‘‘(5) CONTINUATION OF FEDERAL FINANCIAL

23 PARTICIPATION FOR MEDICAL ASSISTANCE PROVIDED

24 TO INDIVIDUALS AS OF EFFECTIVE DATE OF STATE

25 PLAN AMENDMENT.—Notwithstanding paragraph
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1 (1)(B), Federal financial participation shall continue

2 to be available for an individual who is receiving

3 medical assistance in an institutionalized setting, or

4 home and community-based services provided under a

5 waiver under this section or section 1115 that is in

6 effect as of the effective date of the State plan amend7 ment submitted under this subsection, as a result of

8 a determination that the individual requires the level

9 of care provided in a hospital or a nursing facility

10 or intermediate care facility for the mentally re11 tarded, without regard to whether such individuals

12 satisfy the more stringent eligibility criteria estab13 lished under that paragraph, until such time as the

14 individual is discharged from the institution or waiv15 er program or no longer requires such level of care.’’.

16 (b) QUALITY OF CARE MEASURES.—

17 (1) IN GENERAL.—The Secretary, acting through

18 the Director of the Agency for Healthcare Research

19 and Quality, shall consult with consumers, health and

20 social service providers and other professionals knowl21 edgeable about long-term care services and supports to

22 develop program performance indicators, client func23 tion indicators, and measures of client satisfaction

24 with respect to home and community-based services

25 offered under State Medicaid programs.
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1 (2) BEST PRACTICES.—The Secretary shall—

2 (A) use the indicators and measures devel3 oped under paragraph (1) to assess such home

4 and community-based services, the outcomes as5 sociated with the receipt of such services (par6 ticularly with respect to the health and welfare

7 of the recipient of the services), and the overall

8 system for providing home and community-based

9 services under the Medicaid program under title

10 XIX of the Social Security Act; and

11 (B) make publicly available the best prac12 tices identified through such assessment and a

13 comparative analyses of the system features of

14 each State.

15 (3) APPROPRIATION.—Out of any funds in the

16 Treasury not otherwise appropriated, there is appro17 priated to the Secretary of Health and Human Serv18 ices, $1,000,000 for the period of fiscal years 2006

19 through 2010 to carry out this subsection.

20 (c) EFFECTIVE DATE.—The amendments made by sub21 sections (a) and (b) take effect on January 1, 2007, and

22 apply to expenditures for medical assistance for home and

23 community-based services provided in accordance with sec24 tion 1915(i) of the Social Security Act (as added by sub25 sections (a) and (b)) on or after that date.
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1 SEC. 6087. OPTIONAL CHOICE OF SELF-DIRECTED PER2 SONAL ASSISTANCE SERVICES (CASH AND

3 COUNSELING).

4 (a) EXEMPTION FROM CERTAIN REQUIREMENTS.—

5 Section 1915 of the Social Security Act (42 U.S.C. 1396n),

6 as amended by section 6086(a), is amended by adding at

7 the end the following new subsection:

8 ‘‘(j)(1) A State may provide, as ‘medical assistance’,

9 payment for part or all of the cost of self-directed personal

10 assistance services (other than room and board) under the

11 plan which are provided pursuant to a written plan of care

12 to individuals with respect to whom there has been a deter13 mination that, but for the provision of such services, the

14 individuals would require and receive personal care services

15 under the plan, or home and community-based services pro16 vided pursuant to a waiver under subsection (c). Self-di17 rected personal assistance services may not be provided

18 under this subsection to individuals who reside in a home

19 or property that is owned, operated, or controlled by a pro20 vider of services, not related by blood or marriage.

21 ‘‘(2) The Secretary shall not grant approval for a State

22 self-directed personal assistance services program under this

23 section unless the State provides assurances satisfactory to

24 the Secretary of the following:

25 ‘‘(A) Necessary safeguards have been taken to

26 protect the health and welfare of individuals provided
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1 services under the program, and to assure financial

2 accountability for funds expended with respect to such

3 services.

4 ‘‘(B) The State will provide, with respect to in5 dividuals who—

6 ‘‘(i) are entitled to medical assistance for

7 personal care services under the plan, or receive

8 home and community-based services under a

9 waiver granted under subsection (c);

10 ‘‘(ii) may require self-directed personal as11 sistance services; and

12 ‘‘(iii) may be eligible for self-directed per13 sonal assistance services,

14 an evaluation of the need for personal care under the

15 plan, or personal services under a waiver granted

16 under subsection (c).

17 ‘‘(C) Such individuals who are determined to be

18 likely to require personal care under the plan, or

19 home and community-based services under a waiver

20 granted under subsection (c) are informed of the fea21 sible alternatives, if available under the State’s self22 directed personal assistance services program, at the

23 choice of such individuals, to the provision of personal

24 care services under the plan, or personal assistance

25 services under a waiver granted under subsection (c).
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1 ‘‘(D) The State will provide for a support system

2 that ensures participants in the self-directed personal

3 assistance services program are appropriately assessed

4 and counseled prior to enrollment and are able to

5 manage their budgets. Additional counseling and

6 management support may be provided at the request

7 of the participant.

8 ‘‘(E) The State will provide to the Secretary an

9 annual report on the number of individuals served

10 and total expenditures on their behalf in the aggre11 gate. The State shall also provide an evaluation of

12 overall impact on the health and welfare of partici13 pating individuals compared to non-participants

14 every three years.

15 ‘‘(3) A State may provide self-directed personal assist16 ance services under the State plan without regard to the

17 requirements of section 1902(a)(1) and may limit the popu18 lation eligible to receive these services and limit the number

19 of persons served without regard to section 1902(a)(10)(B).

20 ‘‘(4)(A) For purposes of this subsection, the term ‘self21 directed personal assistance services’ means personal care

22 and related services, or home and community-based services

23 otherwise available under the plan under this title or sub24 section (c), that are provided to an eligible participant

25 under a self-directed personal assistance services program
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1 under this section, under which individuals, within an ap2 proved self-directed services plan and budget, purchase per3 sonal assistance and related services, and permits partici4 pants to hire, fire, supervise, and manage the individuals

5 providing such services.

6 ‘‘(B) At the election of the State—

7 ‘‘(i) a participant may choose to use any indi8 vidual capable of providing the assigned tasks includ9 ing legally liable relatives as paid providers of the

10 services; and

11 ‘‘(ii) the individual may use the individual’s

12 budget to acquire items that increase independence or

13 substitute (such as a microwave oven or an accessi14 bility ramp) for human assistance, to the extent that

15 expenditures would otherwise be made for the human

16 assistance.

17 ‘‘(5) For purpose of this section, the term ‘approved

18 self-directed services plan and budget’ means, with respect

19 to a participant, the establishment of a plan and budget

20 for the provision of self-directed personal assistance services,

21 consistent with the following requirements:

22 ‘‘(A) SELF-DIRECTION.—The participant (or in

23 the case of a participant who is a minor child, the

24 participant’s parent or guardian, or in the case of an

25 incapacitated adult, another individual recognized by
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1 State law to act on behalf of the participant) exercises

2 choice and control over the budget, planning, and

3 purchase of self-directed personal assistance services,

4 including the amount, duration, scope, provider, and

5 location of service provision.

6 ‘‘(B) ASSESSMENT OF NEEDS.—There is an as7 sessment of the needs, strengths, and preferences of the

8 participants for such services.

9 ‘‘(C) SERVICE PLAN.—A plan for such services

10 (and supports for such services) for the participant

11 has been developed and approved by the State based

12 on such assessment through a person-centered process

13 that—

14 ‘‘(i) builds upon the participant’s capacity

15 to engage in activities that promote community

16 life and that respects the participant’s pref17 erences, choices, and abilities; and

18 ‘‘(ii) involves families, friends, and profes19 sionals in the planning or delivery of services or

20 supports as desired or required by the partici21 pant.

22 ‘‘(D) SERVICE BUDGET.—A budget for such serv23 ices and supports for the participant has been devel24 oped and approved by the State based on such assess25 ment and plan and on a methodology that uses valid,
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1 reliable cost data, is open to public inspection, and

2 includes a calculation of the expected cost of such

3 services if those services were not self-directed. The

4 budget may not restrict access to other medically nec5 essary care and services furnished under the plan and

6 approved by the State but not included in the budget.

7 ‘‘(E) APPLICATION OF QUALITY ASSURANCE AND

8 RISK MANAGEMENT.—There are appropriate quality

9 assurance and risk management techniques used in

10 establishing and implementing such plan and budget

11 that recognize the roles and responsibilities in obtain12 ing services in a self-directed manner and assure the

13 appropriateness of such plan and budget based upon

14 the participant’s resources and capabilities.

15 ‘‘(6) A State may employ a financial management en16 tity to make payments to providers, track costs, and make

17 reports under the program. Payment for the activities of

18 the financial management entity shall be at the administra19 tive rate established in section 1903(a).’’.

20 (b) EFFECTIVE DATE.—The amendment made by sub21 section (a) shall apply to services furnished on or after Jan22 uary 1, 2007.
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1 Subtitle B—SCHIP

2 SEC. 6101. ADDITIONAL ALLOTMENTS TO ELIMINATE FIS3 CAL YEAR 2006 FUNDING SHORTFALLS.

4 (a) IN GENERAL.—Section 2104 of the Social Security

5 Act (42 U.S.C. 1397dd) is amended by inserting after sub6 section (c) the following:

7 ‘‘(d) ADDITIONAL ALLOTMENTS TO ELIMINATE FUND8 ING SHORTFALLS.—

9 ‘‘(1) APPROPRIATION; ALLOTMENT AUTHORITY.—

10 For the purpose of providing additional allotments to

11 shortfall States described in paragraph (2), there is

12 appropriated, out of any money in the Treasury not

13 otherwise appropriated, $283,000,000 for fiscal year

14 2006.

15 ‘‘(2) SHORTFALL STATES DESCRIBED.—For pur16 poses of paragraph (1), a shortfall State described in

17 this paragraph is a State with a State child health

18 plan approved under this title for which the Secretary

19 estimates, on the basis of the most recent data avail20 able to the Secretary as of December 16, 2005, that

21 the projected expenditures under such plan for such

22 State for fiscal year 2006 will exceed the sum of—

23 ‘‘(A) the amount of the State’s allotments

24 for each of fiscal years 2004 and 2005 that will

25 not be expended by the end of fiscal year 2005;
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1 ‘‘(B) the amount, if any, that is to be redis2 tributed to the State during fiscal year 2006 in

3 accordance with subsection (f); and

4 ‘‘(C) the amount of the State’s allotment for

5 fiscal year 2006.

6 ‘‘(3) ALLOTMENTS.—In addition to the allot7 ments provided under subsections (b) and (c), subject

8 to paragraph (4), of the amount available for the ad9 ditional allotments under paragraph (1) for fiscal

10 year 2006, the Secretary shall allot—

11 ‘‘(A) to each shortfall State described in

12 paragraph (2) such amount as the Secretary de13 termines will eliminate the estimated shortfall

14 described in such paragraph for the State; and

15 ‘‘(B) to each commonwealth or territory de16 scribed in subsection (c)(3), the same proportion

17 as the proportion of the commonwealth’s or terri18 tory’s allotment under subsection (c) (determined

19 without regard to subsection (f)) to 1.05 percent

20 of the amount appropriated under paragraph

21 (1).

22 ‘‘(4) USE OF ADDITIONAL ALLOTMENT.—Addi23 tional allotments provided under this subsection are

24 only available for amounts expended under a State
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1 plan approved under this title for child health assist2 ance for targeted low-income children.

3 ‘‘(5) 1-YEAR AVAILABILITY; NO REDISTRIBUTION

4 OF UNEXPENDED ADDITIONAL ALLOTMENTS.—Not5 withstanding subsections (e) and (f), amounts allotted

6 to a State pursuant to this subsection for fiscal year

7 2006 shall only remain available for expenditure by

8 the State through September 30, 2006. Any amounts

9 of such allotments that remain unexpended as of such

10 date shall not be subject to redistribution under sub11 section (f) and shall revert to the Treasury on October

12 1, 2006.’’.

13 (b) CONFORMING AMENDMENTS.—Section 2104 of the

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

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

16 subsection (d),’’ after ‘‘under this section,’’;

17 (2) in subsection (b)(1), by inserting ‘‘and sub18 section (d)’’ after ‘‘Subject to paragraph (4)’’; and

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

20 subsection (d),’’ after ‘‘for a fiscal year,’’.

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

22 section apply to items and services furnished on or after

23 October 1, 2005, without regard to whether or not regula24 tions implementing such amendments have been issued.
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1 SEC. 6102. PROHIBITION AGAINST COVERING NONPREG2 NANT CHILDLESS ADULTS WITH SCHIP

3 FUNDS.

4 (a) PROHIBITION ON USE OF SCHIP FUNDS.—Sec5 tion 2107 of the Social Security Act (42 U.S.C. 1397gg)

6 is amended by adding at the end the following:

7 ‘‘(f) LIMITATION OF WAIVER AUTHORITY.—Notwith8 standing subsection (e)(2)(A) and section 1115(a), the Sec9 retary may not approve a waiver, experimental, pilot, or

10 demonstration project that would allow funds made avail11 able under this title to be used to provide child health assist12 ance or other health benefits coverage to a nonpregnant

13 childless adult. For purposes of the preceding sentence, a

14 caretaker relative (as such term is defined for purposes of

15 carrying out section 1931) shall not be considered a child16 less adult.’’.

17 (b) CONFORMING AMENDMENTS.—Section 2105(c)(1)

18 of such Act (42 U.S.C. 1397ee(c)(1)) is amended—

19 (1) by inserting ‘‘and may not include coverage

20 of a nonpregnant childless adult’’ after ‘‘section

21 2101)’’; and

22 (2) by adding at the end the following: ‘‘For pur23 poses of the preceding sentence, a caretaker relative

24 (as such term is defined for purposes of carrying out

25 section 1931) shall not be considered a childless

26 adult.’’.
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1 (c) RULE OF CONSTRUCTION.—Nothing in this section

2 or the amendments made by this section shall be construed

3 to—

4 (1) authorize the waiver of any provision of title

5 XIX or XXI of the Social Security Act (42 U.S.C.

6 1396 et seq., 1397aa et seq.) that is not otherwise au7 thorized to be waived under such titles or under title

8 XI of such Act (42 U.S.C. 1301 et seq.) as of the date

9 of enactment of this Act;

10 (2) imply congressional approval of any waiver,

11 experimental, pilot, or demonstration project affecting

12 funds made available under the State children’s

13 health insurance program under title XXI of the So14 cial Security Act (42 U.S.C. 1397aa et. seq.) or any

15 amendment to such a waiver or project that has been

16 approved as of such date of enactment; or

17 (3) apply to any waiver, experimental, pilot, or

18 demonstration project that would allow funds made

19 available under title XXI of the Social Security Act

20 (42 U.S.C. 1397aa et seq.) to be used to provide child

21 health assistance or other health benefits coverage to

22 a nonpregnant childless adult that is approved before

23 the date of enactment of this Act or to any extension,

24 renewal, or amendment of such a waiver or project

25 that is approved on or after such date of enactment.
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1 (d) EFFECTIVE DATE.—This section and the amend2 ments made by this section shall take effect as if enacted

3 on October 1, 2005, and shall apply to any waiver, experi4 mental, pilot, or demonstration project that is approved on

5 or after that date.

6 SEC. 6103. CONTINUED AUTHORITY FOR QUALIFYING

7 STATES TO USE CERTAIN FUNDS FOR MED8 ICAID EXPENDITURES.

9 (a) IN GENERAL.—Section 2105(g)(1)(A) of the Social

10 Security Act (42 U.S.C. 1397ee(g)(1)(A)) is amended by

11 striking ‘‘or 2001’’ and inserting ‘‘2001, 2004, or 2005’’.

12 (b) EFFECTIVE DATE.—The amendment made by sub13 section (a) shall apply to expenditures made under title

14 XIX of the Social Security Act (42 U.S.C. 1396 et seq.)

15 on or after October 1, 2005.

16 Subtitle C—Katrina Relief

17 SEC. 6201. ADDITIONAL FEDERAL PAYMENTS UNDER HUR18 RICANE-RELATED MULTI-STATE SECTION 1115

19 DEMONSTRATIONS.

20 (a) IN GENERAL.—The Secretary of Health and

21 Human Services shall pay to each eligible State, from

22 amounts appropriated pursuant to subsection (e), amounts

23 for the following purposes:
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1 (1) Under the authority of an approved Multi2 State Section 1115 Demonstration Project (in this

3 section referred to as an ‘‘section 1115 project’’)—

4 (A) with respect to evacuees receiving health

5 care under such project, for the non-Federal

6 share of expenditures:

7 (i) for medical assistance furnished

8 under title XIX of the Social Security Act,

9 and

10 (ii) for child health assistance fur11 nished under title XXI of such Act;

12 (B) with respect to evacuees who do not

13 have other coverage for such assistance through

14 insurance, including (but not limited to) private

15 insurance, under title XIX or title XXI of the

16 Social Security Act, or under State-funded

17 health insurance programs, for the total uncom18 pensated care costs incurred for medically nec19 essary services and supplies or premium assist20 ance for such persons, and for those evacuees re21 ceiving medical assistance under the project for

22 the total uncompensated care costs incurred for

23 medically necessary services and supplies beyond

24 those included as medical assistance or child

25 health assistance under the State’s approved
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1 plan under title XIX or title XXI of the Social

2 Security Act;

3 (C) with respect to affected individuals re4 ceiving health care under such project for the

5 non-Federal share of the following expenditures:

6 (i) for medical assistance furnished

7 under title XIX of the Social Security Act,

8 and

9 (ii) for child health assistance fur10 nished under title XXI of such Act; and

11 (D) with respect to affected individuals who

12 do not have other coverage for such assistance

13 through insurance, including (but not limited to)

14 private insurance, under title XIX or title XXI

15 of the Social Security Act, or under State-funded

16 health insurance programs, for the total uncom17 pensated care costs incurred for medically nec18 essary services and supplies or premium assist19 ance for such persons, and for those affected indi20 viduals receiving medical assistance under the

21 project for the total uncompensated care costs in22 curred for medically necessary services and sup23 plies beyond those included as medical assistance

24 or child health assistance under the State’s ap-
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1 proved plan under title XIX or title XXI of the

2 Social Security Act.

3 (2) For reimbursement of the reasonable admin4 istrative costs related to subparagraphs (A) through

5 (D) of paragraph (1) as determined by the Secretary.

6 (3) Only with respect to affected counties or par7 ishes, for reimbursement with respect to individuals

8 receiving medical assistance under existing State

9 plans approved by the Secretary of Health and

10 Human Services for the following non-Federal share

11 of expenditures:

12 (A) For medical assistance furnished under

13 title XIX of the Social Security Act.

14 (B) For child health assistance furnished

15 under title XXI of such Act.

16 (4) For other purposes, if approved by the Sec17 retary under the Secretary’s authority, to restore ac18 cess to health care in impacted communities.

19 (b) DEFINITIONS.—For purposes of this section:

20 (1) The term ‘‘affected individual’’ means an in21 dividual who resided in an individual assistance des22 ignation county or parish pursuant to section 408 of

23 the Robert T. Stafford Disaster Relief and Emergency

24 Assistance Act, as declared by the President as a re25 sult of Hurricane Katrina and continues to reside in
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1 the same State that such county or parish is located

2 in.

3 (2) The term ‘‘affected counties or parishes’’

4 means a county or parish described in paragraph (1).

5 (3) The term ‘‘evacuee’’ means an affected indi6 vidual who has been displaced to another State.

7 (4) The term ‘‘eligible State’’ means a State that

8 has provided care to affected individuals or evacuees

9 under a section 1115 project.

10 (c) APPLICATION TO MATCHING REQUIREMENTS.—The

11 non-Federal share paid under this section shall not be re12 garded as Federal funds for purposes of Medicaid matching

13 requirements, the effect of which is to provide fiscal relief

14 to the State in which the Medicaid eligible individual origi15 nally resided.

16 (d) TIME LIMITS ON PAYMENTS.—

17 (1) No payments shall be made by the Secretary

18 under subsection (a)(1)(A) or (a)(1)(C), for costs of

19 health care provided to an eligible evacuee or affected

20 individual for services for such individual incurred

21 after June 30, 2006.

22 (2) No payments shall be made by the Secretary

23 under subsection (a)(1)(B) or (a)(1)(D) for costs of

24 health care incurred after January 31, 2006.
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1 (3) No payments may be made under subsection

2 (a)(1)(B) or (a)(1)(D) for an item or service that an

3 evacuee or an affected individual has received from

4 an individual or organization as part of a public or

5 private hurricane relief effort.

6 (e) APPROPRIATIONS.—For the purpose of providing

7 funds for payments under this section, in addition to any

8 funds made available for the National Disaster Medical

9 System under the Department of Homeland Security for

10 health care costs related to Hurricane Katrina, including

11 under a section 1115 project, there is appropriated out of

12 any money in the Treasury not otherwise appropriated,

13 $2,000,000,000, to remain available to the Secretary until

14 expended. The total amount of payments made under sub15 section (a) may not exceed the total amount appropriated

16 under this subsection.

17 SEC. 6202. STATE HIGH RISK HEALTH INSURANCE POOL

18 FUNDING.

19 (a) IN GENERAL.—There are hereby authorized and

20 appropriated for fiscal year 2006—

21 (1) $75,000,000 for grants under subsection

22 (b)(1) of section 2745 of the Public Health Service Act

23 (42 U.S.C. 300gg-45); and

24 (2) $15,000,000 for grants under subsection (a)

25 of such section.
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1 (b) TREATMENT.—The amount appropriated under—

2 (1) paragraph (1) shall be treated as if it had

3 been appropriated under subsection (c)(2) of such sec4 tion; and

5 (2) paragraph (2) shall be treated as if it had

6 been appropriated under subsection (c)(1) of such sec7 tion.

