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[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[S. 1932 Engrossed Amendment Senate (EAS)]

  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  

                  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:

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Deficit Reduction Act of 2005''.

SEC. 2. TABLE OF TITLES.

    The table of titles is as follows:

                    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

                    TITLE I--AGRICULTURE PROVISIONS

SECTION 1001. SHORT TITLE.

    This title may be cited as the ``Agricultural Reconciliation Act of 
2005''.

                     Subtitle A--Commodity Programs

SEC. 1101. NATIONAL DAIRY MARKET LOSS PAYMENTS.

    (a) Amount.--Section 1502(c) of the Farm Security and Rural 
Investment Act of 2002 (7 U.S.C. 7982(c)) is amended by striking 
paragraph (3) and inserting the following new paragraph:
            ``(3)(A) during the period beginning on the first day of 
        the month the producers on a dairy farm enter into a contract 
        under this section and ending on September 30, 2005, 45 
        percent;
            ``(B) during the period beginning on October 1, 2005, and 
        ending on August 31, 2007, 34 percent; and
            ``(C) during the period beginning on September 1, 2007, 0 
        percent.''.
    (b) Duration.--Section 1502 of the Farm Security and Rural 
Investment Act of 2002 (7 U.S.C. 7982) is amended by striking ``2005'' 
each place it appears in subsections (f) and (g)(1) and inserting 
``2007''.
    (c) Conforming Amendments.--Section 1502 of the Farm Security and 
Rural Investment Act of 2002 (7 U.S.C. 7982) is amended--
            (1) in subsection (g)(1), by striking ``and subsection 
        (h)''; and
            (2) by striking subsection (h).

SEC. 1102. ADVANCE DIRECT PAYMENTS.

    (a) Covered Commodities.--Section 1103(d)(2) of the Farm Security 
and Rural Investment Act of 2002 (7 U.S.C. 7913(d)(2)) is amended in 
the first sentence by striking ``2007 crop years'' and inserting ``2005 
crop years, up to 40 percent of the direct payment for a covered 
commodity for the 2006 crop year, and up to 22 percent of the direct 
payment for a covered commodity for the 2007 crop year,''.
    (b) Peanuts.--Section 1303(e)(2) of the Farm Security and Rural 
Investment Act of 2002 (7 U.S.C. 7953(e)(2)) is amended in the first 
sentence by striking ``2007 crop years'' and inserting ``2005 crop 
years, up to 40 percent of the direct payment for the 2006 crop year, 
and up to 22 percent of the direct payment for the 2007 crop year,''.

SEC. 1103. COTTON COMPETITIVENESS PROVISIONS.

    (a) Repeal of Authority to Issue Cotton User Marketing 
Certificates.--Section 1207 of the Farm Security and Rural Investment 
Act of 2002 (7 U.S.C. 7937) is amended--
            (1) by striking subsection (a); and
            (2) in subsection (b)(1)--
                    (A) in subparagraph (B), by striking ``, adjusted 
                for the value of any certificate issued under 
                subsection (a),''; and
                    (B) in subparagraph (C), by striking ``, for the 
                value of any certificates issued under subsection 
                (a)''.
    (b) Effective Date.--The amendments made by this section take 
effect on August 1, 2006.

                        Subtitle B--Conservation

SEC. 1201. WATERSHED REHABILITATION PROGRAM.

    The authority to obligate funds previously made available under 
section 14(h)(1) of the Watershed Protection and Flood Prevention Act 
(16 U.S.C. 1012(h)(1)) for a fiscal year and unobligated as of October 
1, 2006, is hereby cancelled effective on that date.

SEC. 1202. CONSERVATION SECURITY PROGRAM.

    (a) Extension.--Section 1238A(a) of the Food Security Act of 1985 
(16 U.S.C. 3838a(a)) is amended by striking ``2007'' and inserting 
``2011''.
    (b) Funding.--Section 1241(a)(3) of the Food Security Act of 1985 
(16 U.S.C. 3841(a)(3)) is amended by striking ``not more than 
$6,037,000,000'' and all that follows through ``2014.'' and inserting 
the following: ``not more than--
                    ``(A) $1,954,000,000 for the period of fiscal years 
                2006 through 2010; and
                    ``(B) $5,650,000,000 for the period of fiscal years 
                2006 through 2015.''.

SEC. 1203. ENVIRONMENTAL QUALITY INCENTIVES PROGRAM.

    (a) Extension.--Section 1240B(a)(1) of the Food Security Act of 
1985 (16 U.S.C. 3839aa-2(a)(1)) is amended by striking ``2007'' and 
inserting ``2010''.
    (b) Limitation on Payments.--Section 1240G of the Food Security Act 
of 1985 (16 U.S.C. 3839aa-7) is amended by striking ``the period of 
fiscal years 2002 through 2007'' and inserting ``any six-year period''.
    (c) Funding.--Section 1241(a)(6) of the Food Security Act of 1985 
(16 U.S.C. 3841(a)(6)) is amended--
            (1) by striking ``and'' at the end of subparagraph (D); and
            (2) by striking subparagraph (E) and inserting the 
        following new subparagraphs:
                    ``(E) $1,270,000,000 in each of fiscal years 2007 
                through 2009; and
                    ``(F) $1,300,000,000 in fiscal year 2010.''.

                           Subtitle C--Energy

SEC. 1301. RENEWABLE ENERGY SYSTEMS AND ENERGY EFFICIENCY IMPROVEMENTS 
              PROGRAM.

    Section 9006(f) of the Farm Security and Rural Investment Act of 
2002 (7 U.S.C. 8106(f)) is amended by striking ``2007'' and inserting 
``2006 and $3,000,000 for fiscal year 2007''.

                     Subtitle D--Rural Development

SEC. 1401. ENHANCED ACCESS TO BROADBAND TELECOMMUNICATIONS SERVICES IN 
              RURAL AREAS.

    The authority to obligate funds previously made available under 
section 601(j)(1) of the Rural Electrification Act of 1936 for a fiscal 
year and unobligated as of October 1, 2006, is hereby cancelled 
effective on that date.