8 (c) REFERENCES.—Effective upon the enactment of the

9 State High Risk Pool Funding Extension Act of 2005—

10 (1) subsection (a)(1) shall be applied by sub11 stituting ‘‘subsections (b)(2) and (c)(3)’’ for ‘‘sub12 section ‘‘(b)(1)’’;

13 (2) subsection (b)(1) shall be applied by sub14 stituting ‘‘(d)(1)(B)’’ for ‘‘(c)(2)’’; and

15 (3) subsection (b)(2) shall be applied by sub16 stituting ‘‘(d)(1)(A)’’ for ‘‘(c)(1)’’.

17 SEC. 6203. IMPLEMENTATION FUNDING.

18 For purposes of implementing the provisions of, and

19 amendments made by, title V of this Act and this title—

20 (1) the Secretary of Health and Human Services

21 shall provide for the transfer, in appropriate part

22 from the Federal Hospital Insurance Trust Fund es23 tablished under section 1817 of the Social Security

24 Act (42 U.S.C. 1395i) and the Federal Supple25 mentary Medical Insurance Trust Fund established
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1 under section 1841 of such Act (42 U.S.C. 1395t), of

2 $30,000,000 to the Centers for Medicare & Medicaid

3 Services Program Management Account for fiscal

4 year 2006; and

5 (2) out of any funds in the Treasury not other6 wise appropriated, there are appropriated to such

7 Secretary for the Centers for Medicare & Medicaid

8 Services Program Management Account, $30,000,000

9 for fiscal year 2006.

10 TITLE VII—HUMAN RESOURCES

11 AND OTHER PROVISIONS

12 SEC. 7001. REFERENCES.

13 Except as otherwise expressly provided, wherever in

14 this title an amendment or repeal is expressed in terms of

15 an amendment to, or repeal of, a section or other provision,

16 the amendment or repeal shall be considered to be made

17 to a section or other provision of the Social Security Act.

18 Subtitle A—TANF

19 SEC. 7101. TEMPORARY ASSISTANCE FOR NEEDY FAMILIES

20 AND RELATED PROGRAMS FUNDING

21 THROUGH SEPTEMBER 30, 2010.

22 (a) IN GENERAL.—Activities authorized by part A of

23 title IV and section 1108(b) of the Social Security Act (ad24 justed, as applicable, by or under this subtitle, the amend25 ments made by this subtitle, and the TANF Emergency Re-
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1 sponse and Recovery Act of 2005) shall continue through

2 September 30, 2010, in the manner authorized for fiscal

3 year 2004, and out of any money in the Treasury of the

4 United States not otherwise appropriated, there are hereby

5 appropriated such sums as may be necessary for such pur6 pose. Grants and payments may be made pursuant to this

7 authority on a quarterly basis through fiscal year 2010 at

8 the level provided for such activities for the corresponding

9 quarter of fiscal year 2004 (or, as applicable, at such great10 er level as may result from the application of this subtitle,

11 the amendments made by this subtitle, and the TANF

12 Emergency Response and Recovery Act of 2005), except that

13 in the case of section 403(a)(3) of the Social Security Act,

14 grants and payments may be made pursuant to this author15 ity only through fiscal year 2008 and in the case of section

16 403(a)(4) of the Social Security Act, no grants shall be

17 made for any fiscal year occurring after fiscal year 2005.

18 (b) CONFORMING AMENDMENTS.—Part A of title IV

19 (42 U.S.C. 601 et seq.) is amended—

20 (1) in section 403(a)(3)(H)(ii), by striking ‘‘De21 cember, 31, 2005’’ and inserting ‘‘fiscal year 2008’’;

22 (2) in section 403(b)(3)(C)(ii), by striking

23 ‘‘2006’’ and inserting ‘‘2010’’; and

24 (3) in section 409(a)(7)—
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1 (A) in subparagraph (A), by striking ‘‘or

2 2007’’ and inserting ‘‘2007, 2008, 2009, 2010, or

3 2011’’; and

4 (B) in subparagraph (B)(ii), by striking

5 ‘‘2006’’ and inserting ‘‘2010’’.

6 (c) EXTENSION OF THE NATIONAL RANDOM SAMPLE

7 STUDY OF CHILD WELFARE THROUGH SEPTEMBER 30,

8 2010.—Activities authorized by section 429A of the Social

9 Security Act shall continue through September 30, 2010,

10 in the manner authorized for fiscal year 2004, and out of

11 any money in the Treasury of the United States not other12 wise appropriated, there are hereby appropriated such sums

13 as may be necessary for such purpose. Grants and payments

14 may be made pursuant to this authority on a quarterly

15 basis through fiscal year 2010 at the level provided for such

16 activities for the corresponding quarter of fiscal year 2004.

17 SEC. 7102. IMPROVED CALCULATION OF WORK PARTICIPA18 TION RATES AND PROGRAM INTEGRITY.

19 (a) RECALIBRATION OF CASELOAD REDUCTION CRED20 IT.—

21 (1) IN GENERAL.—Section 407(b)(3)(A) (42

22 U.S.C. 607(b)(3)(A)) is amended—

23 (A) in clause (i), by inserting ‘‘or any other

24 State program funded with qualified State ex-
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1 penditures (as defined in section

2 409(a)(7)(B)(i))’’ after ‘‘this part’’; and

3 (B) by striking clause (ii) and inserting the

4 following:

5 ‘‘(ii) the average monthly number of

6 families that received assistance under any

7 State program referred to in clause (i) dur8 ing fiscal year 2005.’’.

9 (2) CONFORMING AMENDMENT.—Section

10 407(b)(3)(B) (42 U.S.C. 607(b)(3)(B)) is amended by

11 striking ‘‘and eligibility criteria’’ and all that follows

12 through the close parenthesis and inserting ‘‘and the

13 eligibility criteria in effect during fiscal year 2005’’.

14 (b) INCLUSION OF FAMILIES RECEIVING ASSISTANCE

15 UNDER SEPARATE STATE PROGRAMS IN CALCULATION OF

16 PARTICIPATION RATES.—

17 (1) Section 407 (42 U.S.C. 607) is amended in

18 each of subsections (a)(1), (a)(2), (b)(1)(B)(i),

19 (c)(2)(A)(i), (e)(1), and (e)(2), by inserting ‘‘or any

20 other State program funded with qualified State ex21 penditures (as defined in section 409(a)(7)(B)(i))’’

22 after ‘‘this part’’.

23 (2) Section 411(a)(1) (42 U.S.C. 611(a)(1)) is

24 amended—
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1 (A) in subparagraph (A), by inserting ‘‘or

2 any other State program funded with qualified

3 State expenditures (as defined in section

4 409(a)(7)(B)(i))’’ before the colon; and

5 (B) in subparagraph (B)(ii), by inserting

6 ‘‘and any other State programs funded with

7 qualified State expenditures (as defined in sec8 tion 409(a)(7)(B)(i))’’ after ‘‘this part’’.

9 (c) IMPROVED VERIFICATION AND OVERSIGHT OF

10 WORK PARTICIPATION.—

11 (1) IN GENERAL.—Section 407(i) (42 U.S.C.

12 607(i)) is amended to read as follows:

13 ‘‘(i) VERIFICATION OF WORK AND WORK-ELIGIBLE IN14 DIVIDUALS IN ORDER TO IMPLEMENT REFORMS.—

15 ‘‘(1) SECRETARIAL DIRECTION AND OVER16 SIGHT.—

17 ‘‘(A) REGULATIONS FOR DETERMINING

18 WHETHER ACTIVITIES MAY BE COUNTED AS

19 ‘WORK ACTIVITIES’, HOW TO COUNT AND VERIFY

20 REPORTED HOURS OF WORK, AND DETERMINING

21 WHO IS A WORK-ELIGIBLE INDIVIDUAL.—

22 ‘‘(i) IN GENERAL.—Not later than

23 June 30, 2006, the Secretary shall promul24 gate regulations to ensure consistent meas25 urement of work participation rates under
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1 State programs funded under this part and

2 State programs funded with qualified State

3 expenditures (as defined in section

4 409(a)(7)(B)(i)), which shall include infor5 mation with respect to—

6 ‘‘(I) determining whether an ac7 tivity of a recipient of assistance may

8 be treated as a work activity under

9 subsection (d);

10 ‘‘(II) uniform methods for report11 ing hours of work by a recipient of as12 sistance;

13 ‘‘(III) the type of documentation

14 needed to verify reported hours of work

15 by a recipient of assistance; and

16 ‘‘(IV) the circumstances under

17 which a parent who resides with a

18 child who is a recipient of assistance

19 should be included in the work partici20 pation rates.

21 ‘‘(ii) ISSUANCE OF REGULATIONS ON

22 AN INTERIM FINAL BASIS.—The regulations

23 referred to in clause (i) may be effective and

24 final immediately on an interim basis as of

25 the date of publication of the regulations. If
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1 the Secretary provides for an interim final

2 regulation, the Secretary shall provide for a

3 period of public comment on the regulation

4 after the date of publication. The Secretary

5 may change or revise the regulation after

6 the public comment period.

7 ‘‘(B) OVERSIGHT OF STATE PROCEDURES.—

8 The Secretary shall review the State procedures

9 established in accordance with paragraph (2) to

10 ensure that such procedures are consistent with

11 the regulations promulgated under subparagraph

12 (A) and are adequate to ensure an accurate

13 measurement of work participation under the

14 State programs funded under this part and any

15 other State programs funded with qualified State

16 expenditures (as so defined).

17 ‘‘(2) REQUIREMENT FOR STATES TO ESTABLISH

18 AND MAINTAIN WORK PARTICIPATION VERIFICATION

19 PROCEDURES.—Not later than September 30, 2006, a

20 State to which a grant is made under section 403

21 shall establish procedures for determining, with re22 spect to recipients of assistance under the State pro23 gram funded under this part or under any State pro24 grams funded with qualified State expenditures (as so

25 defined), whether activities may be counted as work
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1 activities, how to count and verify reported hours of

2 work, and who is a work-eligible individual, in ac3 cordance with the regulations promulgated pursuant

4 to paragraph (1)(A)(i) and shall establish internal

5 controls to ensure compliance with the procedures.’’.

6 (2) STATE PENALTY FOR FAILURE TO ESTABLISH

7 OR COMPLY WITH WORK PARTICIPATION VERIFICATION

8 PROCEDURES.—Section 409(a) (42 U.S.C. 609(a)) is

9 amended by adding at the end the following:

10 ‘‘(15) PENALTY FOR FAILURE TO ESTABLISH OR

11 COMPLY WITH WORK PARTICIPATION VERIFICATION

12 PROCEDURES.—

13 ‘‘(A) IN GENERAL.—If the Secretary deter14 mines that a State to which a grant is made

15 under section 403 in a fiscal year has violated

16 section 407(i)(2) during the fiscal year, the Sec17 retary shall reduce the grant payable to the State

18 under section 403(a)(1) for the immediately suc19 ceeding fiscal year by an amount equal to not

20 less than 1 percent and not more than 5 percent

21 of the State family assistance grant.

22 ‘‘(B) PENALTY BASED ON SEVERITY OF

23 FAILURE.—The Secretary shall impose reduc24 tions under subparagraph (A) with respect to a
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1 fiscal year based on the degree of noncompli2 ance.’’.

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

4 subsections (a) and (b) shall take effect on October 1, 2006.

5 SEC. 7103. GRANTS FOR HEALTHY MARRIAGE PROMOTION

6 AND RESPONSIBLE FATHERHOOD.

7 (a) HEALTHY MARRIAGE AND FAMILY FUNDS.—Sec8 tion 403(a)(2) (42 U.S.C. 603(a)(2)) is amended to read

9 as follows:

10 ‘‘(2) HEALTHY MARRIAGE PROMOTION AND RE11 SPONSIBLE FATHERHOOD GRANTS.—

12 ‘‘(A) IN GENERAL.—

13 ‘‘(i) USE OF FUNDS.—Subject to sub14 paragraphs (B) and (C), the Secretary may

15 use the funds made available under sub16 paragraph (D) for the purpose of con17 ducting and supporting research and dem18 onstration projects by public or private en19 tities, and providing technical assistance to

20 States, Indian tribes and tribal organiza21 tions, and such other entities as the Sec22 retary may specify that are receiving a

23 grant under another provision of this part.

24 ‘‘(ii) LIMITATIONS.—The Secretary

25 may not award funds made available under
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1 this paragraph on a noncompetitive basis,

2 and may not provide any such funds to an

3 entity for the purpose of carrying out

4 healthy marriage promotion activities or for

5 the purpose of carrying out activities pro6 moting responsible fatherhood unless the en7 tity has submitted to the Secretary an ap8 plication which—

9 ‘‘(I) describes—

10 ‘‘(aa) how the programs or

11 activities proposed in the applica12 tion will address, as appropriate,

13 issues of domestic violence; and

14 ‘‘(bb) what the applicant will

15 do, to the extent relevant, to en16 sure that participation in the pro17 grams or activities is voluntary,

18 and to inform potential partici19 pants that their participation is

20 voluntary; and

21 ‘‘(II) contains a commitment by

22 the entity—

23 ‘‘(aa) to not use the funds for

24 any other purpose; and
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1 ‘‘(bb) to consult with experts

2 in domestic violence or relevant

3 community domestic violence coa4 litions in developing the programs

5 and activities.

6 ‘‘(iii) HEALTHY MARRIAGE PROMOTION

7 ACTIVITIES.—In clause (ii), the term

8 ‘healthy marriage promotion activities’

9 means the following:

10 ‘‘(I) Public advertising campaigns

11 on the value of marriage and the skills

12 needed to increase marital stability

13 and health.

14 ‘‘(II) Education in high schools

15 on the value of marriage, relationship

16 skills, and budgeting.

17 ‘‘(III) Marriage education, mar18 riage skills, and relationship skills pro19 grams, that may include parenting

20 skills, financial management, conflict

21 resolution, and job and career advance22 ment, for non-married pregnant

23 women and non-married expectant fa24 thers.
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1 ‘‘(IV) Pre-marital education and

2 marriage skills training for engaged

3 couples and for couples or individuals

4 interested in marriage.

5 ‘‘(V) Marriage enhancement and

6 marriage skills training programs for

7 married couples.

8 ‘‘(VI) Divorce reduction programs

9 that teach relationship skills.

10 ‘‘(VII) Marriage mentoring pro11 grams which use married couples as

12 role models and mentors in at-risk

13 communities.

14 ‘‘(VIII) Programs to reduce the

15 disincentives to marriage in means16 tested aid programs, if offered in con17 junction with any activity described in

18 this subparagraph.

19 ‘‘(B) LIMITATION ON USE OF FUNDS FOR

20 DEMONSTRATION PROJECTS FOR COORDINATION

21 OF PROVISION OF CHILD WELFARE AND TANF

22 SERVICES TO TRIBAL FAMILIES AT RISK OF

23 CHILD ABUSE OR NEGLECT.—

24 ‘‘(i) IN GENERAL.—Of the amounts

25 made available under subparagraph (D) for
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1 a fiscal year, the Secretary may not award

2 more than $2,000,000 on a competitive

3 basis to fund demonstration projects de4 signed to test the effectiveness of tribal gov5 ernments or tribal consortia in coordinating

6 the provision to tribal families at risk of

7 child abuse or neglect of child welfare serv8 ices and services under tribal programs

9 funded under this part.

10 ‘‘(ii) LIMITATION ON USE OF FUNDS.—

11 A grant made pursuant to clause (i) to such

12 a project shall not be used for any purpose

13 other than—

14 ‘‘(I) to improve case management

15 for families eligible for assistance from

16 such a tribal program;

17 ‘‘(II) for supportive services and

18 assistance to tribal children in out-of19 home placements and the tribal fami20 lies caring for such children, including

21 families who adopt such children; and

22 ‘‘(III) for prevention services and

23 assistance to tribal families at risk of

24 child abuse and neglect.
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1 ‘‘(iii) REPORTS.—The Secretary may

2 require a recipient of funds awarded under

3 this subparagraph to provide the Secretary

4 with such information as the Secretary

5 deems relevant to enable the Secretary to fa6 cilitate and oversee the administration of

7 any project for which funds are provided

8 under this subparagraph.

9 ‘‘(C) LIMITATION ON USE OF FUNDS FOR

10 ACTIVITIES PROMOTING RESPONSIBLE FATHER11 HOOD.—

12 ‘‘(i) IN GENERAL.—Of the amounts

13 made available under subparagraph (D) for

14 a fiscal year, the Secretary may not award

15 more than $50,000,000 on a competitive

16 basis to States, territories, Indian tribes

17 and tribal organizations, and public and

18 nonprofit community entities, including re19 ligious organizations, for activities pro20 moting responsible fatherhood.

21 ‘‘(ii) ACTIVITIES PROMOTING RESPON22 SIBLE FATHERHOOD.—In this paragraph,

23 the term ‘activities promoting responsible

24 fatherhood’ means the following:
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1 ‘‘(I) Activities to promote mar2 riage or sustain marriage through ac3 tivities such as counseling, mentoring,

4 disseminating information about the

5 benefits of marriage and 2-parent in6 volvement for children, enhancing rela7 tionship skills, education regarding

8 how to control aggressive behavior, dis9 seminating information on the causes

10 of domestic violence and child abuse,

11 marriage preparation programs, pre12 marital counseling, marital inven13 tories, skills-based marriage education,

14 financial planning seminars, including

15 improving a family’s ability to effec16 tively manage family business affairs

17 by means such as education, coun18 seling, or mentoring on matters related

19 to family finances, including household

20 management, budgeting, banking, and

21 handling of financial transactions and

22 home maintenance, and divorce edu23 cation and reduction programs, includ24 ing mediation and counseling.
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1 ‘‘(II) Activities to promote respon2 sible parenting through activities such

3 as counseling, mentoring, and medi4 ation, disseminating information about

5 good parenting practices, skills-based

6 parenting education, encouraging child

7 support payments, and other methods.

8 ‘‘(III) Activities to foster economic

9 stability by helping fathers improve

10 their economic status by providing ac11 tivities such as work first services, job

12 search, job training, subsidized employ13 ment, job retention, job enhancement,

14 and encouraging education, including

15 career-advancing education, dissemina16 tion of employment materials, coordi17 nation with existing employment serv18 ices such as welfare-to-work programs,

19 referrals to local employment training

20 initiatives, and other methods.

21 ‘‘(IV) Activities to promote re22 sponsible fatherhood that are conducted

23 through a contract with a nationally

24 recognized, nonprofit fatherhood pro25 motion organization, such as the devel-
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1 opment, promotion, and distribution of

2 a media campaign to encourage the

3 appropriate involvement of parents in

4 the life of any child and specifically

5 the issue of responsible fatherhood, and

6 the development of a national clearing7 house to assist States and communities

8 in efforts to promote and support mar9 riage and responsible fatherhood.

10 ‘‘(D) APPROPRIATION.—Out of any money

11 in the Treasury of the United States not other12 wise appropriated, there are appropriated

13 $150,000,000 for each of fiscal years 2006

14 through 2010, for expenditure in accordance with

15 this paragraph.’’.

16 (b) COUNTING OF SPENDING ON CERTAIN PRO-FAMILY

17 ACTIVITIES.—Section 409(a)(7)(B)(i) (42 U.S.C.

18 609(a)(7)(B)(i)) is amended by adding at the end the fol19 lowing:

20 ‘‘(V) COUNTING OF SPENDING ON

21 CERTAIN PRO-FAMILY ACTIVITIES.—

22 The term ‘qualified State expenditures’

23 includes the total expenditures by the

24 State during the fiscal year under all

25 State programs for a purpose described
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1 in paragraph (3) or (4) of section

2 401(a).’’.

3 Subtitle B—Child Care

4 SEC. 7201. ENTITLEMENT FUNDING.

5 Section 418(a)(3) (42 U.S.C. 618(a)(3)) is amended—

6 (1) by striking ‘‘and’’ at the end of subpara7 graph (E);

8 (2) by striking the period at the end of subpara9 graph (F) and inserting a semicolon; and

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

11 ‘‘(G) $2,917,000,000 for each of fiscal years

12 2006 through 2010.’’.

13 Subtitle C—Child Support

14 SEC. 7301. ASSIGNMENT AND DISTRIBUTION OF CHILD SUP15 PORT.

16 (a) MODIFICATION OF RULE REQUIRING ASSIGNMENT

17 OF SUPPORT RIGHTS AS A CONDITION OF RECEIVING

18 TANF.—Section 408(a)(3) (42 U.S.C. 608(a)(3)) is amend19 ed to read as follows:

20 ‘‘(3) NO ASSISTANCE FOR FAMILIES NOT ASSIGN21 ING CERTAIN SUPPORT RIGHTS TO THE STATE.—A

22 State to which a grant is made under section 403

23 shall require, as a condition of paying assistance to

24 a family under the State program funded under this

25 part, that a member of the family assign to the State
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1 any right the family member may have (on behalf of

2 the family member or of any other person for whom

3 the family member has applied for or is receiving

4 such assistance) to support from any other person,

5 not exceeding the total amount of assistance so paid

6 to the family, which accrues during the period that

7 the family receives assistance under the program.’’.

8 (b) INCREASING CHILD SUPPORT PAYMENTS TO FAMI9 LIES AND SIMPLIFYING CHILD SUPPORT DISTRIBUTION

10 RULES.—

11 (1) DISTRIBUTION RULES.—

12 (A) IN GENERAL.—Section 457(a) (42

13 U.S.C. 657(a)) is amended to read as follows:

14 ‘‘(a) IN GENERAL.—Subject to subsections (d) and (e),

15 the amounts collected on behalf of a family as support by

16 a State pursuant to a plan approved under this part shall

17 be distributed as follows:

18 ‘‘(1) FAMILIES RECEIVING ASSISTANCE.—In the

19 case of a family receiving assistance from the State,

20 the State shall—

21 ‘‘(A) pay to the Federal Government the

22 Federal share of the amount collected, subject to

23 paragraph (3)(A);
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1 ‘‘(B) retain, or pay to the family, the State

2 share of the amount collected, subject to para3 graph (3)(B); and

4 ‘‘(C) pay to the family any remaining

5 amount.

6 ‘‘(2) FAMILIES THAT FORMERLY RECEIVED AS7 SISTANCE.—In the case of a family that formerly re8 ceived assistance from the State:

9 ‘‘(A) CURRENT SUPPORT.—To the extent

10 that the amount collected does not exceed the cur11 rent support amount, the State shall pay the

12 amount to the family.