SEC. 1402. VALUE-ADDED AGRICULTURAL PRODUCT MARKET DEVELOPMENT GRANTS.

    The authority to obligate funds previously made available under 
section 231(b)(4) of the Agricultural Risk Protection Act of 2000 (Pub. 
L. 106-224; 7 U.S.C. 1621 note) for a fiscal year and unobligated as of 
October 1, 2006, is hereby cancelled effective on that date.

SEC. 1403. RURAL BUSINESS INVESTMENT PROGRAM.

    (a) Termination of Fiscal Year 2007 and Subsequent Funding.--
Subsection (a)(1) of section 384S of the Consolidated Farm and Rural 
Development Act (7 U.S.C. 2009cc-18) is amended by inserting after 
``necessary'' the following: ``through fiscal year 2006''.
    (b) Cancellation of Unobligated Prior-Year Funds.--The authority to 
obligate funds previously made available under such section and 
unobligated as of October 1, 2006, is hereby cancelled effective on 
that date.

SEC. 1404. RURAL BUSINESS STRATEGIC INVESTMENT GRANTS.

    The authority to obligate funds previously made available under 
section 385E of the Consolidated Farm and Rural Development Act and 
unobligated as of October 1, 2006, is hereby cancelled effective on 
that date.

SEC. 1405. RURAL FIREFIGHTERS AND EMERGENCY PERSONNEL GRANTS.

    (a) Termination of Fiscal Year 2007 Funding.--Subsection (c) of 
section 6405 of the Farm Security and Rural Investment Act of 2002 (7 
U.S.C. 2655) is amended by striking ``2007'' and inserting ``2006''.
    (b) Cancellation of Unobligated Prior-Year Funds.--The authority to 
obligate funds previously made available under such section for a 
fiscal year and unobligated as of October 1, 2006, is hereby cancelled 
effective on that date.

                          Subtitle E--Research

SEC. 1501. INITIATIVE FOR FUTURE FOOD AND AGRICULTURE SYSTEMS.

    (a) Termination of Fiscal Year 2007, 2008, and 2009 Transfers.--
Subsection (b)(3)(D) of section 401 of the Agricultural Research, 
Extension, and Education Reform Act of 1998 (7 U.S.C. 7621) is amended 
by striking ``2006'' and inserting ``2009''.
    (b) Termination of Multi-Year Availability of Fiscal Year 2006 
Funds.--Paragraph (6) of subsection (f) of such section is amended to 
read as follows:
            ``(6) Availability of funds.--
                    ``(A) Two-year availability.--Except as provided in 
                subparagraph (B), funds for grants under this section 
                shall be available to the Secretary for obligation for 
                a 2-year period beginning on the date of the transfer 
                of the funds under subsection (b).
                    ``(B) Exception for fiscal year 2006 transfer.--In 
                the case of the funds required to be transferred by 
                subsection (b)(3)(C), the funds shall be available to 
                the Secretary for obligation for the 1-year period 
                beginning on October 1, 2005.''

           TITLE II--HOUSING AND DEPOSIT INSURANCE PROVISIONS

                   Subtitle A--FHA Asset Disposition

SEC. 2001. DEFINITIONS.

    For purposes of this subtitle, the following definitions shall 
apply:
            (1) The term ``affordability requirements'' means any 
        requirements or restrictions imposed by the Secretary, at the 
        time of sale, on a multifamily real property or a multifamily 
        loan, such as use restrictions, rent restrictions, and 
        rehabilitation requirements.
            (2) The term ``discount sale'' means the sale of a 
        multifamily real property in a transaction, such as a 
        negotiated sale, in which the sale price is lower than the 
        property market value and is set outside of a competitive 
        bidding process that has no affordability requirements.
            (3) The term ``discount loan sale'' means the sale of a 
        multifamily loan in a transaction, such as a negotiated sale, 
        in which the sale price is lower than the loan market value and 
        is set outside of a competitive bidding process that has no 
        affordability requirements.
            (4) The term ``loan market value'' means the value of a 
        multifamily loan, without taking into account any affordability 
        requirements.
            (5) The term ``multifamily real property'' means any rental 
        or cooperative housing project of 5 or more units owned by the 
        Secretary that prior to acquisition by the Secretary was 
        security for a loan or loans insured under title II of the 
        National Housing Act.
            (6) The term ``multifamily loan'' means a loan held by the 
        Secretary and secured by a multifamily rental or cooperative 
        housing project of 5 or more units that was formerly insured 
        under title II of the National Housing Act.
            (7) The term ``property market value'' means the value of a 
        multifamily real property for its current use, without taking 
        into account any affordability requirements.
            (8) The term ``Secretary'' means the Secretary of Housing 
        and Urban Development.

SEC. 2002. APPROPRIATED FUNDS REQUIREMENT FOR BELOW-MARKET SALES.

    (a) Discount Sales.--Notwithstanding any other provision of law, 
except for affordability requirements for the elderly and disabled 
required by statute, disposition by the Secretary of a multifamily real 
property during fiscal years 2006 through 2010 through a discount sale 
under sections 207(l) or 246 of the National Housing Act (12 U.S.C. 
1713(l), 1715z-11), section 203 of the Housing and Community 
Development Amendments of 1978 (12 U.S.C. 1701z-11), or section 204 of 
the Departments of Veterans Affairs and Housing and Urban Development, 
and Independent Agencies Appropriations Act, 1997 (12 U.S.C. 1715z-
11a), shall be subject to the availability of appropriations to the 
extent that the property market value exceeds the sale proceeds. If the 
multifamily real property is sold, during such fiscal years, for an 
amount equal to or greater than the property market value then the 
transaction is not subject to the availability of appropriations.
    (b) Discount Loan Sales.--Notwithstanding any other provision of 
law and in accordance with the Federal Credit Reform Act of 1990 (2 
U.S.C. 661 et seq.), a discount loan sale during fiscal years 2006 
through 2010 under section 207(k) of the National Housing Act (12 
U.S.C. 1713(k)), section 203(k) of the Housing and Community 
Development Amendments of 1978 (12 U.S.C. 1701z-11(k)), or section 
204(a) of the Departments of Veterans Affairs and Housing and Urban 
Development, and Independent Agencies Appropriations Act, 1997 (12 
U.S.C. 1715z-11a(a)), shall be subject to the availability of 
appropriations to the extent that the loan market value exceeds the 
sale proceeds. If the multifamily loan is sold, during such fiscal 
years, for an amount equal to or greater than the loan market value 
then the transaction is not subject to the availability of 
appropriations.
    (c) Applicability.--This section shall not apply to any transaction 
that formally commences within one year prior to the enactment of this 
section.

SEC. 2003. UP-FRONT GRANTS.

    (a) 1997 Act.--Section 204(a) of the Departments of Veterans 
Affairs and Housing and Urban Development, and Independent Agencies 
Appropriations Act, 1997 (12 U.S.C. 1715z-11a(a)) is amended by adding 
at the end the following new sentence: ``A grant provided under this 
subsection during fiscal years 2006 through 2010 shall be available 
only to the extent that appropriations are made in advance for such 
purposes and shall not be derived from the General Insurance Fund.''.
    (b) 1978 Act.--Section 203(f)(4) of the Housing and Community 
Development Amendments of 1978 (12 U.S.C. 1701z-11(f)(4)) is amended by 
adding at the end the following new sentence: ``This paragraph shall be 
effective during fiscal years 2006 through 2010 only to the extent that 
such budget authority is made available for use under this paragraph in 
advance in appropriation acts.''.
    (c) Applicability.--The amendments made by this section shall not 
apply to any transaction that formally commences within one year prior 
to the enactment of this section.

                     Subtitle B--Deposit Insurance

SEC. 2101. SHORT TITLE.

    This subtitle may be cited as the ``Federal Deposit Insurance 
Reform Act of 2005''.

SEC. 2102. MERGING THE BIF AND SAIF.

    (a) In General.--
            (1) Merger.--The Bank Insurance Fund and the Savings 
        Association Insurance Fund shall be merged into the Deposit 
        Insurance Fund.
            (2) Disposition of assets and liabilities.--All assets and 
        liabilities of the Bank Insurance Fund and the Savings 
        Association Insurance Fund shall be transferred to the Deposit 
        Insurance Fund.
            (3) No separate existence.--The separate existence of the 
        Bank Insurance Fund and the Savings Association Insurance Fund 
        shall cease on the effective date of the merger thereof under 
        this section.
    (b) Repeal of Outdated Merger Provision.--Section 2704 of the 
Deposit Insurance Funds Act of 1996 (12 U.S.C. 1821 note) is repealed.
    (c) Effective Date.--This section shall take effect no later than 
the first day of the first calendar quarter that begins after the end 
of the 90-day period beginning on the date of the enactment of this 
Act.

SEC. 2103. INCREASE IN DEPOSIT INSURANCE COVERAGE.

    (a) In General.--Section 11(a)(1) of the Federal Deposit Insurance 
Act (12 U.S.C. 1821(a)(1)) is amended--
            (1) by striking subparagraph (B) and inserting the 
        following new subparagraph:
                    ``(B) Net amount of insured deposit.--The net 
                amount due to any depositor at an insured depository 
                institution shall not exceed the standard maximum 
                deposit insurance amount as determined in accordance 
                with subparagraphs (C), (D), (E) and (F) and paragraph 
                (3).''; and
            (2) by adding at the end the following new subparagraphs:
                    ``(E) Standard maximum deposit insurance amount 
                defined.--For purposes of this Act, the term `standard 
                maximum deposit insurance amount' means $100,000, 
                adjusted as provided under subparagraph (F) after March 
                31, 2010.
                    ``(F) Inflation adjustment.--
                            ``(i) In general.--By April 1 of 2010, and 
                        the 1st day of each subsequent 5-year period, 
                        the Board of Directors and the National Credit 
                        Union Administration Board shall jointly 
                        consider the factors set forth under clause 
                        (v), and, upon determining that an inflation 
                        adjustment is appropriate, shall jointly 
                        prescribe the amount by which the standard 
                        maximum deposit insurance amount and the 
                        standard maximum share insurance amount (as 
                        defined in section 207(k) of the Federal Credit 
                        Union Act) applicable to any depositor at an 
                        insured depository institution shall be 
                        increased by calculating the product of--
                                    ``(I) $100,000; and
                                    ``(II) the ratio of the published 
                                annual value of the Personal 
                                Consumption Expenditures Chain-Type 
                                Price Index (or any successor index 
                                thereto), published by the Department 
                                of Commerce, for the calendar year 
                                preceding the year in which the 
                                adjustment is calculated under this 
                                clause, to the published annual value 
                                of such index for the calendar year 
                                preceding the date this subparagraph 
                                takes effect under the Federal Deposit 
                                Insurance Reform Act of 2005.
                        The values used in the calculation under 
                        subclause (II) shall be, as of the date of the 
                        calculation, the values most recently published 
                        by the Department of Commerce.
                            ``(ii) Rounding.--If the amount determined 
                        under clause (ii) for any period is not a 
                        multiple of $10,000, the amount so determined 
                        shall be rounded down to the nearest $10,000.
                            ``(iii) Publication and report to the 
                        congress.--Not later than April 5 of any 
                        calendar year in which an adjustment is 
                        required to be calculated under clause (i) to 
                        the standard maximum deposit insurance amount 
                        and the standard maximum share insurance amount 
                        under such clause, the Board of Directors and 
                        the National Credit Union Administration Board 
                        shall--
                                    ``(I) publish in the Federal 
                                Register the standard maximum deposit 
                                insurance amount, the standard maximum 
                                share insurance amount, and the amount 
                                of coverage under paragraph (3)(A) and 
                                section 207(k)(3) of the Federal Credit 
                                Union Act, as so calculated; and
                                    ``(II) jointly submit a report to 
                                the Congress containing the amounts 
                                described in subclause (I).
                            ``(iv) 6-month implementation period.--
                        Unless an Act of Congress enacted before July 1 
                        of the calendar year in which an adjustment is 
                        required to be calculated under clause (i) 
                        provides otherwise, the increase in the 
                        standard maximum deposit insurance amount and 
                        the standard maximum share insurance amount 
                        shall take effect on January 1 of the year 
                        immediately succeeding such calendar year.
                            ``(v) Inflation adjustment consideration.--
                        In making any determination under clause (i) to 
                        increase the standard maximum deposit insurance 
                        amount and the standard maximum share insurance 
                        amount, the Board of Directors and the National 
                        Credit Union Administration Board shall jointly 
                        consider--
                                    ``(I) the overall state of the 
                                Deposit Insurance Fund and the economic 
                                conditions affecting insured depository 
                                institutions;
                                    ``(II) potential problems affecting 
                                insured depository institutions; or
                                    ``(III) whether the increase will 
                                cause the reserve ratio of the fund to 
                                fall below 1.15 percent of estimated 
                                insured deposits.''.
    (b) Coverage for Certain Employee Benefit Plan Deposits.--Section 
11(a)(1)(D) of the Federal Deposit Insurance Act (12 U.S.C. 
1821(a)(1)(D)) is amended to read as follows:
                    ``(D) Coverage for certain employee benefit plan 
                deposits.--
                            ``(i) Pass-through insurance.--The 
                        Corporation shall provide pass-through deposit 
                        insurance for the deposits of any employee 
                        benefit plan.
                            ``(ii) Prohibition on acceptance of benefit 
                        plan deposits.--An insured depository 
                        institution that is not well capitalized or 
                        adequately capitalized may not accept employee 
                        benefit plan deposits.
                            ``(iii) Definitions.--For purposes of this 
                        subparagraph, the following definitions shall 
                        apply:
                                    ``(I) Capital standards.--The terms 
                                `well capitalized' and `adequately 
                                capitalized' have the same meanings as 
                                in section 38.
                                    ``(II) Employee benefit plan.--The 
                                term `employee benefit plan' has the 
                                same meaning as in paragraph 
                                (5)(B)(ii), and includes any eligible 
                                deferred compensation plan described in 
                                section 457 of the Internal Revenue 
                                Code of 1986.
                                    ``(III) Pass-through deposit 
                                insurance.--The term `pass-through 
                                deposit insurance' means, with respect 
                                to an employee benefit plan, deposit 
                                insurance coverage based on the 
                                interest of each participant, in 
                                accordance with regulations issued by 
                                the Corporation.''.
    (c) Increased Amount of Deposit Insurance for Certain Retirement 
Accounts.--Section 11(a)(3)(A) of the Federal Deposit Insurance Act (12 
U.S.C. 1821(a)(3)(A)) is amended by striking ``$100,000'' and inserting 
``$250,000 (which amount shall be subject to inflation adjustments as 
provided in paragraph (1)(F), except that $250,000 shall be substituted 
for $100,000 wherever such term appears in such paragraph)''.
    (d) Effective Date.--This section and the amendments made by this 
section shall take effect on the date the final regulations required 
under section 9(a)(2) take effect.