13 ‘‘(B) ARREARAGES.—Except as otherwise

14 provided in an election made under section

15 454(34), to the extent that the amount collected

16 exceeds the current support amount, the State—

17 ‘‘(i) shall first pay to the family the

18 excess amount, to the extent necessary to

19 satisfy support arrearages not assigned pur20 suant to section 408(a)(3);

21 ‘‘(ii) if the amount collected exceeds the

22 amount required to be paid to the family

23 under clause (i), shall—

24 ‘‘(I) pay to the Federal Govern25 ment the Federal share of the excess
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1 amount described in this clause, subject

2 to paragraph (3)(A); and

3 ‘‘(II) retain, or pay to the family,

4 the State share of the excess amount

5 described in this clause, subject to

6 paragraph (3)(B); and

7 ‘‘(iii) shall pay to the family any re8 maining amount.

9 ‘‘(3) LIMITATIONS.—

10 ‘‘(A) FEDERAL REIMBURSEMENTS.—The

11 total of the amounts paid by the State to the

12 Federal Government under paragraphs (1) and

13 (2) of this subsection with respect to a family

14 shall not exceed the Federal share of the amount

15 assigned with respect to the family pursuant to

16 section 408(a)(3).

17 ‘‘(B) STATE REIMBURSEMENTS.—The total

18 of the amounts retained by the State under para19 graphs (1) and (2) of this subsection with respect

20 to a family shall not exceed the State share of the

21 amount assigned with respect to the family pur22 suant to section 408(a)(3).

23 ‘‘(4) FAMILIES THAT NEVER RECEIVED ASSIST24 ANCE.—In the case of any other family, the State

25 shall distribute to the family the portion of the
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1 amount so collected that remains after withholding

2 any fee pursuant to section 454(6)(B)(ii).

3 ‘‘(5) FAMILIES UNDER CERTAIN AGREEMENTS.—

4 Notwithstanding paragraphs (1) through (3), in the

5 case of an amount collected for a family in accord6 ance with a cooperative agreement under section

7 454(33), the State shall distribute the amount col8 lected pursuant to the terms of the agreement.’’.

9 (B) STATE OPTION TO PASS THROUGH AD10 DITIONAL SUPPORT WITH FEDERAL FINANCIAL

11 PARTICIPATION BEGINNING WITH FISCAL YEAR

12 2009.—

13 (i) IN GENERAL.—Section 457(a) (42

14 U.S.C. 657(a)) is amended by adding at the

15 end the following:

16 ‘‘(7) STATE OPTION TO PASS THROUGH ADDI17 TIONAL SUPPORT WITH FEDERAL FINANCIAL PARTICI18 PATION.—

19 ‘‘(A) FAMILIES THAT FORMERLY RECEIVED

20 ASSISTANCE.—Notwithstanding paragraph (2), a

21 State shall not be required to pay to the Federal

22 Government the Federal share of an amount col23 lected on behalf of a family that formerly re24 ceived assistance from the State to the extent that

25 the State pays the amount to the family.
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1 ‘‘(B) FAMILIES THAT CURRENTLY RECEIVE

2 ASSISTANCE.—

3 ‘‘(i) IN GENERAL.—Notwithstanding

4 paragraph (1), in the case of a family that

5 receives assistance from the State, a State

6 shall not be required to pay to the Federal

7 Government the Federal share of the ex8 cepted portion (as defined in clause (ii)) of

9 any amount collected on behalf of such fam10 ily during a month to the extent that—

11 ‘‘(I) the State pays the excepted

12 portion to the family; and

13 ‘‘(II) the excepted portion is dis14 regarded in determining the amount

15 and type of assistance provided to the

16 family under such program.

17 ‘‘(ii) EXCEPTED PORTION DEFINED.—

18 For purposes of this subparagraph, the term

19 ‘‘excepted portion’’ means that portion of

20 the amount collected on behalf of a family

21 during a month that does not exceed $100

22 per month, or in the case of a family that

23 includes 2 or more children, that does not

24 exceed an amount established by the State

25 that is not more than $200 per month.’’.
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1 (ii) EFFECTIVE DATE.—The amend2 ment made by clause (i) shall take effect on

3 October 1, 2008.

4 (iii) REDESIGNATION.—Effective Octo5 ber 1, 2009, paragraph (7) of section 457(a)

6 of the Social Security Act (as added by

7 clause (i)) is redesignated as paragraph (6).

8 (C) STATE PLAN TO INCLUDE ELECTION AS

9 TO WHICH RULES TO APPLY IN DISTRIBUTING

10 CHILD SUPPORT ARREARAGES COLLECTED ON

11 BEHALF OF FAMILIES FORMERLY RECEIVING AS12 SISTANCE.—Section 454 (42 U.S.C. 654) is

13 amended—

14 (i) by striking ‘‘and’’ at the end of

15 paragraph (32);

16 (ii) by striking the period at the end of

17 paragraph (33) and inserting ‘‘; and’’; and

18 (iii) by inserting after paragraph (33)

19 the following:

20 ‘‘(34) include an election by the State to apply

21 section 457(a)(2)(B) of this Act or former section

22 457(a)(2)(B) of this Act (as in effect for the State im23 mediately before the date this paragraph first applies

24 to the State) to the distribution of the amounts which

25 are the subject of such sections and, for so long as the
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1 State elects to so apply such former section, the

2 amendments made by subsection (b)(1) of section

3 7301 of the Deficit Reduction Act of 2005 shall not

4 apply with respect to the State, notwithstanding sub5 section (e) of such section 7301.’’.

6 (2) CURRENT SUPPORT AMOUNT DEFINED.—Sec7 tion 457(c) (42 U.S.C. 657(c)) is amended by adding

8 at the end the following:

9 ‘‘(5) CURRENT SUPPORT AMOUNT.—The term

10 ‘current support amount’ means, with respect to

11 amounts collected as support on behalf of a family,

12 the amount designated as the monthly support obliga13 tion of the noncustodial parent in the order requiring

14 the support or calculated by the State based on the

15 order.’’.

16 (c) STATE OPTION TO DISCONTINUE OLDER SUPPORT

17 ASSIGNMENTS.—Section 457(b) (42 U.S.C. 657(b)) is

18 amended to read as follows:

19 ‘‘(b) CONTINUATION OF ASSIGNMENTS.—

20 ‘‘(1) STATE OPTION TO DISCONTINUE PRE-1997

21 SUPPORT ASSIGNMENTS.—

22 ‘‘(A) IN GENERAL.—Any rights to support

23 obligations assigned to a State as a condition of

24 receiving assistance from the State under part A

25 and in effect on September 30, 1997 (or such
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1 earlier date on or after August 22, 1996, as the

2 State may choose), may remain assigned after

3 such date.

4 ‘‘(B) DISTRIBUTION OF AMOUNTS AFTER AS5 SIGNMENT DISCONTINUATION.—If a State chooses

6 to discontinue the assignment of a support obli7 gation described in subparagraph (A), the State

8 may treat amounts collected pursuant to the as9 signment as if the amounts had never been as10 signed and may distribute the amounts to the

11 family in accordance with subsection (a)(4).

12 ‘‘(2) STATE OPTION TO DISCONTINUE POST-1997

13 ASSIGNMENTS.—

14 ‘‘(A) IN GENERAL.—Any rights to support

15 obligations accruing before the date on which a

16 family first receives assistance under part A that

17 are assigned to a State under that part and in

18 effect before the implementation date of this sec19 tion may remain assigned after such date.

20 ‘‘(B) DISTRIBUTION OF AMOUNTS AFTER AS21 SIGNMENT DISCONTINUATION.—If a State chooses

22 to discontinue the assignment of a support obli23 gation described in subparagraph (A), the State

24 may treat amounts collected pursuant to the as25 signment as if the amounts had never been as-
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1 signed and may distribute the amounts to the

2 family in accordance with subsection (a)(4).’’.

3 (d) CONFORMING AMENDMENTS.—Section 6402(c) of

4 the Internal Revenue Code of 1986 (relating to offset of past5 due support against overpayments) is amended—

6 (1) in the first sentence, by striking ‘‘the Social

7 Security Act.’’ and inserting ‘‘of such Act.’’; and

8 (2) by striking the third sentence and inserting

9 the following: ‘‘The Secretary shall apply a reduction

10 under this subsection first to an amount certified by

11 the State as past due support under section 464 of the

12 Social Security Act before any other reductions al13 lowed by law.’’.

14 (e) EFFECTIVE DATE.—

15 (1) IN GENERAL.—Except as otherwise provided

16 in this section, the amendments made by the pre17 ceding provisions of this section shall take effect on

18 October 1, 2009, and shall apply to payments under

19 parts A and D of title IV of the Social Security Act

20 for calendar quarters beginning on or after such date,

21 and without regard to whether regulations to imple22 ment the amendments (in the case of State programs

23 operated under such part D) are promulgated by such

24 date.
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1 (2) STATE OPTION TO ACCELERATE EFFECTIVE

2 DATE.—Notwithstanding paragraph (1), a State may

3 elect to have the amendments made by the preceding

4 provisions of this section apply to the State and to

5 amounts collected by the State (and the payments

6 under parts A and D), on and after such date as the

7 State may select that is not earlier than October 1,

8 2008, and not later than September 30, 2009.

9 (f) USE OF TAX REFUND INTERCEPT PROGRAM TO

10 COLLECT PAST-DUE CHILD SUPPORT ON BEHALF OF

11 CHILDREN WHO ARE NOT MINORS.—

12 (1) IN GENERAL.—Section 464 (42 U.S.C. 664)

13 is amended—

14 (A) in subsection (a)(2)(A), by striking ‘‘(as

15 that term is defined for purposes of this para16 graph under subsection (c))’’; and

17 (B) in subsection (c)—

18 (i) in paragraph (1)—

19 (I) by striking ‘‘(1) Except as

20 provided in paragraph (2), as used in’’

21 and inserting ‘‘In’’; and

22 (II) by inserting ‘‘(whether or not

23 a minor)’’ after ‘‘a child’’ each place it

24 appears; and
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1 (ii) by striking paragraphs (2) and

2 (3).

3 (2) EFFECTIVE DATE.—The amendments made

4 by paragraph (1) shall take effect on October 1, 2007.

5 (g) STATE OPTION TO USE STATEWIDE AUTOMATED

6 DATA PROCESSING AND INFORMATION RETRIEVAL SYSTEM

7 FOR INTERSTATE CASES.—Section 466(a)(14)(A)(iii) (42

8 U.S.C. 666(a)(14)(A)(iii)) is amended by inserting before

9 the semicolon the following: ‘‘(but the assisting State may

10 establish a corresponding case based on such other State’s

11 request for assistance)’’.

12 SEC. 7302. MANDATORY REVIEW AND ADJUSTMENT OF

13 CHILD SUPPORT ORDERS FOR FAMILIES RE14 CEIVING TANF.

15 (a) IN GENERAL.—Section 466(a)(10)(A)(i) (42

16 U.S.C. 666(a)(10)(A)(i)) is amended—

17 (1) by striking ‘‘parent, or,’’ and inserting ‘‘par18 ent or’’; and

19 (2) by striking ‘‘upon the request of the State

20 agency under the State plan or of either parent,’’.

21 (b) EFFECTIVE DATE.—The amendments made by sub22 section (a) shall take effect on October 1, 2007.
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1 SEC. 7303. DECREASE IN AMOUNT OF CHILD SUPPORT AR2 REARAGE TRIGGERING PASSPORT DENIAL.

3 (a) IN GENERAL.—Section 452(k)(1) (42 U.S.C.

4 652(k)(1)) is amended by striking ‘‘$5,000’’ and inserting

5 ‘‘$2,500’’.

6 (b) CONFORMING AMENDMENT.—Section 454(31) (42

7 U.S.C. 654(31)) is amended by striking ‘‘$5,000’’ and in8 serting ‘‘$2,500’’.

9 (c) EFFECTIVE DATE.—The amendments made by this

10 section shall take effect on October 1, 2006.

11 SEC. 7304. MAINTENANCE OF TECHNICAL ASSISTANCE

12 FUNDING.

13 Section 452(j) (42 U.S.C. 652(j)) is amended by insert14 ing ‘‘or the amount appropriated under this paragraph for

15 fiscal year 2002, whichever is greater’’ before ‘‘, which shall

16 be available’’.

17 SEC. 7305. MAINTENANCE OF FEDERAL PARENT LOCATOR

18 SERVICE FUNDING.

19 Section 453(o) (42 U.S.C. 653(o)) is amended—

20 (1) in the first sentence, by inserting ‘‘or the

21 amount appropriated under this paragraph for fiscal

22 year 2002, whichever is greater’’ before ‘‘, which shall

23 be available’’; and

24 (2) in the second sentence, by striking ‘‘for each

25 of fiscal years 1997 through 2001’’.
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1 SEC. 7306. INFORMATION COMPARISONS WITH INSURANCE

2 DATA.

3 (a) DUTIES OF THE SECRETARY.—Section 452 (42

4 U.S.C. 652) is amended by adding at the end the following:

5 ‘‘(l) COMPARISONS WITH INSURANCE INFORMATION.—

6 ‘‘(1) IN GENERAL.—The Secretary, through the

7 Federal Parent Locator Service, may—

8 ‘‘(A) compare information concerning indi9 viduals owing past-due support with informa10 tion maintained by insurers (or their agents)

11 concerning insurance claims, settlements,

12 awards, and payments; and

13 ‘‘(B) furnish information resulting from the

14 data matches to the State agencies responsible for

15 collecting child support from the individuals.

16 ‘‘(2) LIABILITY.—An insurer (including any

17 agent of an insurer) shall not be liable under any

18 Federal or State law to any person for any disclosure

19 provided for under this subsection, or for any other

20 action taken in good faith in accordance with this

21 subsection.’’.

22 (b) STATE REIMBURSEMENT OF FEDERAL COSTS.—

23 Section 453(k)(3) (42 U.S.C. 653(k)(3)) is amended by in24 serting ‘‘or section 452(l)’’ after ‘‘pursuant to this section’’.
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1 SEC. 7307. REQUIREMENT THAT STATE CHILD SUPPORT EN2 FORCEMENT AGENCIES SEEK MEDICAL SUP3 PORT FOR CHILDREN FROM EITHER PARENT.

4 (a) STATE AGENCIES REQUIRED TO SEEK MEDICAL

5 SUPPORT FROM EITHER PARENT.—

6 (1) IN GENERAL.—Section 466(a)(19)(A) (42

7 U.S.C. 666(a)(19)(A)) is amended by striking ‘‘which

8 include a provision for the health care coverage of the

9 child are enforced’’ and inserting ‘‘shall include a

10 provision for medical support for the child to be pro11 vided by either or both parents, and shall be en12 forced’’.

13 (2) CONFORMING AMENDMENTS.—

14 (A) TITLE IV–D.—

15 (i) Section 452(f) (42 U.S.C. 652(f)) is

16 amended by striking ‘‘include medical sup17 port as part of any child support order and

18 enforce medical support’’ and inserting ‘‘en19 force medical support included as part of a

20 child support order’’.

21 (ii) Section 466(a)(19) (42 U.S.C.

22 666(a)(19)), as amended by paragraph (1)

23 of this subsection, is amended—

24 (I) in subparagraph (A)—
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1 (aa) by striking ‘‘section

2 401(e)(3)(C)’’ and inserting ‘‘sec3 tion 401(e)’’; and

4 (bb) by striking ‘‘section

5 401(f)(5)(C)’’ and inserting ‘‘sec6 tion 401(f)’’;

7 (II) in subparagraph (B)—

8 (aa) by striking ‘‘noncusto9 dial’’ each place it appears; and

10 (bb) in clause (iii), by strik11 ing ‘‘section 466(b)’’ and inserting

12 ‘‘subsection (b)’’; and

13 (III) in subparagraph (C), by

14 striking ‘‘noncustodial’’ each place it

15 appears and inserting ‘‘obligated’’.

16 (B) STATE OR LOCAL GOVERNMENTAL

17 GROUP HEALTH PLANS.—Section 401(e)(2) of the

18 Child Support Performance and Incentive Act of

19 1998 (29 U.S.C. 1169 note) is amended, in the

20 matter preceding subparagraph (A), by striking

21 ‘‘who is a noncustodial parent of the child’’.

22 (C) CHURCH PLANS.—Section 401(f)(5)(C)

23 of the Child Support Performance and Incentive

24 Act of 1998 (29 U.S.C. 1169 note) is amended by

25 striking ‘‘noncustodial’’ each place it appears.
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1 (b) ENFORCEMENT OF MEDICAL SUPPORT REQUIRE2 MENTS.—Section 452(f) (42 U.S.C. 652(f)), as amended by

3 subsection (a)(2)(A)(i), is amended by inserting after the

4 first sentence the following: ‘‘A State agency administering

5 the program under this part may enforce medical support

6 against a custodial parent if health care coverage is avail7 able to the custodial parent at a reasonable cost, notwith8 standing any other provision of this part.’’.

9 (c) DEFINITION OF MEDICAL SUPPORT.—Section

10 452(f) (42 U.S.C. 652(f)), as amended by subsections

11 (a)(2)(A)(i) and (b) of this section, is amended by adding

12 at the end the following: ‘‘For purposes of this part, the

13 term ‘medical support’ may include health care coverage,

14 such as coverage under a health insurance plan (including

15 payment of costs of premiums, co-payments, and

16 deductibles) and payment for medical expenses incurred on

17 behalf of a child.’’.

18 SEC. 7308. REDUCTION OF FEDERAL MATCHING RATE FOR

19 LABORATORY COSTS INCURRED IN DETER20 MINING PATERNITY.

21 (a) IN GENERAL.—Section 455(a)(1)(C) (42 U.S.C.

22 655(a)(1)(C)) is amended by striking ‘‘90 percent (rather

23 than the percentage specified in subparagraph (A))’’ and

24 inserting ‘‘66 percent’’.
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1 (b) EFFECTIVE DATE.—The amendment made by sub2 section (a) shall take effect on October 1, 2006, and shall

3 apply to costs incurred on or after that date.

4 SEC. 7309. ENDING FEDERAL MATCHING OF STATE SPEND5 ING OF FEDERAL INCENTIVE PAYMENTS.

6 (a) IN GENERAL.—Section 455(a)(1) (42 U.S.C.

7 655(a)(1)) is amended by inserting ‘‘from amounts paid to

8 the State under section 458 or’’ before ‘‘to carry out an

9 agreement’’.

10 (b) EFFECTIVE DATE.—The amendment made by sub11 section (a) shall take effect on October 1, 2007.

12 SEC. 7310. MANDATORY FEE FOR SUCCESSFUL CHILD SUP13 PORT COLLECTION FOR FAMILY THAT HAS

14 NEVER RECEIVED TANF.

15 (a) IN GENERAL.—Section 454(6)(B) (42 U.S.C.

16 654(6)(B)) is amended—

17 (1) by inserting ‘‘(i)’’ after ‘‘(B)’’;

18 (2) by redesignating clauses (i) and (ii) as sub19 clauses (I) and (II), respectively;

20 (3) by adding ‘‘and’’ after the semicolon; and

21 (4) by adding after and below the end the fol22 lowing new clause:

23 ‘‘(ii) in the case of an individual who has

24 never received assistance under a State program

25 funded under part A and for whom the State has
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1 collected at least $500 of support, the State shall

2 impose an annual fee of $25 for each case in

3 which services are furnished, which shall be re4 tained by the State from support collected on be5 half of the individual (but not from the 1st $500

6 so collected), paid by the individual applying for

7 the services, recovered from the absent parent, or

8 paid by the State out of its own funds (the pay9 ment of which from State funds shall not be con10 sidered as an administrative cost of the State for

11 the operation of the plan, and the fees shall be

12 considered income to the program);’’.

13 (b) CONFORMING AMENDMENTS.—Section 457(a)(3)

14 (42 U.S.C. 657(a)(3)) is amended to read as follows:

15 ‘‘(3) FAMILIES THAT NEVER RECEIVED ASSIST16 ANCE.—In the case of any other family, the State

17 shall distribute to the family the portion of the

18 amount so collected that remains after withholding

19 any fee pursuant to section 454(6)(B)(ii).’’.

20 (c) EFFECTIVE DATE.—The amendments made by this

21 section shall take effect on October 1, 2006.
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1 SEC. 7311. EXCEPTION TO GENERAL EFFECTIVE DATE FOR

2 STATE PLANS REQUIRING STATE LAW AMEND3 MENTS.

4 In the case of a State plan under part D of title IV

5 of the Social Security Act which the Secretary determines

6 requires State legislation in order for the plan to meet the

7 additional requirements imposed by the amendments made

8 by this subtitle, the effective date of the amendments impos9 ing the additional requirements shall be 3 months after the

10 first day of the first calendar quarter beginning after the

11 close of the first regular session of the State legislature that

12 begins after the date of the enactment of this Act. For pur13 poses of the preceding sentence, in the case of a State that

14 has a 2-year legislative session, each year of the session shall

15 be considered to be a separate regular session of the State

16 legislature.

17 Subtitle D—Child Welfare

18 SEC. 7401. STRENGTHENING COURTS.

19 (a) COURT IMPROVEMENT GRANTS.—

20 (1) IN GENERAL.—Section 438(a) (42 U.S.C.

21 629h(a)) is amended—

22 (A) by striking ‘‘and’’ at the end of para23 graph (1);

24 (B) by striking the period at the end of

25 paragraph (2) and inserting a semicolon; and

26 (C) by adding at the end the following:
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1 ‘‘(3) to ensure that the safety, permanence, and

2 well-being needs of children are met in a timely and

3 complete manner; and

4 ‘‘(4) to provide for the training of judges, attor5 neys and other legal personnel in child welfare

6 cases.’’.

7 (2) APPLICATIONS.—Section 438(b) (42 U.S.C.