SEC. 2104. SETTING ASSESSMENTS AND REPEAL OF SPECIAL RULES RELATING TO 
              MINIMUM ASSESSMENTS AND FREE DEPOSIT INSURANCE.

    (a) Setting Assessments.--Section 7(b)(2) of the Federal Deposit 
Insurance Act (12 U.S.C. 1817(b)(2)) is amended--
            (1) by striking subparagraphs (A) and (B) and inserting the 
        following new subparagraphs:
                    ``(A) In general.--The Board of Directors shall set 
                assessments for insured depository institutions in such 
                amounts as the Board of Directors may determine to be 
                necessary or appropriate, subject to subparagraph (D).
                    ``(B) Factors to be considered.--In setting 
                assessments under subparagraph (A), the Board of 
                Directors shall consider the following factors:
                            ``(i) The estimated operating expenses of 
                        the Deposit Insurance Fund.
                            ``(ii) The estimated case resolution 
                        expenses and income of the Deposit Insurance 
                        Fund.
                            ``(iii) The projected effects of the 
                        payment of assessments on the capital and 
                        earnings of insured depository institutions.
                            ``(iv) The risk factors and other factors 
                        taken into account pursuant to paragraph (1) 
                        under the risk-based assessment system, 
                        including the requirement under such paragraph 
                        to maintain a risk-based system.
                            ``(v) Any other factors the Board of 
                        Directors may determine to be appropriate.''; 
                        and
            (2) by inserting after subparagraph (C) the following new 
        subparagraph:
                    ``(D) No discrimination based on size.--No insured 
                depository institution shall be barred from the lowest-
                risk category solely because of size.''.
    (b) Assessment Recordkeeping Period Shortened.--Paragraph (5) of 
section 7(b) of the Federal Deposit Insurance Act (12 U.S.C. 1817(b)) 
is amended to read as follows:
            ``(5) Depository institution required to maintain 
        assessment-related records.--Each insured depository 
        institution shall maintain all records that the Corporation may 
        require for verifying the correctness of any assessment on the 
        insured depository institution under this subsection until the 
        later of--
                    ``(A) the end of the 3-year period beginning on the 
                due date of the assessment; or
                    ``(B) in the case of a dispute between the insured 
                depository institution and the Corporation with respect 
                to such assessment, the date of a final determination 
                of any such dispute.''.
    (c) Increase in Fees for Late Assessment Payments.--Subsection (h) 
of section 18 of the Federal Deposit Insurance Act (12 U.S.C. 1828(h)) 
is amended to read as follows:
    ``(h) Penalty for Failure to Timely Pay Assessments.--
            ``(1) In general.--Subject to paragraph (3), any insured 
        depository institution which fails or refuses to pay any 
        assessment shall be subject to a penalty in an amount of not 
        more than 1 percent of the amount of the assessment due for 
        each day that such violation continues.
            ``(2) Exception in case of dispute.--Paragraph (1) shall 
        not apply if--
                    ``(A) the failure to pay an assessment is due to a 
                dispute between the insured depository institution and 
                the Corporation over the amount of such assessment; and
                    ``(B) the insured depository institution deposits 
                security satisfactory to the Corporation for payment 
                upon final determination of the issue.
            ``(3) Special rule for small assessment amounts.--If the 
        amount of the assessment which an insured depository 
        institution fails or refuses to pay is less than $10,000 at the 
        time of such failure or refusal, the amount of any penalty to 
        which such institution is subject under paragraph (1) shall not 
        exceed $100 for each day that such violation continues.
            ``(4) Authority to modify or remit penalty.--The 
        Corporation, in the sole discretion of the Corporation, may 
        compromise, modify or remit any penalty which the Corporation 
        may assess or has already assessed under paragraph (1) upon a 
        finding that good cause prevented the timely payment of an 
        assessment.''.
    (d) Statute of Limitations for Assessment Actions.--Subsection (g) 
of section 7 of the Federal Deposit Insurance Act (12 U.S.C. 1817(g)) 
is amended to read as follows:
    ``(g) Assessment Actions.--
            ``(1) In general.--The Corporation, in any court of 
        competent jurisdiction, shall be entitled to recover from any 
        insured depository institution the amount of any unpaid 
        assessment lawfully payable by such insured depository 
        institution.
            ``(2) Statute of limitations.--The following provisions 
        shall apply to actions relating to assessments, notwithstanding 
        any other provision in Federal law, or the law of any State:
                    ``(A) Any action by an insured depository 
                institution to recover from the Corporation the 
                overpaid amount of any assessment shall be brought 
                within 3 years after the date the assessment payment 
                was due, subject to the exception in subparagraph (E).
                    ``(B) Any action by the Corporation to recover from 
                an insured depository institution the underpaid amount 
                of any assessment shall be brought within 3 years after 
                the date the assessment payment was due, subject to the 
                exceptions in subparagraphs (C) and (E).
                    ``(C) If an insured depository institution has made 
                a false or fraudulent statement with intent to evade 
                any or all of its assessment, the Corporation shall 
                have until 3 years after the date of discovery of the 
                false or fraudulent statement in which to bring an 
                action to recover the underpaid amount.
                    ``(D) Except as provided in subparagraph (C), 
                assessment deposit information contained in records no 
                longer required to be maintained pursuant to subsection 
                (b)(4) shall be considered conclusive and not subject 
                to change.
                    ``(E) Any action for the underpaid or overpaid 
                amount of any assessment that became due before the 
                amendment to this subsection under the Federal Deposit 
                Insurance Reform Act of 2005 took effect shall be 
                subject to the statute of limitations for assessments 
                in effect at the time the assessment became due.''.
    (e) Effective Date.--This section and the amendments made by this 
section shall take effect on the date that the final regulations 
required under section 9(a)(5) take effect.