8 629h(b)) is amended to read as follows:

9 ‘‘(b) APPLICATIONS.—

10 ‘‘(1) IN GENERAL.—In order to be eligible to re11 ceive a grant under this section, a highest State court

12 shall submit to the Secretary an application at such

13 time, in such form, and including such information

14 and assurances as the Secretary may require,

15 including—

16 ‘‘(A) in the case of a grant for the purpose

17 described in subsection (a)(3), a description of

18 how courts and child welfare agencies on the

19 local and State levels will collaborate and jointly

20 plan for the collection and sharing of all relevant

21 data and information to demonstrate how im22 proved case tracking and analysis of child abuse

23 and neglect cases will produce safe and timely

24 permanency decisions;
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1 ‘‘(B) in the case of a grant for the purpose

2 described in subsection (a)(4), a demonstration

3 that a portion of the grant will be used for cross4 training initiatives that are jointly planned and

5 executed with the State agency or any other

6 agency under contract with the State to admin7 ister the State program under the State plan

8 under subpart 1, the State plan approved under

9 section 434, or the State plan approved under

10 part E; and

11 ‘‘(C) in the case of a grant for any purpose

12 described in subsection (a), a demonstration of

13 meaningful and ongoing collaboration among the

14 courts in the State, the State agency or any

15 other agency under contract with the State who

16 is responsible for administering the State pro17 gram under part B or E, and, where applicable,

18 Indian tribes.

19 ‘‘(2) SEPARATE APPLICATIONS.—A highest State

20 court desiring grants under this section for 2 or more

21 purposes shall submit separate applications for the

22 following grants:

23 ‘‘(A) A grant for the purposes described in

24 paragraphs (1) and (2) of subsection (a).
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1 ‘‘(B) A grant for the purpose described in

2 subsection (a)(3).

3 ‘‘(C) A grant for the purpose described in

4 subsection (a)(4).’’.

5 (3) ALLOTMENTS.—Section 438(c) (42 U.S.C.

6 429h(c)) is amended—

7 (A) in paragraph (1)—

8 (i) by inserting ‘‘of this section for a

9 grant described in subsection (b)(2)(A) of

10 this section’’ after ‘‘subsection (b)’’; and

11 (ii) by striking ‘‘paragraph (2) of this

12 subsection’’ and inserting ‘‘subparagraph

13 (B) of this paragraph’’;

14 (B) in paragraph (2)—

15 (i) by striking ‘‘this paragraph’’ and

16 inserting ‘‘this subparagraph’’;

17 (ii) by striking ‘‘paragraph (1) of this

18 subsection’’ and inserting ‘‘subparagraph

19 (A) of this paragraph’’; and

20 (iii) by inserting ‘‘for such a grant’’

21 after ‘‘subsection (b)’’;

22 (C) by redesignating and indenting para23 graphs (1) and (2) as subparagraphs (A) and

24 (B), respectively;
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1 (D) by inserting before and above such sub2 paragraph (A) the following:

3 ‘‘(1) GRANTS TO ASSESS AND IMPROVE HAN4 DLING OF COURT PROCEEDINGS RELATING TO FOSTER

5 CARE AND ADOPTION.—’’; and

6 (E) by adding at the end the following:

7 ‘‘(2) GRANTS FOR IMPROVED DATA COLLECTION

8 AND TRAINING.—

9 ‘‘(A) IN GENERAL.—Each highest State

10 court which has an application approved under

11 subsection (b) of this section for a grant referred

12 to in subparagraph (B) or (C) of subsection

13 (b)(2) shall be entitled to payment, for each of

14 fiscal years 2006 through 2010, from the amount

15 made available under whichever of paragraph

16 (1) or (2) of subsection (e) applies with respect

17 to the grant, of an amount equal to the sum of

18 $85,000 plus the amount described in subpara19 graph (B) of this paragraph for the fiscal year

20 with respect to the grant.

21 ‘‘(B) FORMULA.—The amount described in

22 this subparagraph for any fiscal year with re23 spect to a grant referred to in subparagraph (B)

24 or (C) of subsection (b)(2) is the amount that

25 bears the same ratio to the amount made avail-
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1 able under subsection (e) for such a grant (re2 duced by the dollar amount specified in subpara3 graph (A) of this paragraph) as the number of

4 individuals in the State who have not attained

5 21 years of age bears to the total number of such

6 individuals in all States the highest State courts

7 of which have approved applications under sub8 section (b) for such a grant.’’.

9 (4) FUNDING.—Section 438 (42 U.S.C. 629h) is

10 amended by adding at the end the following:

11 ‘‘(e) FUNDING FOR GRANTS FOR IMPROVED DATA COL12 LECTION AND TRAINING.—Out of any money in the Treas13 ury of the United States not otherwise appropriated, there

14 are appropriated to the Secretary, for each of fiscal years

15 2006 through 2010—

16 ‘‘(1) $10,000,000 for grants referred to in sub17 section (b)(2)(B); and

18 ‘‘(2) $10,000,000 for grants referred to in sub19 section (b)(2)(C).’’.

20 (b) REQUIREMENT TO DEMONSTRATE MEANINGFUL

21 COLLABORATION BETWEEN COURTS AND AGENCIES IN

22 CHILD WELFARE SERVICES PROGRAMS.—Section 422(b)

23 (42 U.S.C. 622(b)) is amended—

24 (1) by striking ‘‘and’’ at the end of paragraph

25 (13);
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1 (2) by striking the period at the end of para2 graph (14) and inserting ‘‘; and’’; and

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

4 ‘‘(15) demonstrate substantial, ongoing, and

5 meaningful collaboration with State courts in the de6 velopment and implementation of the State plan

7 under subpart 1, the State plan approved under sub8 part 2, and the State plan approved under part E,

9 and in the development and implementation of any

10 program improvement plan required under section

11 1123A.’’.

12 (c) USE OF CHILD WELFARE RECORDS IN STATE

13 COURT PROCEEDINGS.—Section 471 (42 U.S.C. 671) is

14 amended—

15 (1) in subsection (a)(8), by inserting ‘‘subject to

16 subsection (c),’’ after ‘‘(8)’’; and

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

18 ‘‘(c) USE OF CHILD WELFARE RECORDS IN STATE

19 COURT PROCEEDINGS.—Subsection (a)(8) shall not be con20 strued to limit the flexibility of a State in determining

21 State policies relating to public access to court proceedings

22 to determine child abuse and neglect or other court hearings

23 held pursuant to part B or this part, except that such poli24 cies shall, at a minimum, ensure the safety and well-being

25 of the child, parents, and family.’’.
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1 SEC. 7402. FUNDING OF SAFE AND STABLE FAMILIES PRO2 GRAMS.

3 Section 436(a) (42 U.S.C. 629f(a)) is amended to read

4 as follows:

5 ‘‘(a) AUTHORIZATION.—In addition to any amount

6 otherwise made available to carry out this subpart, there

7 are authorized to be appropriated to carry out this subpart

8 $345,000,000 for fiscal year 2006. Notwithstanding the pre9 ceding sentence, the total amount authorized to be so appro10 priated for fiscal year 2006 under this subsection and under

11 this subsection (as in effect before the date of the enactment

12 of the Deficit Reduction Act of 2005) is $345,000,000.’’.

13 SEC. 7403. CLARIFICATION REGARDING FEDERAL MATCH14 ING OF CERTAIN ADMINISTRATIVE COSTS

15 UNDER THE FOSTER CARE MAINTENANCE

16 PAYMENTS PROGRAM.

17 (a) ADMINISTRATIVE COSTS RELATING TO UNLI18 CENSED CARE.—Section 472 (42 U.S.C. 672) is amended

19 by inserting after subsection (h) the following:

20 ‘‘(i) ADMINISTRATIVE COSTS ASSOCIATED WITH OTH21 ERWISE ELIGIBLE CHILDREN NOT IN LICENSED FOSTER

22 CARE SETTINGS.—Expenditures by a State that would be

23 considered administrative expenditures for purposes of sec24 tion 474(a)(3) if made with respect to a child who was re25 siding in a foster family home or child-care institution shall
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1 be so considered with respect to a child not residing in such

2 a home or institution—

3 ‘‘(1) in the case of a child who has been removed

4 in accordance with subsection (a) of this section from

5 the home of a relative specified in section 406(a) (as

6 in effect on July 16, 1996), only for expenditures—

7 ‘‘(A) with respect to a period of not more

8 than the lesser of 12 months or the average

9 length of time it takes for the State to license or

10 approve a home as a foster home, in which the

11 child is in the home of a relative and an appli12 cation is pending for licensing or approval of the

13 home as a foster family home; or

14 ‘‘(B) with respect to a period of not more

15 than 1 calendar month when a child moves from

16 a facility not eligible for payments under this

17 part into a foster family home or child care in18 stitution licensed or approved by the State; and

19 ‘‘(2) in the case of any other child who is poten20 tially eligible for benefits under a State plan ap21 proved under this part and at imminent risk of re22 moval from the home, only if—

23 ‘‘(A) reasonable efforts are being made in

24 accordance with section 471(a)(15) to prevent the
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1 need for, or if necessary to pursue, removal of the

2 child from the home; and

3 ‘‘(B) the State agency has made, not less

4 often than every 6 months, a determination (or

5 redetermination) as to whether the child remains

6 at imminent risk of removal from the home.’’.

7 (b) CONFORMING AMENDMENT.—Section 474(a)(3) (42

8 U.S.C. 674(a)(3)) is amended by inserting ‘‘subject to sec9 tion 472(i)’’ before ‘‘an amount equal to’’.

10 SEC. 7404. CLARIFICATION OF ELIGIBILITY FOR FOSTER

11 CARE MAINTENANCE PAYMENTS AND ADOP12 TION ASSISTANCE.

13 (a) FOSTER CARE MAINTENANCE PAYMENTS.—Section

14 472(a) (42 U.S.C. 672(a)) is amended to read as follows:

15 ‘‘(a) IN GENERAL.—

16 ‘‘(1) ELIGIBILITY.—Each State with a plan ap17 proved under this part shall make foster care mainte18 nance payments on behalf of each child who has been

19 removed from the home of a relative specified in sec20 tion 406(a) (as in effect on July 16, 1996) into foster

21 care if—

22 ‘‘(A) the removal and foster care placement

23 met, and the placement continues to meet, the re24 quirements of paragraph (2); and
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1 ‘‘(B) the child, while in the home, would

2 have met the AFDC eligibility requirement of

3 paragraph (3).

4 ‘‘(2) REMOVAL AND FOSTER CARE PLACEMENT

5 REQUIREMENTS.—The removal and foster care place6 ment of a child meet the requirements of this para7 graph if—

8 ‘‘(A) the removal and foster care placement

9 are in accordance with—

10 ‘‘(i) a voluntary placement agreement

11 entered into by a parent or legal guardian

12 of the child who is the relative referred to in

13 paragraph (1); or

14 ‘‘(ii) a judicial determination to the ef15 fect that continuation in the home from

16 which removed would be contrary to the

17 welfare of the child and that reasonable ef18 forts of the type described in section

19 471(a)(15) for a child have been made;

20 ‘‘(B) the child’s placement and care are the

21 responsibility of—

22 ‘‘(i) the State agency administering the

23 State plan approved under section 471; or

24 ‘‘(ii) any other public agency with

25 which the State agency administering or su-
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1 pervising the administration of the State

2 plan has made an agreement which is in ef3 fect; and

4 ‘‘(C) the child has been placed in a foster

5 family home or child-care institution.

6 ‘‘(3) AFDC ELIGIBILITY REQUIREMENT.—

7 ‘‘(A) IN GENERAL.—A child in the home re8 ferred to in paragraph (1) would have met the

9 AFDC eligibility requirement of this paragraph

10 if the child—

11 ‘‘(i) would have received aid under the

12 State plan approved under section 402 (as

13 in effect on July 16, 1996) in the home, in

14 or for the month in which the agreement

15 was entered into or court proceedings lead16 ing to the determination referred to in

17 paragraph (2)(A)(ii) of this subsection were

18 initiated; or

19 ‘‘(ii)(I) would have received the aid in

20 the home, in or for the month referred to in

21 clause (i), if application had been made

22 therefor; or

23 ‘‘(II) had been living in the home with24 in 6 months before the month in which the

25 agreement was entered into or the pro-
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1 ceedings were initiated, and would have re2 ceived the aid in or for such month, if, in

3 such month, the child had been living in the

4 home with the relative referred to in para5 graph (1) and application for the aid had

6 been made.

7 ‘‘(B) RESOURCES DETERMINATION.—For

8 purposes of subparagraph (A), in determining

9 whether a child would have received aid under a

10 State plan approved under section 402 (as in ef11 fect on July 16, 1996), a child whose resources

12 (determined pursuant to section 402(a)(7)(B), as

13 so in effect) have a combined value of not more

14 than $10,000 shall be considered a child whose

15 resources have a combined value of not more

16 than $1,000 (or such lower amount as the State

17 may determine for purposes of section

18 402(a)(7)(B)).

19 ‘‘(4) ELIGIBILITY OF CERTAIN ALIEN CHIL20 DREN.—Subject to title IV of the Personal Responsi21 bility and Work Opportunity Reconciliation Act of

22 1996, if the child is an alien disqualified under sec23 tion 245A(h) or 210(f) of the Immigration and Na24 tionality Act from receiving aid under the State plan

25 approved under section 402 in or for the month in
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1 which the agreement described in paragraph (2)(A)(i)

2 was entered into or court proceedings leading to the

3 determination described in paragraph (2)(A)(ii) were

4 initiated, the child shall be considered to satisfy the

5 requirements of paragraph (3), with respect to the

6 month, if the child would have satisfied the require7 ments but for the disqualification.’’.

8 (b) ADOPTION ASSISTANCE.—Section 473(a)(2) (42

9 U.S.C. 673(a)(2)) is amended to read as follows:

10 ‘‘(2)(A) For purposes of paragraph (1)(B)(ii), a child

11 meets the requirements of this paragraph if the child—

12 ‘‘(i)(I)(aa) was removed from the home of a rel13 ative specified in section 406(a) (as in effect on July

14 16, 1996) and placed in foster care in accordance

15 with a voluntary placement agreement with respect to

16 which Federal payments are provided under section

17 474 (or section 403, as such section was in effect on

18 July 16, 1996), or in accordance with a judicial de19 termination to the effect that continuation in the

20 home would be contrary to the welfare of the child;

21 and

22 ‘‘(bb) met the requirements of section 472(a)(3)

23 with respect to the home referred to in item (aa) of

24 this subclause;
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1 ‘‘(II) meets all of the requirements of title XVI

2 with respect to eligibility for supplemental security

3 income benefits; or

4 ‘‘(III) is a child whose costs in a foster family

5 home or child-care institution are covered by the fos6 ter care maintenance payments being made with re7 spect to the minor parent of the child as provided in

8 section 475(4)(B); and

9 ‘‘(ii) has been determined by the State, pursuant

10 to subsection (c) of this section, to be a child with spe11 cial needs.

12 ‘‘(B) Section 472(a)(4) shall apply for purposes of sub13 paragraph (A) of this paragraph, in any case in which the

14 child is an alien described in such section.

15 ‘‘(C) A child shall be treated as meeting the require16 ments of this paragraph for the purpose of paragraph

17 (1)(B)(ii) if the child—

18 ‘‘(i) meets the requirements of subparagraph

19 (A)(ii);

20 ‘‘(ii) was determined eligible for adoption assist21 ance payments under this part with respect to a prior

22 adoption;

23 ‘‘(iii) is available for adoption because—
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1 ‘‘(I) the prior adoption has been dissolved,

2 and the parental rights of the adoptive parents

3 have been terminated; or

4 ‘‘(II) the child’s adoptive parents have died;

5 and

6 ‘‘(iv) fails to meet the requirements of subpara7 graph (A) but would meet such requirements if—

8 ‘‘(I) the child were treated as if the child

9 were in the same financial and other cir10 cumstances the child was in the last time the

11 child was determined eligible for adoption assist12 ance payments under this part; and

13 ‘‘(II) the prior adoption were treated as

14 never having occurred.’’.

15 Subtitle E—Supplemental Security

16 Income

17 SEC. 7501. REVIEW OF STATE AGENCY BLINDNESS AND DIS18 ABILITY DETERMINATIONS.

19 Section 1633 (42 U.S.C. 1383b) is amended by adding

20 at the end the following:

21 ‘‘(e)(1) The Commissioner of Social Security shall re22 view determinations, made by State agencies pursuant to

23 subsection (a) in connection with applications for benefits

24 under this title on the basis of blindness or disability, that

25 individuals who have attained 18 years of age are blind
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1 or disabled as of a specified onset date. The Commissioner

2 of Social Security shall review such a determination before

3 any action is taken to implement the determination.

4 ‘‘(2)(A) In carrying out paragraph (1), the Commis5 sioner of Social Security shall review—

6 ‘‘(i) at least 20 percent of all determinations re7 ferred to in paragraph (1) that are made in fiscal

8 year 2006;

9 ‘‘(ii) at least 40 percent of all such determina10 tions that are made in fiscal year 2007; and

11 ‘‘(iii) at least 50 percent of all such determina12 tions that are made in fiscal year 2008 or thereafter.

13 ‘‘(B) In carrying out subparagraph (A), the Commis14 sioner of Social Security shall, to the extent feasible, select

15 for review the determinations which the Commissioner of

16 Social Security identifies as being the most likely to be in17 correct.’’.

18 SEC. 7502. PAYMENT OF CERTAIN LUMP SUM BENEFITS IN

19 INSTALLMENTS UNDER THE SUPPLEMENTAL

20 SECURITY INCOME PROGRAM.

21 (a) IN GENERAL.—Section 1631(a)(10)(A)(i) (42

22 U.S.C. 1383(a)(10)(A)(i)) is amended by striking ‘‘12’’ and

23 inserting ‘‘3’’.
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1 (b) EFFECTIVE DATE.—The amendment made by sub2 section (a) shall take effect 3 months after the date of the

3 enactment of this Act.

4 Subtitle F—Repeal of Continued

5 Dumping and Subsidy Offset

6 SEC. 7601. REPEAL OF CONTINUED DUMPING AND SUBSIDY

7 OFFSET.

8 (a) REPEAL.—Effective upon the date of enactment of

9 this Act, section 754 of the Tariff Act of 1930 (19 U.S.C.

10 1675c), and the item relating to section 754 in the table

11 of contents of title VII of that Act, are repealed.

12 (b) DISTRIBUTIONS ON CERTAIN ENTRIES.—All duties

13 on entries of goods made and filed before October 1, 2007,

14 that would, but for subsection (a) of this section, be distrib15 uted under section 754 of the Tariff Act of 1930, shall be

16 distributed as if section 754 of the Tariff Act of 1930 had

17 not been repealed by subsection (a).

18 Subtitle G—Effective Date

19 SEC. 7701. EFFECTIVE DATE.

20 Except as otherwise provided in this title, this title and

21 the amendments made by this title shall take effect as if

22 enacted on October 1, 2005.
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1 TITLE VIII—EDUCATION AND

2 PENSION BENEFIT PROVISIONS

3 Subtitle A—Higher Education

4 Provisions

5 SEC. 8001. SHORT TITLE; REFERENCE; EFFECTIVE DATE.

6 (a) SHORT TITLE.—This subtitle may be cited as the

7 ‘‘Higher Education Reconciliation Act of 2005’’.

8 (b) REFERENCES.—Except as otherwise expressly pro9 vided, whenever in this subtitle an amendment or repeal

10 is expressed in terms of an amendment to, or repeal of, a

11 section or other provision, the reference shall be considered

12 to be made to a section or other provision of the Higher

13 Education Act of 1965 (20 U.S.C. 1001 et seq.).

14 (c) EFFECTIVE DATE.—Except as otherwise provided

15 in this subtitle or the amendments made by this subtitle,

16 the amendments made by this subtitle shall be effective July

17 1, 2006.

18 SEC. 8002. MODIFICATION OF 50/50 RULE.

19 Section 102(a)(3) (20 U.S.C. 1002(a)(3)) is

20 amended—

21 (1) in subparagraph (A), by inserting ‘‘(exclud22 ing courses offered by telecommunications as defined

23 in section 484(l)(4))’’ after ‘‘courses by correspond24 ence’’; and
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1 (2) in subparagraph (B), by inserting ‘‘(exclud2 ing courses offered by telecommunications as defined

3 in section 484(l)(4))’’ after ‘‘correspondence courses’’.

4 SEC. 8003. ACADEMIC COMPETITIVENESS GRANTS.

5 Subpart 1 of part A of title IV (20 U.S.C. 1070a) is

6 amended by adding after section 401 the following new sec7 tion:

8 ‘‘SEC. 401A. ACADEMIC COMPETITIVENESS GRANTS.

9 ‘‘(a) ACADEMIC COMPETITIVENESS GRANT PRO10 GRAM.—

11 ‘‘(1) ACADEMIC COMPETITIVENESS GRANTS AU12 THORIZED.—The Secretary shall award grants, in the

13 amounts specified in subsection (d)(1), to eligible stu14 dents to assist the eligible students in paying their

15 college education expenses.

16 ‘‘(2) ACADEMIC COMPETITIVENESS COUNCIL.—

17 ‘‘(A) ESTABLISHMENT.—There is estab18 lished an Academic Competitiveness Council (re19 ferred to in this paragraph as the ‘Council’).

20 From the funds made available under subsection

21 (e) for fiscal year 2006, $50,000 shall be avail22 able to the Council to carry out the duties de23 scribed in subparagraph (B). The Council shall

24 be chaired by the Secretary of Education, and

25 the membership of the Council shall consist of of-
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1 ficials from Federal agencies with responsibilities

2 for managing existing Federal programs that

3 promote mathematics and science (or designees of

4 such officials with significant decision-making

5 authority).

6 ‘‘(B) DUTIES.—The Council shall—

7 ‘‘(i) identify all Federal programs with

8 a mathematics or science focus;

9 ‘‘(ii) identify the target populations

10 being served by such programs;

11 ‘‘(iii) determine the effectiveness of

12 such programs;

13 ‘‘(iv) identify areas of overlap or du14 plication in such programs; and

15 ‘‘(v) recommend ways to efficiently in16 tegrate and coordinate such programs.

17 ‘‘(C) REPORT.—Not later than one year

18 after the date of enactment of the Higher Edu19 cation Reconciliation Act of 2005, the Council

20 shall transmit a report to each committee of

21 Congress with jurisdiction over a Federal pro22 gram identified under subparagraph (B)(i), de23 tailing the findings and recommendations under

24 subparagraph (B), including recommendations

25 for legislative or administrative action.
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1 ‘‘(b) DESIGNATION.—A grant under this section—

2 ‘‘(1) for the first or second academic year of a

3 program of undergraduate education shall be known

4 as an ‘Academic Competitiveness Grant’; and

5 ‘‘(2) for the third or fourth academic year of a

6 program of undergraduate education shall be known

7 as a ‘National Science and Mathematics Access to Re8 tain Talent Grant’ or a ‘National SMART Grant’.

9 ‘‘(c) DEFINITION OF ELIGIBLE STUDENT.—In this sec10 tion the term ‘eligible student’ means a full-time student

11 who, for the academic year for which the determination of

12 eligibility is made—

13 ‘‘(1) is a citizen of the United States;

14 ‘‘(2) is eligible for a Federal Pell Grant; and

15 ‘‘(3) in the case of a student enrolled or accepted

16 for enrollment in—

17 ‘‘(A) the first academic year of a program

18 of undergraduate education at a two- or four19 year degree-granting institution of higher

20 education—

21 ‘‘(i) has successfully completed, after

22 January 1, 2006, a rigorous secondary

23 school program of study established by a

24 State or local educational agency and recog25 nized as such by the Secretary; and
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1 ‘‘(ii) has not been previously enrolled

2 in a program of undergraduate education;

3 ‘‘(B) the second academic year of a program

4 of undergraduate education at a two- or four5 year degree-granting institution of higher

6 education—

7 ‘‘(i) has successfully completed, after

8 January 1, 2005, a rigorous secondary

9 school program of study established by a

10 State or local educational agency and recog11 nized as such by the Secretary; and

12 ‘‘(ii) has obtained a cumulative grade

13 point average of at least 3.0 (or the equiva14 lent as determined under regulations pre15 scribed by the Secretary) at the end of the

16 first academic year of such program of un17 dergraduate education; or

18 ‘‘(C) the third or fourth academic year of a

19 program of undergraduate education at a four20 year degree-granting institution of higher

21 education—

22 ‘‘(i) is pursuing a major in—

23 ‘‘(I) the physical, life, or computer

24 sciences, mathematics, technology, or
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1 engineering (as determined by the Sec2 retary pursuant to regulations); or

3 ‘‘(II) a foreign language that the

4 Secretary, in consultation with the Di5 rector of National Intelligence, deter6 mines is critical to the national secu7 rity of the United States; and

8 ‘‘(ii) has obtained a cumulative grade

9 point average of at least 3.0 (or the equiva10 lent as determined under regulations pre11 scribed by the Secretary) in the coursework

12 required for the major described in clause

13 (i).

14 ‘‘(d) GRANT AWARD.—

15 ‘‘(1) AMOUNTS.—

16 ‘‘(A) The Secretary shall award a grant

17 under this section in the amount of—

18 ‘‘(i) $750 for an eligible student under

19 subsection (c)(3)(A);

20 ‘‘(ii) $1,300 for an eligible student

21 under subsection (c)(3)(B); or

22 ‘‘(iii) $4,000 for an eligible student

23 under subsection (c)(3)(C).

24 ‘‘(B) Notwithstanding subparagraph (A)—
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1 ‘‘(i) the amount of such grant, in com2 bination with the Federal Pell Grant assist3 ance and other student financial assistance

4 available to such student, shall not exceed

5 the student’s cost of attendance;

6 ‘‘(ii) if the amount made available

7 under subsection (e) for any fiscal year is

8 less than the amount required to be pro9 vided grants to all eligible students in the

10 amounts determined under subparagraph

11 (A) and clause (i) of this subparagraph,

12 then the amount of the grant to each eligible

13 student shall be ratably reduced; and

14 ‘‘(iii) if additional amounts are appro15 priated for any such fiscal year, such re16 duced amounts shall be increased on the

17 same basis as they were reduced.

18 ‘‘(2) LIMITATIONS.—The Secretary shall not

19 award a grant under this section—

20 ‘‘(A) to any student for an academic year

21 of a program of undergraduate education de22 scribed in subparagraph (A), (B), or (C) of sub23 section (c)(3) for which the student received cred24 it before the date of enactment of the Higher

25 Education Reconciliation Act of 2005; or
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1 ‘‘(B) to any student for more than—

2 ‘‘(i) one academic year under sub3 section (c)(3)(A);

4 ‘‘(ii) one academic year under sub5 section (c)(3)(B); or

6 ‘‘(iii) two academic years under sub7 section (c)(3)(C).

8 ‘‘(e) FUNDING.—

9 ‘‘(1) AUTHORIZATION AND APPROPRIATION OF

10 FUNDS.—There are authorized to be appropriated,

11 and there are appropriated, out of any money in the

12 Treasury not otherwise appropriated, for the Depart13 ment of Education to carry out this section—

14 ‘‘(A) $790,000,000 for fiscal year 2006;

15 ‘‘(B) $850,000,000 for fiscal year 2007;

16 ‘‘(C) $920,000,000 for fiscal year 2008;

17 ‘‘(D) $960,000,000 for fiscal year 2009; and

18 ‘‘(E) $1,010,000,000 for fiscal year 2010.

19 ‘‘(2) USE OF EXCESS FUNDS.—If, at the end of

20 a fiscal year, the funds available for awarding grants

21 under this section exceed the amount necessary to

22 make such grants in the amounts authorized by sub23 section (d), then all of the excess funds shall remain

24 available for awarding grants under this section dur25 ing the subsequent fiscal year.
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1 ‘‘(f) RECOGNITION OF PROGRAMS OF STUDY.—The

2 Secretary shall recognize at least one rigorous secondary

3 school program of study in each State under subsection

4 (c)(3)(A) and (B) for the purpose of determining student

5 eligibility under such subsection.

6 ‘‘(g) SUNSET PROVISION.—The authority to make

7 grants under this section shall expire at the end of academic

8 year 2010–2011.’’.

9 SEC. 8004. REAUTHORIZATION OF FEDERAL FAMILY EDU10 CATION LOAN PROGRAM.

11 (a) AUTHORIZATION OF APPROPRIATIONS.—Section

12 421(b)(5) (20 U.S.C. 1071(b)(5)) is amended by striking

13 ‘‘an administrative cost allowance’’ and inserting ‘‘a loan

14 processing and issuance fee’’.

15 (b) EXTENSION OF AUTHORITY.—

16 (1) FEDERAL INSURANCE LIMITATIONS.—Section

17 424(a) (20 U.S.C. 1074(a)) is amended—

18 (A) by striking ‘‘2004’’ and inserting

19 ‘‘2012’’; and

20 (B) by striking ‘‘2008’’ and inserting

21 ‘‘2016’’.

22 (2) GUARANTEED LOANS.—Section 428(a)(5) (20

23 U.S.C. 1078(a)(5)) is amended—

24 (A) by striking ‘‘2004’’ and inserting

25 ‘‘2012’’; and
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1 (B) by striking ‘‘2008’’ and inserting

2 ‘‘2016’’.

3 (3) CONSOLIDATION LOANS.—Section 428C(e)

4 (20 U.S.C. 1078–3(e)) is amended by striking ‘‘2004’’

5 and inserting ‘‘2012’’.

6 SEC. 8005. LOAN LIMITS.

7 (a) FEDERAL INSURANCE LIMITS.—Section

8 425(a)(1)(A) (20 U.S.C. 1075(a)(1)(A)) is amended—

9 (1) in clause (i)(I), by striking ‘‘$2,625’’ and in10 serting ‘‘$3,500’’; and

11 (2) in clause (ii)(I), by striking ‘‘$3,500’’ and

12 inserting ‘‘$4,500’’.

13 (b) GUARANTEE LIMITS.—Section 428(b)(1)(A) (20

14 U.S.C. 1078(b)(1)(A)) is amended—

15 (1) in clause (i)(I), by striking ‘‘$2,625’’ and in16 serting ‘‘$3,500’’; and

17 (2) in clause (ii)(I), by striking ‘‘$3,500’’ and

18 inserting ‘‘$4,500’’.

19 (c) FEDERAL PLUS LOANS.—Section 428B (20

20 U.S.C. 1078–2) is amended—

21 (1) in subsection (a)(1)—

22 (A) in the matter preceding subparagraph

23 (A), by striking ‘‘Parents’’ and inserting ‘‘A

24 graduate or professional student or the parents’’;
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1 (B) in subparagraph (A), by striking ‘‘the

2 parents’’ and inserting ‘‘the graduate or profes3 sional student or the parents’’; and

4 (C) in subparagraph (B), by striking ‘‘the

5 parents’’ and inserting ‘‘the graduate or profes6 sional student or the parents’’;

7 (2) in subsection (b), by striking ‘‘any parent’’

8 and inserting ‘‘any graduate or professional student

9 or any parent’’;

10 (3) in subsection (c)(2), by striking ‘‘parent’’

11 and inserting ‘‘graduate or professional student or

12 parent’’; and

13 (4) in subsection (d)(1), by striking ‘‘the parent’’

14 and inserting ‘‘the graduate or professional student or

15 the parent’’.

16 (d) UNSUBSIDIZED STAFFORD LOANS FOR GRADUATE

17 OR PROFESSIONAL STUDENTS.—Section 428H(d)(2) (20

18 U.S.C. 1078–8(d)(2)) is amended—

19 (1) in subparagraph (C), by striking ‘‘$10,000’’

20 and inserting ‘‘$12,000’’; and

21 (2) in subparagraph (D)—

22 (A) in clause (i), by striking ‘‘$5,000’’ and

23 inserting ‘‘$7,000’’; and

24 (B) in clause (ii), by striking ‘‘$5,000’’ and

25 inserting ‘‘$7,000’’.
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1 (e) EFFECTIVE DATE OF INCREASES.—The amend2 ments made by subsections (a), (b), and (d) shall be effective

3 July 1, 2007.

4 SEC. 8006. PLUS LOAN INTEREST RATES AND ZERO SPECIAL

5 ALLOWANCE PAYMENT.

6 (a) PLUS LOANS.—Section 427A(l)(2) (20 U.S.C.

7 1077a(l)(2)) is amended by striking ‘‘7.9 percent’’ and in8 serting ‘‘8.5 percent’’.

9 (b) CONFORMING AMENDMENTS FOR SPECIAL ALLOW10 ANCES.—

11 (1) AMENDMENTS.—Subparagraph (I) of section

12 438(b)(2) (20 U.S.C. 1087–1(b)(2)) is amended—

13 (A) in clause (iii), by striking ‘‘, subject to

14 clause (v) of this subparagraph’’;

15 (B) in clause (iv), by striking ‘‘, subject to

16 clause (vi) of this subparagraph’’; and

17 (C) by striking clauses (v), (vi), and (vii)

18 and inserting the following:

19 ‘‘(v) RECAPTURE OF EXCESS INTER20 EST.—

21 ‘‘(I) EXCESS CREDITED.—With

22 respect to a loan on which the applica23 ble interest rate is determined under

24 subsection (k) or (l) of section 427A

25 and for which the first disbursement of
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1 principal is made on or after April 1,

2 2006, if the applicable interest rate for

3 any 3-month period exceeds the special

4 allowance support level applicable to

5 such loan under this subparagraph for

6 such period, then an adjustment shall

7 be made by calculating the excess inter8 est in the amount computed under sub9 clause (II) of this clause, and by cred10 iting the excess interest to the Govern11 ment not less often than annually.

12 ‘‘(II) CALCULATION OF EXCESS.—

13 The amount of any adjustment of in14 terest on a loan to be made under this

15 subsection for any quarter shall be

16 equal to—

17 ‘‘(aa) the applicable interest

18 rate minus the special allowance

19 support level determined under

20 this subparagraph; multiplied by

21 ‘‘(bb) the average daily prin22 cipal balance of the loan (not in23 cluding unearned interest added

24 to principal) during such cal25 endar quarter; divided by
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1 ‘‘(cc) four.

2 ‘‘(III) SPECIAL ALLOWANCE SUP3 PORT LEVEL.—For purposes of this

4 clause, the term ‘special allowance sup5 port level’ means, for any loan, a num6 ber expressed as a percentage equal to

7 the sum of the rates determined under

8 subclauses (I) and (III) of clause (i),

9 and applying any substitution rules

10 applicable to such loan under clauses

11 (ii), (iii), and (iv) in determining such

12 sum.’’.

13 (2) EFFECTIVE DATE.—The amendments made

14 by this subsection shall not apply with respect to any

15 special allowance payment made under section 438 of

16 the Higher Education Act of 1965 (20 U.S.C. 1087–

17 1) before April 1, 2006.

18 SEC. 8007. DEFERMENT OF STUDENT LOANS FOR MILITARY

19 SERVICE.

20 (a) FEDERAL FAMILY EDUCATION LOANS.—Section

21 428(b)(1)(M) (20 U.S.C. 1078(b)(1)(M)) is amended—

22 (1) by striking ‘‘or’’ at the end of clause (ii);

23 (2) by redesignating clause (iii) as clause (iv);

24 and
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1 (3) by inserting after clause (ii) the following

2 new clause:

3 ‘‘(iii) not in excess of 3 years during

4 which the borrower—

5 ‘‘(I) is serving on active duty dur6 ing a war or other military operation

7 or national emergency; or

8 ‘‘(II) is performing qualifying

9 National Guard duty during a war or

10 other military operation or national

11 emergency; or’’.

12 (b) DIRECT LOANS.—Section 455(f)(2) (20 U.S.C.

13 1087e(f)(2)) is amended—

14 (1) by redesignating subparagraph (C) as sub15 paragraph (D); and

16 (2) by inserting after subparagraph (B) the fol17 lowing new subparagraph:

18 ‘‘(C) not in excess of 3 years during which

19 the borrower—

20 ‘‘(i) is serving on active duty during a

21 war or other military operation or national

22 emergency; or

23 ‘‘(ii) is performing qualifying National

24 Guard duty during a war or other military

25 operation or national emergency; or’’.
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1 (c) PERKINS LOANS.—Section 464(c)(2)(A) (20 U.S.C.

2 1087dd(c)(2)(A)) is amended—

3 (1) by redesignating clauses (iii) and (iv) as

4 clauses (iv) and (v), respectively; and

5 (2) by inserting after clause (ii) the following

6 new clause:

7 ‘‘(iii) not in excess of 3 years during

8 which the borrower—

9 ‘‘(I) is serving on active duty dur10 ing a war or other military operation

11 or national emergency; or

12 ‘‘(II) is performing qualifying

13 National Guard duty during a war or

14 other military operation or national

15 emergency;’’.

16 (d) DEFINITIONS.—Section 481 (20 U.S.C. 1088) is

17 amended by adding at the end the following new subsection:

18 ‘‘(d) DEFINITIONS FOR MILITARY DEFERMENTS.—For

19 purposes of parts B, D, and E of this title:

20 ‘‘(1) ACTIVE DUTY.—The term ‘active duty’ has

21 the meaning given such term in section 101(d)(1) of

22 title 10, United States Code, except that such term

23 does not include active duty for training or attend24 ance at a service school.
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1 ‘‘(2) MILITARY OPERATION.—The term ‘military

2 operation’ means a contingency operation as such

3 term is defined in section 101(a)(13) of title 10,

4 United States Code.

5 ‘‘(3) NATIONAL EMERGENCY.—The term ‘na6 tional emergency’ means the national emergency by

7 reason of certain terrorist attacks declared by the

8 President on September 14, 2001, or subsequent na9 tional emergencies declared by the President by rea10 son of terrorist attacks.

11 ‘‘(4) SERVING ON ACTIVE DUTY.—The term ‘serv12 ing on active duty during a war or other military op13 eration or national emergency’ means service by an

14 individual who is—

15 ‘‘(A) a Reserve of an Armed Force ordered

16 to active duty under section 12301(a), 12301(g),

17 12302, 12304, or 12306 of title 10, United States

18 Code, or any retired member of an Armed Force

19 ordered to active duty under section 688 of such

20 title, for service in connection with a war or

21 other military operation or national emergency,

22 regardless of the location at which such active

23 duty service is performed; and

24 ‘‘(B) any other member of an Armed Force

25 on active duty in connection with such emer-
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1 gency or subsequent actions or conditions who

2 has been assigned to a duty station at a location

3 other than the location at which such member is

4 normally assigned.

5 ‘‘(5) QUALIFYING NATIONAL GUARD DUTY.—The

6 term ‘qualifying National Guard duty during a war

7 or other military operation or national emergency’

8 means service as a member of the National Guard on

9 full-time National Guard duty (as defined in section

10 101(d)(5) of title 10, United States Code) under a call

11 to active service authorized by the President or the

12 Secretary of Defense for a period of more than 30

13 consecutive days under section 502(f) of title 32,

14 United States Code, in connection with a war, other

15 military operation, or a national emergency declared

16 by the President and supported by Federal funds.’’.

17 (e) RULE OF CONSTRUCTION.—Nothing in the amend18 ments made by this section shall be construed to authorize

19 any refunding of any repayment of a loan.

20 (f) EFFECTIVE DATE.—The amendments made by this

21 section shall apply with respect to loans for which the first

22 disbursement is made on or after July 1, 2001.

23 SEC. 8008. ADDITIONAL LOAN TERMS AND CONDITIONS.

24 (a) DISBURSEMENT.—Section 428(b)(1)(N) (20 U.S.C.

25 1078(b)(1)(N)) is amended—
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1 (1) by striking ‘‘or’’ at the end of clause (i); and

2 (2) by striking clause (ii) and inserting the fol3 lowing:

4 ‘‘(ii) in the case of a student who is

5 studying outside the United States in a pro6 gram of study abroad that is approved for

7 credit by the home institution at which such

8 student is enrolled, and only after

9 verification of the student’s enrollment by

10 the lender or guaranty agency, are, at the

11 request of the student, disbursed directly to

12 the student by the means described in clause

13 (i), unless such student requests that the

14 check be endorsed, or the funds transfer be

15 authorized, pursuant to an authorized

16 power-of-attorney; or

17 ‘‘(iii) in the case of a student who is

18 studying outside the United States in a pro19 gram of study at an eligible foreign institu20 tion, are, at the request of the foreign insti21 tution, disbursed directly to the student,

22 only after verification of the student’s en23 rollment by the lender or guaranty agency

24 by the means described in clause (i).’’.
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1 (b) REPAYMENT PLANS: DIRECT LOANS.—Section

2 455(d)(1) (20 U.S.C. 1087e(d)(1)) is amended by striking

3 subparagraphs (A), (B), and (C) and inserting the fol4 lowing:

5 ‘‘(A) a standard repayment plan, consistent

6 with subsection (a)(1) of this section and with

7 section 428(b)(9)(A)(i);

8 ‘‘(B) a graduated repayment plan, con9 sistent with section 428(b)(9)(A)(ii);

10 ‘‘(C) an extended repayment plan, con11 sistent with section 428(b)(9)(A)(v), except that

12 the borrower shall annually repay a minimum

13 amount determined by the Secretary in accord14 ance with section 428(b)(1)(L); and’’.

15 (c) ORIGINATION FEES.—

16 (1) FFEL PROGRAM.—Paragraph (2) of section

17 438(c) (20 U.S.C. 1087–1(c)) is amended—

18 (A) by striking the designation and heading

19 of such paragraph and inserting the following:

20 ‘‘(2) AMOUNT OF ORIGINATION FEES.—

21 ‘‘(A) IN GENERAL.—’’; and

22 (B) by adding at the end the following new

23 subparagraph:

24 ‘‘(B) SUBSEQUENT REDUCTIONS.—Subpara25 graph (A) shall be applied to loans made under
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1 this part (other than loans made under sections

2 428C and 439(o))—

3 ‘‘(i) by substituting ‘2.0 percent’ for

4 ‘3.0 percent’ with respect to loans for which

5 the first disbursement of principal is made

6 on or after July 1, 2006, and before July 1,

7 2007;

8 ‘‘(ii) by substituting ‘1.5 percent’ for

9 ‘3.0 percent’ with respect to loans for which

10 the first disbursement of principal is made

11 on or after July 1, 2007, and before July 1,

12 2008;

13 ‘‘(iii) by substituting ‘1.0 percent’ for

14 ‘3.0 percent’ with respect to loans for which

15 the first disbursement of principal is made

16 on or after July 1, 2008, and before July 1,

17 2009;

18 ‘‘(iv) by substituting ‘0.5 percent’ for

19 ‘3.0 percent’ with respect to loans for which

20 the first disbursement of principal is made

21 on or after July 1, 2009, and before July 1,

22 2010; and

23 ‘‘(v) by substituting ‘0.0 percent’ for

24 ‘3.0 percent’ with respect to loans for which
 †

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1 the first disbursement of principal is made

2 on or after July 1, 2010.’’.

3 (2) DIRECT LOAN PROGRAM.—Subsection (c) of

4 section 455 (20 U.S.C. 1087e(c)) is amended—

5 (A) by striking ‘‘(c) LOAN FEE.—’’ and in6 serting the following:

7 ‘‘(c) LOAN FEE.—

8 ‘‘(1) IN GENERAL.—’’; and

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

10 ‘‘(2) SUBSEQUENT REDUCTION.—Paragraph (1)

11 shall be applied to loans made under this part, other

12 than Federal Direct Consolidation loans and Federal

13 Direct PLUS loans—

14 ‘‘(A) by substituting ‘3.0 percent’ for ‘4.0

15 percent’ with respect to loans for which the first

16 disbursement of principal is made on or after the

17 date of enactment of the Higher Education Rec18 onciliation Act of 2005, and before July 1, 2007;

19 ‘‘(B) by substituting ‘2.5 percent’ for ‘4.0

20 percent’ with respect to loans for which the first

21 disbursement of principal is made on or after

22 July 1, 2007, and before July 1, 2008;

23 ‘‘(C) by substituting ‘2.0 percent’ for ‘4.0

24 percent’ with respect to loans for which the first
 †

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1 disbursement of principal is made on or after

2 July 1, 2008, and before July 1, 2009;

3 ‘‘(D) by substituting ‘1.5 percent’ for ‘4.0

4 percent’ with respect to loans for which the first

5 disbursement of principal is made on or after

6 July 1, 2009, and before July 1, 2010; and

7 ‘‘(E) by substituting ‘1.0 percent’ for ‘4.0

8 percent’ with respect to loans for which the first

9 disbursement of principal is made on or after

10 July 1, 2010.’’.

11 (3) CONFORMING AMENDMENT.—Section

12 455(b)(8)(A) (20 U.S.C. 1087e(b)(8)(A)) is amended

13 by inserting ‘‘or origination fee’’ after ‘‘reductions in

14 the interest rate’’.