SEC. 2105. REPLACEMENT OF FIXED DESIGNATED RESERVE RATIO WITH RESERVE 
              RANGE.

    (a) In General.--Section 7(b)(3) of the Federal Deposit Insurance 
Act (12 U.S.C. 1817(b)(3)) is amended to read as follows:
            ``(3) Designated reserve ratio.--
                    ``(A) Establishment.--
                            ``(i) In general.--Before the beginning of 
                        each calendar year, the Board of Directors 
                        shall designate the reserve ratio applicable 
                        with respect to the Deposit Insurance Fund and 
                        publish the reserve ratio so designated.
                            ``(ii) Rulemaking requirement.--Any change 
                        to the designated reserve ratio shall be made 
                        by the Board of Directors by regulation after 
                        notice and opportunity for comment.
                    ``(B) Range.--The reserve ratio designated by the 
                Board of Directors for any year--
                            ``(i) may not exceed 1.5 percent of 
                        estimated insured deposits; and
                            ``(ii) may not be less than 1.15 percent of 
                        estimated insured deposits.
                    ``(C) Factors.--In designating a reserve ratio for 
                any year, the Board of Directors shall--
                            ``(i) take into account the risk of losses 
                        to the Deposit Insurance Fund in such year and 
                        future years, including historic experience and 
                        potential and estimated losses from insured 
                        depository institutions;
                            ``(ii) take into account economic 
                        conditions generally affecting insured 
                        depository institutions so as to allow the 
                        designated reserve ratio to increase during 
                        more favorable economic conditions and to 
                        decrease during less favorable economic 
                        conditions, notwithstanding the increased risks 
                        of loss that may exist during such less 
                        favorable conditions, as determined to be 
                        appropriate by the Board of Directors;
                            ``(iii) seek to prevent sharp swings in the 
                        assessment rates for insured depository 
                        institutions; and
                            ``(iv) take into account such other factors 
                        as the Board of Directors may determine to be 
                        appropriate, consistent with the requirements 
                        of this subparagraph.
                    ``(D) Publication of proposed change in ratio.--In 
                soliciting comment on any proposed change in the 
                designated reserve ratio in accordance with 
                subparagraph (A), the Board of Directors shall include 
                in the published proposal a thorough analysis of the 
                data and projections on which the proposal is based.''.
    (b) Effective Date.--This section and the amendments made by this 
section shall take effect on the date that the final regulations 
required under section 9(a)(1) take effect.

SEC. 2106. REQUIREMENTS APPLICABLE TO THE RISK-BASED ASSESSMENT SYSTEM.