15 SEC. 8009. CONSOLIDATION LOAN CHANGES.

16 (a) CONSOLIDATION BETWEEN PROGRAMS.—Section

17 428C (20 U.S.C. 1078–3) is amended—

18 (1) in subsection (a)(3)(B)(i)—

19 (A) by inserting ‘‘or under section 455(g)’’

20 after ‘‘under this section’’ both places it appears;

21 (B) by inserting ‘‘under both sections’’ after

22 ‘‘terminates’’

23 (C) by striking ‘‘and’’ at the end of sub24 clause (III);
 †

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1 (D) by striking the period at the end of sub2 clause (IV) and inserting ‘‘; and’’; and

3 (E) by adding at the end the following new

4 subclause:

5 ‘‘(V) an individual may obtain a subse6 quent consolidation loan under section 455(g)

7 only for the purposes of obtaining an income

8 contingent repayment plan, and only if the loan

9 has been submitted to the guaranty agency for

10 default aversion.’’; and

11 (2) in subsection (b)(5), by striking the first sen12 tence and inserting the following: ‘‘In the event that

13 a lender with an agreement under subsection (a)(1) of

14 this section denies a consolidation loan application

15 submitted to the lender by an eligible borrower under

16 this section, or denies an application submitted to the

17 lender by such a borrower for a consolidation loan

18 with income-sensitive repayment terms, the Secretary

19 shall offer any such borrower who applies for it, a

20 Federal Direct Consolidation loan. The Secretary

21 shall offer such a loan to a borrower who has de22 faulted, for the purpose of resolving the default.’’.

23 (b) REPEAL OF IN-SCHOOL CONSOLIDATION.—

24 (1) DEFINITION OF REPAYMENT PERIOD.—Sec25 tion 428(b)(7)(A) (20 U.S.C. 1078(b)(7)(A)) is
 †

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1 amended by striking ‘‘shall begin—’’ and all that fol2 lows through ‘‘earlier date.’’ and inserting the fol3 lowing: ‘‘shall begin the day after 6 months after the

4 date the student ceases to carry at least one-half the

5 normal full-time academic workload (as determined

6 by the institution).’’.

7 (2) CONFORMING CHANGE TO ELIGIBLE BOR8 ROWER DEFINITION.—Section 428C(a)(3)(A)(ii)(I)

9 (20 U.S.C. 1078–3(a)(3)(A)(ii)(I)) is amended by in10 serting ‘‘as determined under section 428(b)(7)(A)’’

11 after ‘‘repayment status’’.

12 (c) ADDITIONAL AMENDMENTS.—Section 428C (20

13 U.S.C. 1078–3) is amended in subsection (a)(3), by striking

14 subparagraph (C).

15 (d) CONFORMING AMENDMENTS TO DIRECT LOAN

16 PROGRAM.—Section 455 (20 U.S.C. 1087e) is amended

17 (1) in subsection (a)(1) by inserting ‘‘428C,’’

18 after ‘‘428B,’’;

19 (2) in subsection (a)(2)—

20 (A) by striking ‘‘and’’ at the end of sub21 paragraph (B);

22 (B) by redesignating subparagraph (C) as

23 subparagraph (D); and

24 (C) by inserting after subparagraph (B) the

25 following:
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1 ‘‘(C) section 428C shall be known as ‘Fed2 eral Direct Consolidation Loans’; and ’’; and

3 (3) in subsection (g)—

4 (A) by striking the second sentence; and

5 (B) by adding at the end the following new

6 sentences: ‘‘To be eligible for a consolidation loan

7 under this part, a borrower shall meet the eligi8 bility criteria set forth in section 428C(a)(3).

9 The Secretary, upon application for such a loan,

10 shall comply with the requirements applicable to

11 a lender under section 428C(b)(1)(F).’’.

12 SEC. 8010. REQUIREMENTS FOR DISBURSEMENTS OF STU13 DENT LOANS.

14 Section 428G (20 U.S.C. 1078–7) is amended—

15 (1) in subsection (a)(3), by adding at the end the

16 following: ‘‘Notwithstanding section 422(d) of the

17 Higher Education Amendments of 1998, this para18 graph shall be effective beginning on the date of enact19 ment of the Higher Education Reconciliation Act of

20 2005.’’;

21 (2) in subsection (b)(1), by adding at the end the

22 following: ‘‘Notwithstanding section 422(d) of the

23 Higher Education Amendments of 1998, the second

24 sentence of this paragraph shall be effective beginning
 †

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1 on the date of enactment of the Higher Education

2 Reconciliation Act of 2005.’’; and

3 (3) in subsection (e), by striking ‘‘, made to a

4 student to cover the cost of attendance at an eligible

5 institution outside the United States’’.

6 SEC. 8011. SCHOOL AS LENDER.

7 Paragraph (2) of section 435(d) (20 U.S.C.

8 1085(d)(2)) is amended to read as follows:

9 ‘‘(2) REQUIREMENTS FOR ELIGIBLE INSTITU10 TIONS.—

11 ‘‘(A) IN GENERAL.—To be an eligible lender

12 under this part, an eligible institution—

13 ‘‘(i) shall employ at least one person

14 whose full-time responsibilities are limited

15 to the administration of programs of finan16 cial aid for students attending such institu17 tion;

18 ‘‘(ii) shall not be a home study school;

19 ‘‘(iii) shall not—

20 ‘‘(I) make a loan to any under21 graduate student;

22 ‘‘(II) make a loan other than a

23 loan under section 428 or 428H to a

24 graduate or professional student; or
 †

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1 ‘‘(III) make a loan to a borrower

2 who is not enrolled at that institution;

3 ‘‘(iv) shall award any contract for fi4 nancing, servicing, or administration of

5 loans under this title on a competitive basis;

6 ‘‘(v) shall offer loans that carry an

7 origination fee or an interest rate, or both,

8 that are less than such fee or rate author9 ized under the provisions of this title;

10 ‘‘(vi) shall not have a cohort default

11 rate (as defined in section 435(m)) greater

12 than 10 percent;

13 ‘‘(vii) shall, for any year for which the

14 institution engages in activities as an eligi15 ble lender, provide for a compliance audit

16 conducted in accordance with section

17 428(b)(1)(U)(iii)(I), and the regulations

18 thereunder, and submit the results of such

19 audit to the Secretary;

20 ‘‘(viii) shall use any proceeds from spe21 cial allowance payments and interest pay22 ments from borrowers, interest subsidies re23 ceived from the Department of Education,

24 and any proceeds from the sale or other dis-
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1 position of loans, for need-based grant pro2 grams; and

3 ‘‘(ix) shall have met the requirements

4 of subparagraphs (A) through (F) of this

5 paragraph as in effect on the day before the

6 date of enactment of the Higher Education

7 Reconciliation Act of 2005, and made loans

8 under this part, on or before April 1, 2006.

9 ‘‘(B) ADMINISTRATIVE EXPENSES.—An eli10 gible lender under subparagraph (A) shall be

11 permitted to use a portion of the proceeds de12 scribed in subparagraph (A)(viii) for reasonable

13 and direct administrative expenses.

14 ‘‘(C) SUPPLEMENT, NOT SUPPLANT.—An el15 igible lender under subparagraph (A) shall en16 sure that the proceeds described in subparagraph

17 (A)(viii) are used to supplement, and not to sup18 plant, non-Federal funds that would otherwise be

19 used for need-based grant programs.’’.
 †

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1 SEC. 8012. REPAYMENT BY THE SECRETARY OF LOANS OF

2 BANKRUPT, DECEASED, OR DISABLED BOR3 ROWERS; TREATMENT OF BORROWERS AT4 TENDING SCHOOLS THAT FAIL TO PROVIDE A

5 REFUND, ATTENDING CLOSED SCHOOLS, OR

6 FALSELY CERTIFIED AS ELIGIBLE TO BOR7 ROW.

8 Section 437 (20 U.S.C. 1087) is amended—

9 (1) in the section heading, by striking ‘‘CLOSED

10 SCHOOLS OR FALSELY CERTIFIED AS ELIGIBLE

11 TO BORROW’’ and inserting ‘‘SCHOOLS THAT

12 FAIL TO PROVIDE A REFUND, ATTENDING

13 CLOSED SCHOOLS, OR FALSELY CERTIFIED AS

14 ELIGIBLE TO BORROW’’; and

15 (2) in the first sentence of subsection (c)(1), by

16 inserting ‘‘or was falsely certified as a result of a

17 crime of identity theft’’ after ‘‘falsely certified by the

18 eligible institution’’.

19 SEC. 8013. ELIMINATION OF TERMINATION DATES FROM

20 TAXPAYER-TEACHER PROTECTION ACT OF

21 2004.

22 (a) EXTENSION OF LIMITATIONS ON SPECIAL ALLOW23 ANCE FOR LOANS FROM THE PROCEEDS OF TAX EXEMPT

24 ISSUES.—Section 438(b)(2)(B) (20 U.S.C. 1087–

25 1(b)(2)(B)) is amended—
 †

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1 (1) in clause (iv), by striking ‘‘and before Janu2 ary 1, 2006,’’; and

3 (2) in clause (v)(II)—

4 (A) by striking ‘‘and before January 1,

5 2006,’’ each place it appears in divisions (aa)

6 and (bb); and

7 (B) by striking ‘‘, and before January 1,

8 2006’’ in division (cc).

9 (b) ADDITIONAL LIMITATION ON SPECIAL ALLOWANCE

10 FOR LOANS FROM THE PROCEEDS OF TAX EXEMPT

11 ISSUES.—Section 438(b)(2)(B) (20 U.S.C 1087–1(b)(2)(B))

12 is further amended by adding at the end thereof the fol13 lowing new clauses:

14 ‘‘(vi) Notwithstanding clauses (i), (ii), and (v),

15 but subject to clause (vii), the quarterly rate of the

16 special allowance shall be the rate determined under

17 subparagraph (A), (E), (F), (G), (H), or (I) of this

18 paragraph, as the case may be, for a holder of

19 loans—

20 ‘‘(I) that were made or purchased on or

21 after the date of enactment of the Higher Edu22 cation Reconciliation Act of 2005; or

23 ‘‘(II) that were not earning a quarterly rate

24 of special allowance determined under clauses (i)

25 or (ii) of subparagraph (B) of this paragraph
 †

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1 (20 U.S.C. 1087–1(b)(2)(b)) as of the date of en2 actment of the Higher Education Reconciliation

3 Act of 2005.

4 ‘‘(vii) Clause (vi) shall be applied by sub5 stituting ‘December 31, 2010’ for ‘the date of enact6 ment of the Higher Education Reconciliation Act of

7 2005’ in the case of a holder of loans that—

8 ‘‘(I) was, as of the date of enactment of the

9 Higher Education Reconciliation Act of 2005,

10 and during the quarter for which the special al11 lowance is paid, a unit of State or local govern12 ment or a nonprofit private entity;

13 ‘‘(II) was, as of such date of enactment, and

14 during such quarter, not owned or controlled by,

15 or under common ownership or control with, a

16 for-profit entity; and

17 ‘‘(III) held, directly or through any sub18 sidiary, affiliate, or trustee, a total unpaid bal19 ance of principal equal to or less than

20 $100,000,000 on loans for which special allow21 ances were paid under this subparagraph in the

22 most recent quarterly payment prior to Sep23 tember 30, 2005.’’.

24 (c) ELIMINATION OF EFFECTIVE DATE LIMITATION ON

25 HIGHER TEACHER LOAN FORGIVENESS BENEFITS.—
 †

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1 (1) TECHNICAL CLARIFICATION.—The matter

2 preceding paragraph (1) of section 2 of the Taxpayer3 Teacher Protection Act of 2004 (Pub. L. 108–409; 118

4 Stat. 2299) is amended by inserting ‘‘of the Higher

5 Education Act of 1965’’ after ‘‘Section 438(b)(2)(B)’’.

6 (2) AMENDMENT.—Paragraph (3) of section 3(b)

7 of the Taxpayer-Teacher Protection Act of 2004 (20

8 U.S.C. 1078–10 note) is amended by striking ‘‘, and

9 before October 1, 2005’’.

10 (3) EFFECTIVE DATES.—The amendment made

11 by paragraph (1) shall be effective as if enacted on

12 October 30, 2004, and the amendment made by para13 graph (2) shall be effective as if enacted on October

14 1, 2005.

15 (d) COORDINATION WITH SECOND HIGHER EDU16 CATION EXTENSION ACT OF 2005.—

17 (1) REPEAL.—Section 2 of the Second Higher

18 Education Extension Act of 2005 is amended by

19 striking subsections (b) and (c).

20 (2) EFFECT ON AMENDMENTS.—The amendments

21 made by subsections (a) and (c) of this section shall

22 be effective as if the amendments made in subsections

23 (b) and (c) of section 2 of the Second Higher Edu24 cation Extension Act of 2005 had not been enacted.
 †

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1 (e) ADDITIONAL CHANGES TO TEACHER LOAN FOR2 GIVENESS PROVISIONS.—

3 (1) FFEL PROVISIONS.—Section 428J (20

4 U.S.C. 1078–10) is amended—

5 (A) in subsection (b)(1)(B), by inserting

6 after ‘‘1965’’ the following: ‘‘, or meets the re7 quirements of subsection (g)(3)’’; and

8 (B) in subsection (g), by adding at the end

9 the following new paragraph:

10 ‘‘(3) PRIVATE SCHOOL TEACHERS.—An indi11 vidual who is employed as a teacher in a private

12 school and is exempt from State certification require13 ments (unless otherwise applicable under State law),

14 may, in lieu of the requirement of subsection

15 (b)(1)(B), have such employment treated as quali16 fying employment under this section if such indi17 vidual is permitted to and does satisfy rigorous sub18 ject knowledge and skills tests by taking competency

19 tests in the applicable grade levels and subject areas.

20 For such purposes, the competency tests taken by such

21 a private school teacher shall be recognized by 5 or

22 more States for the purpose of fulfilling the highly

23 qualified teacher requirements under section 9101 of

24 the Elementary and Secondary Education Act of

25 1965, and the score achieved by such teacher on each
 †

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1 test shall equal or exceed the average passing score of

2 those 5 States.’’.

3 (2) DIRECT LOAN PROVISIONS.—Section 460 (20

4 U.S.C. 1087j) is amended—

5 (A) in subsection (b)(1)(A)(ii), by inserting

6 after ‘‘1965’’ the following: ‘‘, or meets the re7 quirements of subsection (g)(3)’’; and

8 (B) in subsection (g), by adding at the end

9 the following new paragraph:

10 ‘‘(3) PRIVATE SCHOOL TEACHERS.—An indi11 vidual who is employed as a teacher in a private

12 school and is exempt from State certification require13 ments (unless otherwise applicable under State law),

14 may, in lieu of the requirement of subsection

15 (b)(1)(A)(ii), have such employment treated as quali16 fying employment under this section if such indi17 vidual is permitted to and does satisfy rigorous sub18 ject knowledge and skills tests by taking competency

19 tests in the applicable grade levels and subject areas.

20 For such purposes, the competency tests taken by such

21 a private school teacher shall be recognized by 5 or

22 more States for the purpose of fulfilling the highly

23 qualified teacher requirements under section 9101 of

24 the Elementary and Secondary Education Act of

25 1965, and the score achieved by such teacher on each
 †

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1 test shall equal or exceed the average passing score of

2 those 5 States.’’.

3 SEC. 8014. ADDITIONAL ADMINISTRATIVE PROVISIONS.

4 (a) INSURANCE PERCENTAGE.—

5 (1) AMENDMENT.—Subparagraph (G) of section

6 428(b)(1) (20 U.S.C. 1078(b)(1)(G)) is amended to

7 read as follows:

8 ‘‘(G) insures 98 percent of the unpaid prin9 cipal of loans insured under the program, except

10 that—

11 ‘‘(i) such program shall insure 100

12 percent of the unpaid principal of loans

13 made with funds advanced pursuant to sec14 tion 428(j) or 439(q);

15 ‘‘(ii) for any loan for which the first

16 disbursement of principal is made on or

17 after July 1, 2006, the preceding provisions

18 of this subparagraph shall be applied by

19 substituting ‘97 percent’ for ‘98 percent’;

20 and

21 ‘‘(iii) notwithstanding the preceding

22 provisions of this subparagraph, such pro23 gram shall insure 100 percent of the unpaid

24 principal amount of exempt claims as de25 fined in subsection (c)(1)(G);’’.
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1 (2) EFFECTIVE DATE OF AMENDMENT.—The

2 amendment made by this subsection shall apply with

3 respect to loans for which the first disbursement of

4 principal is made on or after July 1, 2006.

5 (b) FEDERAL DEFAULT FEES.—

6 (1) IN GENERAL.—Subparagraph (H) of section

7 428(b)(1) (20 U.S.C. 1078(b)(1)(H)) is amended to

8 read as follows:

9 ‘‘(H) provides—

10 ‘‘(i) for loans for which the date of

11 guarantee of principal is before July 1,

12 2006, for the collection of a single insurance

13 premium equal to not more than 1.0 per14 cent of the principal amount of the loan, by

15 deduction proportionately from each install16 ment payment of the proceeds of the loan to

17 the borrower, and ensures that the proceeds

18 of the premium will not be used for incen19 tive payments to lenders; or

20 ‘‘(ii) for loans for which the date of

21 guarantee of principal is on or after July

22 1, 2006, for the collection, and the deposit

23 into the Federal Student Loan Reserve

24 Fund under section 422A of a Federal de25 fault fee of an amount equal to 1.0 percent
 †

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1 of the principal amount of the loan, which

2 fee shall be collected either by deduction

3 from the proceeds of the loan or by payment

4 from other non-Federal sources, and ensures

5 that the proceeds of the Federal default fee

6 will not be used for incentive payments to

7 lenders;’’.

8 (2) UNSUBSIDIZED LOANS.—Section 428H(h)

9 (20 U.S.C. 1078–8(h)) is amended by adding at the

10 end the following new sentences: ‘‘Effective for loans

11 for which the date of guarantee of principal is on or

12 after July 1, 2006, in lieu of the insurance premium

13 authorized under the preceding sentence, each State or

14 nonprofit private institution or organization having

15 an agreement with the Secretary under section

16 428(b)(1) shall collect and deposit into the Federal

17 Student Loan Reserve Fund under section 422A, a

18 Federal default fee of an amount equal to 1.0 percent

19 of the principal amount of the loan, which fee shall

20 be collected either by deduction from the proceeds of

21 the loan or by payment from other non-Federal

22 sources. The Federal default fee shall not be used for

23 incentive payments to lenders.’’.
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1 (3) VOLUNTARY FLEXIBLE AGREEMENTS.—Sec2 tion 428A(a)(1) (20 U.S.C. 1078–1(a)(1)) is

3 amended—

4 (A) by striking ‘‘or’’ at the end of subpara5 graph (A);

6 (B) by striking the period at the end of sub7 paragraph (B) and inserting ‘‘; or’’; and

8 (C) by adding at the end the following new

9 subparagraph:

10 ‘‘(C) the Federal default fee required by sec11 tion 428(b)(1)(H) and the second sentence of sec12 tion 428H(h).’’.

13 (c) TREATMENT OF EXEMPT CLAIMS.—

14 (1) AMENDMENT.—Section 428(c)(1) (20 U.S.C.

15 1078(c)(1)) is amended—

16 (A) by redesignating subparagraph (G) as

17 subparagraph (H), and moving such subpara18 graph 2 em spaces to the left; and

19 (B) by inserting after subparagraph (F) the

20 following new subparagraph:

21 ‘‘(G)(i) Notwithstanding any other provisions of

22 this section, in the case of exempt claims, the Sec23 retary shall apply the provisions of—

24 ‘‘(I) the fourth sentence of subparagraph (A)

25 by substituting ‘100 percent’ for ‘95 percent’;
 †

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1 ‘‘(II) subparagraph (B)(i) by substituting

2 ‘100 percent’ for ‘85 percent’; and

3 ‘‘(III) subparagraph (B)(ii) by substituting

4 ‘100 percent’ for ‘75 percent’.

5 ‘‘(ii) For purposes of clause (i) of this subpara6 graph, the term ‘exempt claims’ means claims with

7 respect to loans for which it is determined that the

8 borrower (or the student on whose behalf a parent has

9 borrowed), without the lender’s or the institution’s

10 knowledge at the time the loan was made, provided

11 false or erroneous information or took actions that

12 caused the borrower or the student to be ineligible for

13 all or a portion of the loan or for interest benefits

14 thereon.’’.

15 (2) EFFECTIVE DATE OF AMENDMENTS.—The

16 amendments made by this subsection shall apply with

17 respect to loans for which the first disbursement of

18 principal is made on or after July 1, 2006.

19 (d) CONSOLIDATION OF DEFAULTED LOANS.—Section

20 428(c) (20 U.S.C. 1078(c)) is further amended—

21 (1) in paragraph (2)(A)—

22 (A) by inserting ‘‘(i)’’ after ‘‘including’’;

23 and

24 (B) by inserting before the semicolon at the

25 end the following: ‘‘and (ii) requirements estab-
 †

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1 lishing procedures to preclude consolidation lend2 ing from being an excessive proportion of guar3 anty agency recoveries on defaulted loans under

4 this part’’;

5 (2) in paragraph (2)(D), by striking ‘‘paragraph

6 (6)’’ and inserting ‘‘paragraph (6)(A)’’; and

7 (3) in paragraph (6)—

8 (A) by redesignating subparagraphs (A)

9 and (B) as clauses (i) and (ii), respectively;

10 (B) by inserting ‘‘(A)’’ before ‘‘For the pur11 pose of paragraph (2)(D),’’; and

12 (C) by adding at the end the following new

13 subparagraphs:

14 ‘‘(B) A guaranty agency shall—

15 ‘‘(i) on or after October 1, 2006—

16 ‘‘(I) not charge the borrower collection

17 costs in an amount in excess of 18.5 percent

18 of the outstanding principal and interest of

19 a defaulted loan that is paid off through

20 consolidation by the borrower under this

21 title; and

22 ‘‘(II) remit to the Secretary a portion

23 of the collection charge under subclause (I)

24 equal to 8.5 percent of the outstanding prin-
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1 cipal and interest of such defaulted loan;

2 and

3 ‘‘(ii) on and after October 1, 2009, remit to

4 the Secretary the entire amount charged under

5 clause (i)(I) with respect to each defaulted loan

6 that is paid off with excess consolidation pro7 ceeds.