    Section 7(b)(1) of the Federal Deposit Insurance Act (12 U.S.C. 
1817(b)(1)) is amended by adding at the end the following new 
subparagraphs:
                    ``(E) Information concerning risk of loss and 
                economic conditions.--
                            ``(i) Sources of information.--For purposes 
                        of determining risk of losses at insured 
                        depository institutions and economic conditions 
                        generally affecting depository institutions, 
                        the Corporation shall collect information, as 
                        appropriate, from all sources the Board of 
                        Directors considers appropriate, such as 
                        reports of condition, inspection reports, and 
                        other information from all Federal banking 
                        agencies, any information available from State 
                        bank supervisors, State insurance and 
                        securities regulators, the Securities and 
                        Exchange Commission (including information 
                        described in section 35), the Secretary of the 
                        Treasury, the Commodity Futures Trading 
                        Commission, the Farm Credit Administration, the 
                        Federal Trade Commission, any Federal reserve 
                        bank or Federal home loan bank, and other 
                        regulators of financial institutions, and any 
                        information available from credit rating 
                        entities, and other private economic or 
                        business analysts.
                            ``(ii) Consultation with federal banking 
                        agencies.--
                                    ``(I) In general.--Except as 
                                provided in subclause (II), in 
                                assessing the risk of loss to the 
                                Deposit Insurance Fund with respect to 
                                any insured depository institution, the 
                                Corporation shall consult with the 
                                appropriate Federal banking agency of 
                                such institution.
                                    ``(II) Treatment on aggregate 
                                basis.--In the case of insured 
                                depository institutions that are well 
                                capitalized (as defined in section 38) 
                                and, in the most recent examination, 
                                were found to be well managed, the 
                                consultation under subclause (I) 
                                concerning the assessment of the risk 
                                of loss posed by such institutions may 
                                be made on an aggregate basis.
                            ``(iii) Rule of construction.--No provision 
                        of this paragraph shall be construed as 
                        providing any new authority for the Corporation 
                        to require submission of information by insured 
                        depository institutions to the Corporation.
                    ``(F) Modifications to the risk-based assessment 
                system allowed only after notice and comment.--In 
                revising or modifying the risk-based assessment system 
                at any time after the date of the enactment of the 
                Federal Deposit Insurance Reform Act of 2005, the Board 
                of Directors may implement such revisions or 
                modification in final form only after notice and 
                opportunity for comment.''.

SEC. 2107. REFUNDS, DIVIDENDS, AND CREDITS FROM DEPOSIT INSURANCE FUND.

    (a) In General.--Subsection (e) of section 7 of the Federal Deposit 
Insurance Act (12 U.S.C. 1817(e)) is amended to read as follows:
    ``(e) Refunds, Dividends, and Credits.--
            ``(1) Refunds of overpayments.--In the case of any payment 
        of an assessment by an insured depository institution in excess 
        of the amount due to the Corporation, the Corporation may--
                    ``(A) refund the amount of the excess payment to 
                the insured depository institution; or
                    ``(B) credit such excess amount toward the payment 
                of subsequent assessments until such credit is 
                exhausted.
            ``(2) Dividends from excess amounts in deposit insurance 
        fund.--
                    ``(A) Reserve ratio in excess of 1.5 percent of 
                estimated insured deposits.--If, at the end of a 
                calendar year, the reserve ratio of the Deposit 
                Insurance Fund exceeds 1.5 percent of estimated insured 
                deposits, the Corporation shall declare the amount in 
                the Fund in excess of the amount required to maintain 
                the reserve ratio at 1.5 percent of estimated insured 
                deposits, as dividends to be paid to insured depository 
                institutions.
                    ``(B) Reserve ratio equal to or in excess of 1.35 
                percent of estimated insured deposits and not more than 
                1.5 percent.--If, at the end of a calendar year, the 
                reserve ratio of the Deposit Insurance Fund equals or 
                exceeds 1.35 percent of estimated insured deposits and 
                is not more than 1.5 percent of such deposits, the 
                Corporation shall declare the amount in the Fund that 
                is equal to 50 percent of the amount in excess of the 
                amount required to maintain the reserve ratio at 1.35 
                percent of the estimated insured deposits as dividends 
                to be paid to insured depository institutions.
                    ``(C) Basis for distribution of dividends.--
                            ``(i) In general.--Solely for the purposes 
                        of dividend distribution under this paragraph, 
                        the Corporation shall determine each insured 
                        depository institution's relative contribution 
                        to the Deposit Insurance Fund (or any 
                        predecessor deposit insurance fund) for 
                        calculating such institution's share of any 
                        dividend declared under this paragraph, taking 
                        into account the factors described in clause 
                        (ii).
                            ``(ii) Factors for distribution.--In 
                        implementing this paragraph in accordance with 
                        regulations, the Corporation shall take into 
                        account the following factors:
                                    ``(I) The ratio of the assessment 
                                base of an insured depository 
                                institution (including any predecessor) 
                                on December 31, 1996, to the assessment 
                                base of all eligible insured depository 
                                institutions on that date.
                                    ``(II) The total amount of 
                                assessments paid on or after January 1, 
                                1997, by an insured depository 
                                institution (including any predecessor) 
                                to the Deposit Insurance Fund (and any 
                                predecessor deposit insurance fund).
                                    ``(III) That portion of assessments 
                                paid by an insured depository 
                                institution (including any predecessor) 
                                that reflects higher levels of risk 
                                assumed by such institution.
                                    ``(IV) Such other factors as the 
                                Corporation may determine to be 
                                appropriate.
                    ``(D) Notice and opportunity for comment.--The 
                Corporation shall prescribe by regulation, after notice 
                and opportunity for comment, the method for the 
                calculation, declaration, and payment of dividends 
                under this paragraph.
                    ``(E) Limitation.--The Board of Directors may 
                suspend or limit dividends paid under subparagraph (B), 
                if the Board determines in writing that--
                            ``(i) a significant risk of losses to the 
                        Deposit Insurance Fund exists over the next 1-
                        year period; and
                            ``(ii) it is likely that such losses will 
                        be sufficiently high as to justify a finding by 
                        the Board that the reserve ratio should 
                        temporarily be allowed--
                                    ``(I) to grow without requiring 
                                dividends under subparagraph (B); or
                                    ``(II) to exceed the maximum amount 
                                established under subsection 
                                (b)(3)(B)(i).
                    ``(F) Considerations.--In making a determination 
                under subparagraph (E), the Board shall consider--
                            ``(i) national and regional conditions and 
                        their impact on insured depository 
                        institutions;
                            ``(ii) potential problems affecting insured 
                        depository institutions or a specific group or 
                        type of depository institution;
                            ``(iii) the degree to which the contingent 
                        liability of the Corporation for anticipated 
                        failures of insured institutions adequately 
                        addresses concerns over funding levels in the 
                        Deposit Insurance Fund; and
                            ``(iv) any other factors that the Board 
                        determines are appropriate.
                    ``(G) Review of determination.--
                            ``(i) Annual review.--A determination to 
                        suspend or limit dividends under subparagraph 
                        (E) shall be reviewed by the Board of Directors 
                        annually.
                            ``(ii) Action by board.--Based on each 
                        annual review under clause (i), the Board of 
                        Directors shall either renew or remove a 
                        determination to suspend or limit dividends 
                        under subparagraph (E), or shall make a new 
                        determination in accordance with this 
                        paragraph. Unless justified under the terms of 
                        the renewal or new determination, the 
                        Corporation shall be required to provide cash 
                        dividends under subparagraph (A) or (B), as 
                        appropriate.
            ``(3) One-time credit based on total assessment base at 
        year-end 1996.--
                    ``(A) In general.--Before the end of the 270-day 
                period beginning on the date of the enactment of the 
                Federal Deposit Insurance Reform Act of 2005, the Board 
                of Directors shall, by regulation after notice and 
                opportunity for comment, provide for a credit to each 
                eligible insured depository institution (or a successor 
                insured depository institution), based on the 
                assessment base of the institution on December 31, 
                1996, as compared to the combined aggregate assessment 
                base of all eligible insured depository institutions, 
                taking into account such factors as the Board of 
                Directors may determine to be appropriate.
                    ``(B) Credit limit.--The aggregate amount of 
                credits available under subparagraph (A) to all 
                eligible insured depository institutions shall equal 
                the amount that the Corporation could collect if the 
                Corporation imposed an assessment of 10.5 basis points 
                on the combined assessment base of the Bank Insurance 
                Fund and the Savings Association Insurance Fund as of 
                December 31, 2001.
                    ``(C) Eligible insured depository institution 
                defined.--For purposes of this paragraph, the term 
                `eligible insured depository institution' means any 
                insured depository institution that--
                            ``(i) was in existence on December 31, 
                        1996, and paid a deposit insurance assessment 
                        prior to that date; or
                            ``(ii) is a successor to any insured 
                        depository institution described in clause (i).
                    ``(D) Application of credits.--
                            ``(i) In general.--Subject to clause (ii), 
                        the amount of a credit to any eligible insured 
                        depository institution under this paragraph 
                        shall be applied by the Corporation, subject to 
                        subsection (b)(3)(E), to the assessments 
                        imposed on such institution under subsection 
                        (b) that become due for assessment periods 
                        beginning after the effective date of 
                        regulations prescribed under subparagraph (A).
                            ``(ii) Temporary restriction on use of 
                        credits.--The amount of a credit to any 
                        eligible insured depository institution under 
                        this paragraph may not be applied to more than 
                        90 percent of the assessments imposed on such 
                        institution under subsection (b) that become 
                        due for assessment periods beginning in fiscal 
                        years 2008, 2009, and 2010.
                            ``(iii) Regulations.--The regulations 
                        prescribed under subparagraph (A) shall 
                        establish the qualifications and procedures 
                        governing the application of assessment credits 
                        pursuant to clause (i).
                    ``(E) Limitation on amount of credit for certain 
                depository institutions.--In the case of an insured 
                depository institution that exhibits financial, 
                operational, or compliance weaknesses ranging from 
                moderately severe to unsatisfactory, or is not 
                adequately capitalized (as defined in section 38) at 
                the beginning of an assessment period, the amount of 
                any credit allowed under this paragraph against the 
                assessment on that depository institution for such 
                period may not exceed the amount calculated by applying 
                to that depository institution the average assessment 
                rate on all insured depository institutions for such 
                assessment period.
                    ``(F) Successor defined.--The Corporation shall 
                define the term `successor' for purposes of this 
                paragraph, by regulation, and may consider any factors 
                as the Board may deem appropriate.
            ``(4) Administrative review.--
                    ``(A) In general.--The regulations prescribed under 
                paragraphs (2)(D) and (3) shall include provisions 
                allowing an insured depository institution a reasonable 
                opportunity to challenge administratively the amount of 
                the credit or dividend determined under paragraph (2) 
                or (3) for such institution.
                    ``(B) Administrative review.--Any review under 
                subparagraph (A) of any determination of the 
                Corporation under paragraph (2) or (3) shall be final 
                and not subject to judicial review.''.
    (b) Definition of Reserve Ratio.--Section 3(y) of the Federal 
Deposit Insurance Act (12 U.S.C. 1813(y)) (as amended by section 
2105(b) of this subtitle) is amended by adding at the end the following 
new paragraph:
            ``(3) Reserve ratio.--The term `reserve ratio', when used 
        with regard to the Deposit Insurance Fund other than in 
        connection with a reference to the designated reserve ratio, 
        means the ratio of the net worth of the Deposit Insurance Fund 
        to the value of the aggregate estimated insured deposits.''.