8 ‘‘(C) For purposes of subparagraph (B), the term

9 ‘excess consolidation proceeds’ means, with respect to

10 any guaranty agency for any Federal fiscal year be11 ginning on or after October 1, 2009, the proceeds of

12 consolidation of defaulted loans under this title that

13 exceed 45 percent of the agency’s total collections on

14 defaulted loans in such Federal fiscal year.’’.

15 (e) DOCUMENTATION OF FORBEARANCE AGREE16 MENTS.—Section 428(c) (20 U.S.C. 1078(c)) is further

17 amended—

18 (1) in paragraph (3)(A)(i)—

19 (A) by striking ‘‘in writing’’; and

20 (B) by inserting ‘‘and documented in ac21 cordance with paragraph (10)’’ after ‘‘approval

22 of the insurer’’; and

23 (2) by adding at the end the following new para24 graph:
 †

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1 ‘‘(10) DOCUMENTATION OF FORBEARANCE

2 AGREEMENTS.—For the purposes of paragraph (3),

3 the terms of forbearance agreed to by the parties shall

4 be documented by confirming the agreement of the

5 borrower by notice to the borrower from the lender,

6 and by recording the terms in the borrower’s file.’’.

7 (f) VOLUNTARY FLEXIBLE AGREEMENTS.—Section

8 428A(a) (20 U.S.C. 1078–1(a)) is further amended—

9 (1) in paragraph (1)(B), by striking ‘‘unless the

10 Secretary’’ and all that follows through ‘‘designated

11 guarantor’’;

12 (2) by striking paragraph (2);

13 (3) by redesignating paragraph (3) as para14 graph (2); and

15 (4) by striking paragraph (4).

16 (g) FRAUD; REPAYMENT REQUIRED.—Section

17 428B(a)(1) (20 U.S.C. 1078–2(a)(1)) is further amended—

18 (1) by striking ‘‘and’’ at the end of subpara19 graph (A);

20 (2) by redesignating subparagraph (B) as sub21 paragraph (C); and

22 (3) by inserting after subparagraph (A) the fol23 lowing new subparagraph:

24 ‘‘(B) in the case of a graduate or profes25 sional student or parent who has been convicted
 †

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1 of, or has pled nolo contendere or guilty to, a

2 crime involving fraud in obtaining funds under

3 this title, such graduate or professional student

4 or parent has completed the repayment of such

5 funds to the Secretary, or to the holder in the

6 case of a loan under this title obtained by fraud;

7 and’’.

8 (h) DEFAULT REDUCTION PROGRAM.—Section

9 428F(a)(1) (20 U.S.C. 1078–6(a)(1)) is amended—

10 (1) in subparagraph (A), by striking ‘‘consecu11 tive payments for 12 months’’ and inserting ‘‘9 pay12 ments made within 20 days of the due date during

13 10 consecutive months’’;

14 (2) by redesignating subparagraph (C) as sub15 paragraph (D); and

16 (3) by inserting after subparagraph (B) the fol17 lowing new subparagraph:

18 ‘‘(C) A guaranty agency may charge the

19 borrower and retain collection costs in an

20 amount not to exceed 18.5 percent of the out21 standing principal and interest at the time of

22 sale of a loan rehabilitated under subparagraph

23 (A).’’.

24 (i) EXCEPTIONAL PERFORMANCE INSURANCE RATE.—

25 Section 428I(b)(1) (20 U.S.C. 1078–9(b)(1)) is amended—
 †

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1 (1) in the heading, by striking ‘‘100 PERCENT’’

2 and inserting ‘‘99 PERCENT’’; and

3 (2) by striking ‘‘100 percent of the unpaid’’ and

4 inserting ‘‘99 percent of the unpaid’’.

5 (j) UNIFORM ADMINISTRATIVE AND CLAIMS PROCE6 DURE.—Section 432(l)(1)(H) (20 U.S.C. 1082(l)(1)(H)) is

7 amended by inserting ‘‘and anticipated graduation date’’

8 after ‘‘status change’’.

9 (1) Section 428(a)(3)(A)(v) (20 U.S.C.

10 1078(a)(3)(A)(v)) is amended—

11 (A) by striking ‘‘or’’ at the end of subclause

12 (I);

13 (B) by striking the period at the end of sub14 clause (II) and inserting ‘‘; or’’; and

15 (C) by adding after subclause (II) the fol16 lowing new subclause:

17 ‘‘(III) in the case of a loan disbursed

18 through an escrow agent, 3 days before the first

19 disbursement of the loan.’’.

20 (2) Section 428(c)(1)(A) (20 U.S.C.

21 1078(c)(1)(A)) is amended by striking ‘‘45 days’’ in

22 the last sentence and inserting ‘‘30 days’’.

23 (3) Section 428(i)(1) (20 U.S.C. 1078(i)(1)) is

24 amended by striking ‘‘21 days’’ in the third sentence

25 and inserting ‘‘10 days’’.
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1 SEC. 8015. FUNDS FOR ADMINISTRATIVE EXPENSES.

2 Section 458 is amended to read as follows:

3 ‘‘SEC. 458. FUNDS FOR ADMINISTRATIVE EXPENSES.

4 ‘‘(a) ADMINISTRATIVE EXPENSES.—

5 ‘‘(1) MANDATORY FUNDS FOR FISCAL YEAR

6 2006.—For fiscal year 2006, there shall be available to

7 the Secretary, from funds not otherwise appropriated,

8 funds to be obligated for—

9 ‘‘(A) administrative costs under this part

10 and part B, including the costs of the direct stu11 dent loan programs under this part; and

12 ‘‘(B) account maintenance fees payable to

13 guaranty agencies under part B and calculated

14 in accordance with subsections (b) and (c),

15 not to exceed (from such funds not otherwise appro16 priated) $820,000,000 in fiscal year 2006.

17 ‘‘(2) AUTHORIZATION FOR ADMINISTRATIVE

18 COSTS BEGINNING IN FISCAL YEARS 2007 THROUGH

19 2011.—For each of the fiscal years 2007 through 2011,

20 there are authorized to be appropriated such sums as

21 may be necessary for administrative costs under this

22 part and part B, including the costs of the direct stu23 dent loan programs under this part.

24 ‘‘(3) CONTINUING MANDATORY FUNDS FOR AC25 COUNT MAINTENANCE FEES.—For each of the fiscal

26 years 2007 through 2011, there shall be available to
 †

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1 the Secretary, from funds not otherwise appropriated,

2 funds to be obligated for account maintenance fees

3 payable to guaranty agencies under part B and cal4 culated in accordance with subsection (b).

5 ‘‘(4) ACCOUNT MAINTENANCE FEES.—Account

6 maintenance fees under paragraph (3) shall be paid

7 quarterly and deposited in the Agency Operating

8 Fund established under section 422B.

9 ‘‘(5) CARRYOVER.—The Secretary may carry

10 over funds made available under this section to a sub11 sequent fiscal year.

12 ‘‘(b) CALCULATION BASIS.—Account maintenance fees

13 payable to guaranty agencies under subsection (a)(3) shall

14 not exceed the basis of 0.10 percent of the original principal

15 amount of outstanding loans on which insurance was issued

16 under part B.

17 ‘‘(c) BUDGET JUSTIFICATION.—No funds may be ex18 pended under this section unless the Secretary includes in

19 the Department of Education’s annual budget justification

20 to Congress a detailed description of the specific activities

21 for which the funds made available by this section have been

22 used in the prior and current years (if applicable), the ac23 tivities and costs planned for the budget year, and the pro24 jection of activities and costs for each remaining year for
 †

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1 which administrative expenses under this section are made

2 available.’’.

3 SEC. 8016. COST OF ATTENDANCE.

4 Section 472 (20 U.S.C. 1087ll) is amended—

5 (1) by striking paragraph (4) and inserting the

6 following:

7 ‘‘(4) for less than half-time students (as deter8 mined by the institution), tuition and fees and an al9 lowance for only—

10 ‘‘(A) books, supplies, and transportation (as

11 determined by the institution);

12 ‘‘(B) dependent care expenses (determined

13 in accordance with paragraph (8)); and

14 ‘‘(C) room and board costs (determined in

15 accordance with paragraph (3)), except that a

16 student may receive an allowance for such costs

17 under this subparagraph for not more than 3 se18 mesters or the equivalent, of which not more than

19 2 semesters or the equivalent may be consecu20 tive;’’;

21 (2) in paragraph (11), by striking ‘‘and’’ after

22 the semicolon;

23 (3) in paragraph (12), by striking the period

24 and inserting ‘‘; and’’; and

25 (4) by adding at the end the following:
 †

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1 ‘‘(13) at the option of the institution, for a stu2 dent in a program requiring professional licensure or

3 certification, the one-time cost of obtaining the first

4 professional credentials (as determined by the institu5 tion).’’.

6 SEC. 8017. FAMILY CONTRIBUTION.

7 (a) FAMILY CONTRIBUTION FOR DEPENDENT STU8 DENTS.—

9 (1) AMENDMENTS.—Section 475 (20 U.S.C.

10 1087oo) is amended—

11 (A) in subsection (g)(2)(D), by striking

12 ‘‘$2,200’’ and inserting ‘‘$3,000’’; and

13 (B) in subsection (h), by striking ‘‘35’’ and

14 inserting ‘‘20’’.

15 (2) EFFECTIVE DATE.—The amendments made

16 by paragraph (1) shall apply with respect to deter17 minations of need for periods of enrollment beginning

18 on or after July 1, 2007.

19 (b) FAMILY CONTRIBUTION FOR INDEPENDENT STU20 DENTS WITHOUT DEPENDENTS OTHER THAN A SPOUSE.—

21 (1) AMENDMENTS.—Section 476 (20 U.S.C.

22 1087pp) is amended—

23 (A) in subsection (b)(1)(A)(iv)—

24 (i) in subclause (I), by striking

25 ‘‘$5,000’’ and inserting ‘‘$6,050’’;
 †

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1 (ii) in subclause (II), by striking

2 ‘‘$5,000’’ and inserting ‘‘$6,050’’; and

3 (iii) in subclause (III), by striking

4 ‘‘$8,000’’ and inserting ‘‘$9,700’’; and

5 (B) in subsection (c)(4), by striking ‘‘35’’

6 and inserting ‘‘20’’.

7 (2) EFFECTIVE DATE.—The amendments made

8 by paragraph (1) shall apply with respect to deter9 minations of need for periods of enrollment beginning

10 on or after July 1, 2007.

11 (c) FAMILY CONTRIBUTION FOR INDEPENDENT STU12 DENTS WITH DEPENDENTS OTHER THAN A SPOUSE.—

13 (1) AMENDMENT.—Section 477(c)(4) (20 U.S.C.

14 1087qq(c)(4)) is amended by striking ‘‘12’’ and in15 serting ‘‘7’’.

16 (2) EFFECTIVE DATE.—The amendment made by

17 paragraph (1) shall apply with respect to determina18 tions of need for periods of enrollment beginning on

19 or after July 1, 2007.

20 (d) REGULATIONS; UPDATED TABLES.—Section

21 478(b) (20 U.S.C. 1087rr(b)) is amended—

22 (1) in paragraph (1), by adding at the end the

23 following: ‘‘For the 2007–2008 academic year, the

24 Secretary shall revise the tables in accordance with

25 this paragraph, except that the Secretary shall in-
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1 crease the amounts contained in the table in section

2 477(b)(4) by a percentage equal to the greater of the

3 estimated percentage increase in the Consumer Price

4 Index (as determined under the preceding sentence) or

5 5 percent.’’; and

6 (2) in paragraph (2)—

7 (A) by striking ‘‘2000–2001’’ and inserting

8 ‘‘2007–2008’’; and

9 (B) by striking ‘‘1999’’ and inserting

10 ‘‘2006’’.

11 (e) EMPLOYMENT EXPENSE ALLOWANCE.—Section

12 478(h) (20 U.S.C. 1087rr(h)) is amended—

13 (1) by striking ‘‘476(b)(4)(B),’’; and

14 (2) by striking ‘‘meals away from home, apparel

15 and upkeep, transportation, and housekeeping serv16 ices’’ and inserting ‘‘food away from home, apparel,

17 transportation, and household furnishings and oper18 ations’’.

19 SEC. 8018. SIMPLIFIED NEED TEST AND AUTOMATIC ZERO

20 IMPROVEMENTS.

21 (a) AMENDMENTS.—Section 479 (20 U.S.C. 1087ss) is

22 amended—

23 (1) in subsection (b)—

24 (A) in paragraph (1)—
 †

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1 (i) in subparagraph (A), by striking

2 clause (i) and inserting the following:

3 ‘‘(i) the student’s parents—

4 ‘‘(I) file, or are eligible to file, a

5 form described in paragraph (3);

6 ‘‘(II) certify that the parents are

7 not required to file a Federal income

8 tax return; or

9 ‘‘(III) received, or the student re10 ceived, benefits at some time during the

11 previous 12-month period under a

12 means-tested Federal benefit program

13 as defined under subsection (d); and’’;

14 and

15 (ii) in subparagraph (B), by striking

16 clause (i) and inserting the following:

17 ‘‘(i) the student (and the student’s

18 spouse, if any)—

19 ‘‘(I) files, or is eligible to file, a

20 form described in paragraph (3);

21 ‘‘(II) certifies that the student

22 (and the student’s spouse, if any) is

23 not required to file a Federal income

24 tax return; or
 †

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1 ‘‘(III) received benefits at some

2 time during the previous 12-month pe3 riod under a means-tested Federal ben4 efit program as defined under sub5 section (d); and’’; and

6 (B) in the matter preceding subparagraph

7 (A) of paragraph (3), by striking ‘‘A student or

8 family files a form described in this subsection,

9 or subsection (c), as the case maybe, if the stu10 dent or family, respectively, files’’ and inserting

11 ‘‘In the case of an independent student, the stu12 dent, or in the case of a dependent student, the

13 family, files a form described in this subsection,

14 or subsection (c), as the case may be, if the stu15 dent or family, as appropriate, files’’;

16 (2) in subsection (c)—

17 (A) in paragraph (1)—

18 (i) by striking subparagraph (A) and

19 inserting the following:

20 ‘‘(A) the student’s parents—

21 ‘‘(i) file, or are eligible to file, a form

22 described in subsection (b)(3);

23 ‘‘(ii) certify that the parents are not

24 required to file a Federal income tax return;

25 or
 †

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1 ‘‘(iii) received, or the student received,

2 benefits at some time during the previous

3 12-month period under a means-tested Fed4 eral benefit program as defined under sub5 section (d); and’’; and

6 (ii) by striking subparagraph (B) and

7 inserting the following:

8 ‘‘(B) the sum of the adjusted gross income

9 of the parents is less than or equal to $20,000;

10 or’’; and

11 (B) in paragraph (2)—

12 (i) by striking subparagraph (A) and

13 inserting the following:

14 ‘‘(A) the student (and the student’s spouse,

15 if any)—

16 ‘‘(i) files, or is eligible to file, a form

17 described in subsection (b)(3);

18 ‘‘(ii) certifies that the student (and the

19 student’s spouse, if any) is not required to

20 file a Federal income tax return; or

21 ‘‘(iii) received benefits at some time

22 during the previous 12-month period under

23 a means-tested Federal benefit program as

24 defined under subsection (d); and’’; and
 †

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1 (ii) by striking subparagraph (B) and

2 inserting the following:

3 ‘‘(B) the sum of the adjusted gross income

4 of the student and spouse (if appropriate) is less

5 than or equal to $20,000.’’; and

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

7 ‘‘(d) DEFINITION OF MEANS-TESTED FEDERAL BEN8 EFIT PROGRAM.—In this section, the term ‘means-tested

9 Federal benefit program’ means a mandatory spending pro10 gram of the Federal Government, other than a program

11 under this title, in which eligibility for the program’s bene12 fits, or the amount of such benefits, are determined on the

13 basis of income or resources of the individual or family seek14 ing the benefit, and may include such programs as—

15 ‘‘(1) the supplemental security income program

16 under title XVI of the Social Security Act (42 U.S.C.

17 1381 et seq.);

18 ‘‘(2) the food stamp program under the Food

19 Stamp Act of 1977 (7 U.S.C. 2011 et seq.);

20 ‘‘(3) the free and reduced price school lunch pro21 gram established under the Richard B. Russell Na22 tional School Lunch Act (42 U.S.C. 1751 et seq.);

23 ‘‘(4) the program of block grants for States for

24 temporary assistance for needy families established
 †

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1 under part A of title IV of the Social Security Act (42

2 U.S.C. 601 et seq.);

3 ‘‘(5) the special supplemental nutrition program

4 for women, infants, and children established by sec5 tion 17 of the Child Nutrition Act of 1966 (42 U.S.C.

6 1786); and

7 ‘‘(6) other programs identified by the Sec8 retary.’’.

9 (b) EVALUATION OF SIMPLIFIED NEEDS TEST.—

10 (1) ELIGIBILITY GUIDELINES.—The Secretary of

11 Education shall regularly evaluate the impact of the

12 eligibility guidelines in subsections (b)(1)(A)(i),

13 (b)(1)(B)(i), (c)(1)(A), and (c)(2)(A) of section 479 of

14 the Higher Education Act of 1965 (20 U.S.C.

15 1087ss(b)(1)(A)(i), (b)(1)(B)(i), (c)(1)(A), and

16 (c)(2)(A)).

17 (2) MEANS-TESTED FEDERAL BENEFIT PRO18 GRAM.—For each 3-year period, the Secretary of Edu19 cation shall evaluate the impact of including the re20 ceipt of benefits by a student or parent under a

21 means-tested Federal benefit program (as defined in

22 section 479(d) of the Higher Education Act of 1965

23 (20 U.S.C. 1087ss(d)) as a factor in determining eli24 gibility under subsections (b) and (c) of section 479
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1 of the Higher Education Act of 1965 (20 U.S.C.

2 1087ss(b) and (c)).

3 SEC. 8019. ADDITIONAL NEED ANALYSIS AMENDMENTS.

4 (a) TREATING ACTIVE DUTY MEMBERS OF THE

5 ARMED FORCES AS INDEPENDENT STUDENTS.—Section

6 480(d)(3) (20 U.S.C. 1087vv(d)(3)) is amended by inserting

7 before the semicolon at the end the following: ‘‘or is cur8 rently serving on active duty in the Armed Forces for other

9 than training purposes’’.

10 (b) DEFINITION OF ASSETS.—Section 480(f)(1) (20

11 U.S.C. 1087vv(f)(1)) is amended by inserting ‘‘qualified

12 education benefits (except as provided in paragraph (3)),’’

13 after ‘‘tax shelters,’’.

14 (c) TREATMENT OF FAMILY OWNERSHIP OF SMALL

15 BUSINESSES.—Section 480(f)(2) (20 U.S.C. 1087vv(f)(2))

16 is amended—

17 (1) in subparagraph (A), by striking ‘‘or’’;

18 (2) in subparagraph (B), by striking the period

19 at the end and inserting ‘‘; or’’; and

20 (3) by adding at the end the following new sub21 paragraph:

22 ‘‘(C) a small business with not more than 100

23 full-time or full-time equivalent employees (or any

24 part of such a small business) that is owned and con25 trolled by the family.’’.
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1 (d) ADDITIONAL DEFINITIONS.—Section 480(f) is fur2 ther amended by adding at the end the following new para3 graphs:

4 ‘‘(3) A qualified education benefit shall not be consid5 ered an asset of a student for purposes of section 475.

6 ‘‘(4) In determining the value of assets in a determina7 tion of need under this title (other than for subpart 4 of

8 part A), the value of a qualified education benefit shall be—

9 ‘‘(A) the refund value of any tuition credits or

10 certificates purchased under a qualified education

11 benefit; and

12 ‘‘(B) in the case of a program in which contribu13 tions are made to an account that is established for

14 the purpose of meeting the qualified higher education

15 expenses of the designated beneficiary of the account,

16 the current balance of such account.

17 ‘‘(5) In this subsection:

18 ‘‘(A) The term ‘qualified education benefit’

19 means—

20 ‘‘(i) a qualified tuition program (as defined

21 in section 529(b)(1)(A) of the Internal Revenue

22 Code of 1986) or other prepaid tuition plan of23 fered by a State; and
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1 ‘‘(ii) a Coverdell education savings account

2 (as defined in section 530(b)(1) of the Internal

3 Revenue Code of 1986).

4 ‘‘(B) The term ‘qualified higher education ex5 penses’ has the meaning given the term in section

6 529(e) of the Internal Revenue Code of 1986.’’.

7 (e) DESIGNATED ASSISTANCE.—Section 480(j) (20

8 U.S.C. 1087vv(j)) is amended—

9 (1) in the subsection heading, by striking ‘‘; TUI10 TION PREPAYMENT PLANS’’;

11 (2) by striking paragraph (2);

12 (3) by redesignating paragraph (3) as para13 graph (2); and

14 (4) by adding at the end the following new para15 graph:

16 ‘‘(3) Notwithstanding paragraph (1) and section 472,

17 assistance not received under this title may be excluded

18 from both estimated financial assistance and cost of attend19 ance, if that assistance is provided by a State and is des20 ignated by such State to offset a specific component of the

21 cost of attendance. If that assistance is excluded from either

22 estimated financial assistance or cost of attendance, it shall

23 be excluded from both.’’.
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1 SEC. 8020. GENERAL PROVISIONS.

2 (a) ACADEMIC YEAR.—Paragraph (2) of section 481(a)

3 (20 U.S.C. 1088(a)) is amended to read as follows:

4 ‘‘(2)(A) For the purpose of any program under this

5 title, the term ‘academic year’ shall—

6 ‘‘(i) require a minimum of 30 weeks of instruc7 tional time for a course of study that measures its

8 program length in credit hours; or

9 ‘‘(ii) require a minimum of 26 weeks of instruc10 tional time for a course of study that measures its

11 program length in clock hours; and

12 ‘‘(iii) require an undergraduate course of study

13 to contain an amount of instructional time whereby

14 a full-time student is expected to complete at least—

15 ‘‘(I) 24 semester or trimester hours or 36

16 quarter credit hours in a course of study that

17 measures its program length in credit hours; or

18 ‘‘(II) 900 clock hours in a course of study

19 that measures its program length in clock hours.

20 ‘‘(B) The Secretary may reduce such minimum of 30

21 weeks to not less than 26 weeks for good cause, as deter22 mined by the Secretary on a case-by-case basis, in the case

23 of an institution of higher education that provides a 2-year

24 or 4-year program of instruction for which the institution

25 awards an associate or baccalaureate degree.’’.
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1 (b) DISTANCE EDUCATION: ELIGIBLE PROGRAM.—Sec2 tion 481(b) (20 U.S.C. 1088(b)) is amended by adding at

3 the end the following new paragraphs:

4 ‘‘(3) An otherwise eligible program that is offered in

5 whole or in part through telecommunications is eligible for

6 the purposes of this title if the program is offered by an

7 institution, other than a foreign institution, that has been

8 evaluated and determined (before or after the date of enact9 ment of the Higher Education Reconciliation Act of 2005)

10 to have the capability to effectively deliver distance edu11 cation programs by an accrediting agency or association

12 that—

13 ‘‘(A) is recognized by the Secretary under sub14 part 2 of part H; and

15 ‘‘(B) has evaluation of distance education pro16 grams within the scope of its recognition, as described

17 in section 496(n)(3).

18 ‘‘(4) For purposes of this title, the term ‘eligible pro19 gram’ includes an instructional program that, in lieu of

20 credit hours or clock hours as the measure of student learn21 ing, utilizes direct assessment of student learning, or recog22 nizes the direct assessment of student learning by others,

23 if such assessment is consistent with the accreditation of

24 the institution or program utilizing the results of the assess25 ment. In the case of a program being determined eligible
 †

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1 for the first time under this paragraph, such determination

2 shall be made by the Secretary before such program is con3 sidered to be an eligible program.’’.

4 (c) CORRESPONDENCE COURSES.—Section 484(l)(1)

5 (20 U.S.C. 1091(l)(1)) is amended—

6 (1) in subparagraph (A)—

7 (A) by striking ‘‘for a program of study of

8 1 year or longer’’; and

9 (B) by striking ‘‘unless the total’’ and all

10 that follows through ‘‘courses at the institution’’;

11 and

12 (2) by amending subparagraph (B) to read as

13 follows:

14 ‘‘(B) EXCEPTION.—Subparagraph (A) shall

15 not apply to an institution or school described in

16 section 3(3)(C) of the Carl D. Perkins Vocational

17 and Technical Education Act of 1998.’’.

18 SEC. 8021. STUDENT ELIGIBILITY.

19 (a) FRAUD: REPAYMENT REQUIRED.—Section 484(a)

20 (20 U.S.C. 1091(a)) is amended—

21 (1) by striking the period at the end of para22 graph (5) and inserting ‘‘; and’’; and

23 (2) by adding at the end the following new para24 graph:
 †

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1 ‘‘(6) if the student has been convicted of, or has

2 pled nolo contendere or guilty to, a crime involving

3 fraud in obtaining funds under this title, have com4 pleted the repayment of such funds to the Secretary,

5 or to the holder in the case of a loan under this title

6 obtained by fraud.’’.

7 (b) VERIFICATION OF INCOME DATE.—Paragraph (1)

8 of section 484(q) (20 U.S.C. 1091(q)) is amended to read

9 as follows:

10 ‘‘(1) CONFIRMATION WITH IRS.—The Secretary

11 of Education, in cooperation with the Secretary of the

12 Treasury, is authorized to confirm with the Internal

13 Revenue Service the information specified in section

14 6103(l)(13) of the Internal Revenue Code of 1986 re15 ported by applicants (including parents) under this

16 title on their Federal income tax returns for the pur17 pose of verifying the information reported by appli18 cants on student financial aid applications.’’.

19 (c) SUSPENSION OF ELIGIBILITY FOR DRUG OF20 FENSES.—Section 484(r)(1) (20 U.S.C. 1091(r)(1)) is

21 amended by striking everything preceding the table and in22 serting the following:

23 ‘‘(1) IN GENERAL.—A student who is convicted

24 of any offense under any Federal or State law involv25 ing the possession or sale of a controlled substance for
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1 conduct that occurred during a period of enrollment

2 for which the student was receiving any grant, loan,

3 or work assistance under this title shall not be eligible

4 to receive any grant, loan, or work assistance under

5 this title from the date of that conviction for the pe6 riod of time specified in the following table:’’.

7 SEC. 8022. INSTITUTIONAL REFUNDS.

8 Section 484B (20 U.S.C. 1091b) is amended—

9 (1) in the matter preceding clause (i) of sub10 section (a)(2)(A), by striking ‘‘a leave of’’ and insert11 ing ‘‘1 or more leaves of’’;

12 (2) in subsection (a)(3)(B)(ii), by inserting ‘‘(as

13 determined in accordance with subsection (d))’’ after

14 ‘‘student has completed’’;

15 (3) in subsection (a)(3)(C)(i), by striking ‘‘grant

16 or loan assistance under this title’’ and inserting

17 ‘‘grant assistance under subparts 1 and 3 of part A,

18 or loan assistance under parts B, D, and E,’’;

19 (4) in subsection (a)(4), by amending subpara20 graph (A) to read as follows:

21 ‘‘(A) IN GENERAL.—After determining the

22 eligibility of the student for a late disbursement

23 or post-withdrawal disbursement (as required in

24 regulations prescribed by the Secretary), the in25 stitution of higher education shall contact the
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1 borrower and obtain confirmation that the loan

2 funds are still required by the borrower. In mak3 ing such contact, the institution shall explain to

4 the borrower the borrower’s obligation to repay

5 the funds following any such disbursement. The

6 institution shall document in the borrower’s file

7 the result of such contact and the final deter8 mination made concerning such disbursement.’’;

9 (5) in subsection (b)(1), by inserting ‘‘not later

10 than 45 days from the determination of withdrawal’’

11 after ‘‘return’’;

12 (6) in subsection (b)(2), by amending subpara13 graph (C) to read as follows:

14 ‘‘(C) GRANT OVERPAYMENT REQUIRE15 MENTS.—

16 ‘‘(i) IN GENERAL.—Notwithstanding

17 subparagraphs (A) and (B), a student shall

18 only be required to return grant assistance

19 in the amount (if any) by which—

20 ‘‘(I) the amount to be returned by

21 the student (as determined under sub22 paragraphs (A) and (B)), exceeds

23 ‘‘(II) 50 percent of the total grant

24 assistance received by the student
 †

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1 under this title for the payment period

2 or period of enrollment.

3 ‘‘(ii) MINIMUM.—A student shall not

4 be required to return amounts of $50 or

5 less.’’;

6 (7) in subsection (d), by striking ‘‘(a)(3)(B)(i)’’

7 and inserting ‘‘(a)(3)(B)’’; and

8 (8) in subsection (d)(2), by striking ‘‘clock

9 hours—’’ and all that follows through the period and

10 inserting ‘‘clock hours scheduled to be completed by

11 the student in that period as of the day the student

12 withdrew.’’.

13 SEC. 8023. COLLEGE ACCESS INITIATIVE.

14 Part G is further amended by inserting after section

15 485C (20 U.S.C. 1092c) the following new section:

16 ‘‘SEC. 485D. COLLEGE ACCESS INITIATIVE.

17 ‘‘(a) STATE-BY-STATE INFORMATION.—The Secretary

18 shall direct each guaranty agency with which the Secretary

19 has an agreement under section 428(c) to provide to the

20 Secretary the information necessary for the development of

21 Internet web links and access for students and families to

22 a comprehensive listing of the postsecondary education op23 portunities, programs, publications, Internet web sites, and

24 other services available in the States for which such agency

25 serves as the designated guarantor.
 †

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1 ‘‘(b) GUARANTY AGENCY ACTIVITIES.—

2 ‘‘(1) PLAN AND ACTIVITY REQUIRED.—Each

3 guaranty agency with which the Secretary has an

4 agreement under section 428(c) shall develop a plan,

5 and undertake the activity necessary, to gather the in6 formation required under subsection (a) and to make

7 such information available to the public and to the

8 Secretary in a form and manner as prescribed by the

9 Secretary.

10 ‘‘(2) ACTIVITIES.—Each guaranty agency shall

11 undertake such activities as are necessary to promote

12 access to postsecondary education for students through

13 providing information on college planning, career

14 preparation, and paying for college. The guaranty

15 agency shall publicize such information and coordi16 nate such activities with other entities that either pro17 vide or distribute such information in the States for

18 which such guaranty agency serves as the designated

19 guarantor.

20 ‘‘(3) FUNDING.—The activities required by this

21 section may be funded from the guaranty agency’s

22 Operating Fund established pursuant to section 422B

23 and, to the extent funds remain, from earnings on the

24 restricted account established pursuant to section

25 422(h)(4).
 †

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1 ‘‘(4) RULE OF CONSTRUCTION.—Nothing in this

2 subsection shall be construed to require a guaranty

3 agency to duplicate any efforts under way on the date

4 of enactment of the Higher Education Reconciliation

5 Act of 2005 that meet the requirements of this section.

6 ‘‘(c) ACCESS TO INFORMATION.—

7 ‘‘(1) SECRETARY’S RESPONSIBILITY.—The Sec8 retary shall ensure the availability of the information

9 provided, by the guaranty agencies in accordance

10 with this section, to students, parents, and other in11 terested individuals, through Internet web links or

12 other methods prescribed by the Secretary.

13 ‘‘(2) GUARANTY AGENCY RESPONSIBILITY.—The

14 guaranty agencies shall ensure that the information

15 required by this section is available without charge in

16 printed format for students and parents requesting

17 such information.

18 ‘‘(3) PUBLICITY.—Not later than 270 days after

19 the date of enactment of the Higher Education Rec20 onciliation Act of 2005, the Secretary and guaranty

21 agencies shall publicize the availability of the infor22 mation required by this section, with special empha23 sis on ensuring that populations that are tradition24 ally underrepresented in postsecondary education are

25 made aware of the availability of such information.’’.
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1 SEC. 8024. WAGE GARNISHMENT REQUIREMENT.

2 Section 488A(a)(1) (20 U.S.C. 1095a(a)(1)) is amend3 ed by striking ‘‘10 percent’’ and inserting ‘‘15 percent’’.

4 Subtitle B—Pensions

5 SEC. 8201. INCREASES IN PBGC PREMIUMS.

6 (a) FLAT-RATE PREMIUMS.—

7 (1) SINGLE-EMPLOYER PLANS.—

8 (A) IN GENERAL.—Clause (i) of section

9 4006(a)(3)(A) of the Employee Retirement In10 come Security Act of 1974 (29 U.S.C.

11 1306(a)(3)(A)) is amended by striking ‘‘$19’’

12 and inserting ‘‘$30’’.

13 (B) ADJUSTMENT FOR INFLATION.—Section

14 4006(a)(3) of such Act (29 U.S.C. 1306(a)(3)) is

15 amended by adding at the end the following new

16 subparagraph:

17 ‘‘(F) For each plan year beginning in a calendar year

18 after 2006, there shall be substituted for the premium rate

19 specified in clause (i) of subparagraph (A) an amount equal

20 to the greater of—

21 ‘‘(i) the product derived by multiplying the pre22 mium rate specified in clause (i) of subparagraph (A)

23 by the ratio of—

24 ‘‘(I) the national average wage index (as de25 fined in section 209(k)(1) of the Social Security

26 Act) for the first of the 2 calendar years pre-
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1 ceding the calendar year in which such plan

2 year begins, to

3 ‘‘(II) the national average wage index (as so

4 defined) for 2004; and

5 ‘‘(ii) the premium rate in effect under clause (i)

6 of subparagraph (A) for plan years beginning in the

7 preceding calendar year.

8 If the amount determined under this subparagraph is not

9 a multiple of $1, such product shall be rounded to the near10 est multiple of $1.’’.

11 (2) MULTIEMPLOYER PLANS.—

12 (A) IN GENERAL.—Section 4006(a)(3)(A) of

13 such Act (29 U.S.C. 1306(a)(3)(A)) is

14 amended—

15 (i) in clause (iii)—

16 (I) by inserting ‘‘and before Janu17 ary 1, 2006,’’ after ‘‘Act of 1980,’’; and

18 (II) by striking the period at the

19 end and inserting ‘‘, or’’; and

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

21 ‘‘(iv) in the case of a multiemployer plan, for

22 plan years beginning after December 31, 2005, $8.00

23 for each individual who is a participant in such plan

24 during the applicable plan year.’’.
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1 (B) ADJUSTMENT FOR INFLATION.—Section

2 4006(a)(3) of such Act (29 U.S.C. 1306(a)(3)),

3 as amended by this subsection, is amended by

4 adding at the end the following new subpara5 graph:

6 ‘‘(G) For each plan year beginning in a calendar year

7 after 2006, there shall be substituted for the premium rate

8 specified in clause (iv) of subparagraph (A) an amount

9 equal to the greater of—

10 ‘‘(i) the product derived by multiplying the pre11 mium rate specified in clause (iv) of subparagraph

12 (A) by the ratio of—

13 ‘‘(I) the national average wage index (as de14 fined in section 209(k)(1) of the Social Security

15 Act) for the first of the 2 calendar years pre16 ceding the calendar year in which such plan

17 year begins, to

18 ‘‘(II) the national average wage index (as so

19 defined) for 2004; and

20 ‘‘(ii) the premium rate in effect under clause (iv)

21 of subparagraph (A) for plan years beginning in the

22 preceding calendar year.

23 If the amount determined under this subparagraph is not

24 a multiple of $1, such product shall be rounded to the near25 est multiple of $1.’’.
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1 (b) PREMIUM RATE FOR CERTAIN TERMINATED SIN2 GLE-EMPLOYER PLANS.—Subsection (a) of section 4006 of

3 such Act (29 U.S.C. 1306) is amended by adding at the

4 end the following:

5 ‘‘(7) PREMIUM RATE FOR CERTAIN TERMINATED SIN6 GLE-EMPLOYER PLANS.—

7 ‘‘(A) IN GENERAL.—If there is a termination of

8 a single-employer plan under clause (ii) or (iii) of

9 section 4041(c)(2)(B) or section 4042, there shall be

10 payable to the corporation, with respect to each appli11 cable 12-month period, a premium at a rate equal to

12 $1,250 multiplied by the number of individuals who

13 were participants in the plan immediately before the

14 termination date. Such premium shall be in addition

15 to any other premium under this section.

16 ‘‘(B) SPECIAL RULE FOR PLANS TERMINATED IN

17 BANKRUPTCY REORGANIZATION.—In the case of a sin18 gle-employer plan terminated under section

19 4041(c)(2)(B)(ii) or under section 4042 during pend20 ency of any bankruptcy reorganization proceeding

21 under chapter 11 of title 11, United States Code, or

22 under any similar law of a State or a political sub23 division of a State (or a case described in section

24 4041(c)(2)(B)(i) filed by or against such person has

25 been converted, as of such date, to such a case in
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1 which reorganization is sought), subparagraph (A)

2 shall not apply to such plan until the date of the dis3 charge or dismissal of such person in such case.

4 ‘‘(C) APPLICABLE 12-MONTH PERIOD.—For pur5 poses of subparagraph (A)—

6 ‘‘(i) IN GENERAL.—The term ‘applicable 12-

7 month period’ means—

8 ‘‘(I) the 12-month period beginning

9 with the first month following the month in

10 which the termination date occurs, and

11 ‘‘(II) each of the first two 12-month pe12 riods immediately following the period de13 scribed in subclause (I).

14 ‘‘(ii) PLANS TERMINATED IN BANKRUPTCY

15 REORGANIZATION.—In any case in which the re16 quirements of subparagraph (B)(i)(I) are met in

17 connection with the termination of the plan with

18 respect to 1 or more persons described in such

19 subparagraph, the 12-month period described in

20 clause (i)(I) shall be the 12-month period begin21 ning with the first month following the month

22 which includes the earliest date as of which each

23 such person is discharged or dismissed in the

24 case described in such clause in connection with

25 such person.
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1 ‘‘(D) COORDINATION WITH SECTION 4007.—

2 ‘‘(i) Notwithstanding section 4007—

3 ‘‘(I) premiums under this paragraph

4 shall be due within 30 days after the begin5 ning of any applicable 12-month period,

6 and

7 ‘‘(II) the designated payor shall be the

8 person who is the contributing sponsor as of

9 immediately before the termination date.

10 ‘‘(ii) The fifth sentence of section 4007(a)

11 shall not apply in connection with premiums de12 termined under this paragraph.

13 ‘‘(E) TERMINATION.—Subparagraph (A) shall

14 not apply with respect to any plan terminated after

15 December 31, 2010.’’.

16 (c) CONFORMING AMENDMENT.—Section

17 4006(a)(3)(B) of such Act (29 U.S.C. 1306(a)(3)(B)) is

18 amended by striking ‘‘subparagraph (A)(iii)’’ and inserting

19 ‘‘clause (iii) or (iv) of subparagraph (A)’’.

20 (d) EFFECTIVE DATES.—

21 (1) IN GENERAL.—Except as otherwise provided

22 in this subsection, the amendments made by this sec23 tion shall apply to plan years beginning after Decem24 ber 31, 2005.
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1 (2) PREMIUM RATE FOR CERTAIN TERMINATED

2 SINGLE-EMPLOYER PLANS.—

3 (A) IN GENERAL.—Except as provided in

4 subparagraph (B), the amendment made by sub5 section (b) shall apply to plans terminated after

6 December 31, 2005.

7 (B) SPECIAL RULE FOR PLANS TERMINATED

8 IN BANKRUPTCY.—The amendment made by sub9 section (b) shall not apply to a termination of

10 a single-employer plan that is terminated during

11 the pendency of any bankruptcy reorganization

12 proceeding under chapter 11 of title 11, United

13 States Code (or under any similar law of a State

14 or political subdivision of a State), if the pro15 ceeding is pursuant to a bankruptcy filing occur16 ring before October 18, 2005.

17 TITLE IX—LIHEAP PROVISIONS

18 SEC. 9001. FUNDING AVAILABILITY.

19 (a) IN GENERAL.—In addition to amounts otherwise

20 made available, there are appropriated, out of any money

21 in the Treasury not otherwise appropriated, to the Sec22 retary of Health and Human Services for a 1-time only

23 obligation and expenditure—

24 (1) $250,000,000 for fiscal year 2007 for alloca25 tion under section 2604(a) through (d) of the Low-In-
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1 come Home Energy Assistance Act of 1981 (42 U.S.C.

2 8623(a) through (d)); and

3 (2) $750,000,000 for fiscal year 2007 for alloca4 tion under section 2604(e) of the Low-Income Home

5 Energy Assistance Act of 1981 (42 U.S.C. 8623(e)).

6 (b) SUNSET.—The provisions of this section shall ter7 minate, be null and void, and have no force and effect what8 soever after September 30, 2007. No monies provided for

9 under this section shall be available after such date.

10 TITLE X—JUDICIARY RELATED

11 PROVISIONS

12 Subtitle A—Civil Filing

13 Adjustments

14 SEC. 10001. CIVIL CASE FILING FEE INCREASES.

15 (a) CIVIL ACTIONS FILED IN DISTRICT COURTS.—Sec16 tion 1914(a) of title 28, United States Code, is amended

17 by striking ‘‘$250’’ and inserting ‘‘$350’’.

18 (b) APPEALS FILED IN COURTS OF APPEALS.—The

19 $250 fee for docketing a case on appeal or review, or dock20 eting any other proceeding, in a court of appeals, as pre21 scribed by the Judicial Conference, effective as of January

22 1, 2005, under section 1913 of title 28, United States Code,

23 shall be increased to $450.

24 (c) EXPENDITURE LIMITATION.—Incremental amounts

25 collected by reason of the enactment of this section shall be
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1 deposited in a special fund in the Treasury to be established

2 after the enactment of this Act. Such amounts shall be

3 available for the purposes specified in section 1931(a) of

4 title 28, United States Code, but only to the extent specifi5 cally appropriated by an Act of Congress enacted after the

6 enactment of this Act.

7 (d) EFFECTIVE DATE.—This section and the amend8 ment made by this section shall take effect 60 days after

9 the date of the enactment of this Act.

10 Subtitle B—Bankruptcy Fees

11 SEC. 11101. BANKRUPTCY FEES.

12 (a) BANKRUPTCY FILING FEES.—Section 1930(a) of

13 title 28, United States Code, is amended—

14 (1) in paragraph (1)—

15 (A) in subparagraph (A) by striking

16 ‘‘$220’’ and inserting ‘‘$245’’; and

17 (B) in subparagraph (B) by striking

18 ‘‘$150’’ and inserting ‘‘$235’’; and

19 (2) in paragraph (2) by striking ‘‘$1,000’’ and

20 inserting ‘‘$2,750’’.

21 (b) EXPENDITURE LIMITATION.—Incremental

22 amounts collected by reason of the amendments made by

23 subsection (a) shall be deposited in a special fund in the

24 Treasury to be established after the enactment of this Act.

25 Such amounts shall be available for the purposes specified
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1 in section 1931(a) of title 28, United States Code, but only

2 to the extent specifically appropriated by an Act of Congress

3 enacted after the enactment of this Act.

4 (c) EFFECTIVE DATE.—This section and the amend5 ments made by this section shall take effect 60 days after

6 the date of the enactment of this Act.

Attest:

Secretary.
109TH CONGRESS

1ST SESSION S. 1932

SENATE AMENDMENT TO

HOUSE AMENDMENT