SEC. 2108. DEPOSIT INSURANCE FUND RESTORATION PLANS.

    Section 7(b)(3) of the Federal Deposit Insurance Act (12 U.S.C. 
1817(b)(3)) (as amended by section 2105(a) of this subtitle) is amended 
by adding at the end the following new subparagraph:
                    ``(E) DIF restoration plans.--
                            ``(i) In general.--Whenever--
                                    ``(I) the Corporation projects that 
                                the reserve ratio of the Deposit 
                                Insurance Fund will, within 6 months of 
                                such determination, fall below the 
                                minimum amount specified in 
                                subparagraph (B)(ii) for the designated 
                                reserve ratio; or
                                    ``(II) the reserve ratio of the 
                                Deposit Insurance Fund actually falls 
                                below the minimum amount specified in 
                                subparagraph (B)(ii) for the designated 
                                reserve ratio without any determination 
                                under subclause (I) having been made,
                        the Corporation shall establish and implement a 
                        Deposit Insurance Fund restoration plan within 
                        90 days that meets the requirements of clause 
                        (ii) and such other conditions as the 
                        Corporation determines to be appropriate.
                            ``(ii) Requirements of restoration plan.--A 
                        Deposit Insurance Fund restoration plan meets 
                        the requirements of this clause if the plan 
                        provides that the reserve ratio of the Fund 
                        will meet or exceed the minimum amount 
                        specified in subparagraph (B)(ii) for the 
                        designated reserve ratio before the end of the 
                        5-year period beginning upon the implementation 
                        of the plan (or such longer period as the 
                        Corporation may determine to be necessary due 
                        to extraordinary circumstances).
                            ``(iii) Restriction on assessment 
                        credits.--As part of any restoration plan under 
                        this subparagraph, the Corporation may elect to 
                        restrict the application of assessment credits 
                        provided under subsection (e)(3) for any period 
                        that the plan is in effect.
                            ``(iv) Limitation on restriction.--
                        Notwithstanding clause (iii), while any 
                        restoration plan under this subparagraph is in 
                        effect, the Corporation shall apply credits 
                        provided to an insured depository institution 
                        under subsection (e)(3) against any assessment 
                        imposed on the institution for any assessment 
                        period in an amount equal to the lesser of--
                                    ``(I) the amount of the assessment; 
                                or
                                    ``(II) the amount equal to 3 basis 
                                points of the institution's assessment 
                                base.
                            ``(v) Transparency.--Not more than 30 days 
                        after the Corporation establishes and 
                        implements a restoration plan under clause (i), 
                        the Corporation shall publish in the Federal 
                        Register a detailed analysis of the factors 
                        considered and the basis for the actions taken 
                        with regard to the plan.''.

SEC. 2109. REGULATIONS REQUIRED.

    (a) In General.--Not later than 270 days after the date of the 
enactment of this Act, the Board of Directors of the Federal Deposit 
Insurance Corporation shall prescribe final regulations, after notice 
and opportunity for comment--
            (1) designating the reserve ratio for the Deposit Insurance 
        Fund in accordance with section 7(b)(3) of the Federal Deposit 
        Insurance Act (as amended by section 2105 of this subtitle);
            (2) implementing increases in deposit insurance coverage in 
        accordance with the amendments made by section 2103 of this 
        subtitle;
            (3) implementing the dividend requirement under section 
        7(e)(2) of the Federal Deposit Insurance Act (as amended by 
        section 2107 of this subtitle);
            (4) implementing the 1-time assessment credit to certain 
        insured depository institutions in accordance with section 
        7(e)(3) of the Federal Deposit Insurance Act, as amended by 
        section 2107 of this subtitle, including the qualifications and 
        procedures under which the Corporation would apply assessment 
        credits; and
            (5) providing for assessments under section 7(b) of the 
        Federal Deposit Insurance Act, as amended by this subtitle.
    (b) Transition Provisions.--
            (1) Continuation of existing assessment regulations.--No 
        provision of this subtitle or any amendment made by this 
        subtitle shall be construed as affecting the authority of the 
        Corporation to set or collect deposit insurance assessments 
        pursuant to any regulations in effect before the effective date 
        of the final regulations prescribed under subsection (a).
            (2) Treatment of dif members under existing regulations.--
        As of the date of the merger of the Bank Insurance Fund and the 
        Savings Association Insurance Fund pursuant to section 2102, 
        the assessment regulations in effect immediately before the 
        date of the enactment of this Act shall continue to apply to 
        all members of the Deposit Insurance Fund, until such 
        regulations are modified by the Corporation, notwithstanding 
        that such regulations may refer to ``Bank Insurance Fund 
        members'' or ``Savings Association Insurance Fund members''.

       TITLE III--DIGITAL TELEVISION TRANSITION AND PUBLIC SAFETY

SEC. 3001. SHORT TITLE; DEFINITION.

    (a) Short Title.--This title may be cited as the ``Digital 
Television Transition and Public Safety Act of 2005''.
    (b) Definition.--As used in this Act, the term ``Assistant 
Secretary'' means the Assistant Secretary for Communications and 
Information of the Department of Commerce.

SEC. 3002. ANALOG SPECTRUM RECOVERY: FIRM DEADLINE.

    (a) Amendments.--Section 309(j)(14) of the Communications Act of 
1934 (47 U.S.C. 309(j)(14)) is amended--
            (1) in subparagraph (A)--
                    (A) by inserting ``full-power'' before ``television 
                broadcast license''; and
                    (B) by striking ``December 31, 2006'' and inserting 
                ``February 17, 2009'';
            (2) by striking subparagraph (B);
            (3) in subparagraph (C)(i)(I), by striking ``or (B)'';
            (4) in subparagraph (D), by striking ``subparagraph 
        (C)(i)'' and inserting ``subparagraph (B)(i)''; and
            (5) by redesignating subparagraphs (C) and (D) as 
        subparagraphs (B) and (C), respectively.
    (b) Terminations of Analog Licenses and Broadcasting.--The Federal 
Communications Commission shall take such actions as are necessary--
            (1) to terminate all licenses for full-power television 
        stations in the analog television service, and to require the 
        cessation of broadcasting by full-power stations in the analog 
        television service, by February 18, 2009; and
            (2) to require by February 18, 2009, that all broadcasting 
        by Class A stations, whether in the analog television service 
        or digital television service, and all broadcasting by full-
        power stations in the digital television service, occur only on 
        channels between channels 2 and 36, inclusive, or 38 and 51, 
        inclusive (between frequencies 54 and 698 megahertz, 
        inclusive).
    (c) Conforming Amendments.--
            (1) Section 337(e) of the Communications Act of 1934 (47 
        U.S.C. 337(e)) is amended--
                    (A) in paragraph (1)--
                            (i) by striking ``channels 60 to 69'' and 
                        inserting ``channels 52 to 69'';
                            (ii) by striking ``person who'' and 
                        inserting ``full-power television station 
                        licensee that'';
                            (iii) by striking ``746 and 806 megahertz'' 
                        and inserting ``698 and 806 megahertz''; and
                            (iv) by striking ``the date on which the 
                        digital television service transition period 
                        terminates, as determined by the Commission'' 
                        and inserting ``February 17, 2009''; and
                    (B) in paragraph (2), by striking ``746 megahertz'' 
                and inserting ``698 megahertz''.

SEC. 3003. AUCTION OF RECOVERED SPECTRUM.

    (a) Deadline for Auction.--Section 309(j) of the Communications Act 
of 1934 (47 U.S.C. 309(j)) is amended--
            (1) by redesignating the second paragraph (15) of such 
        section (as added by section 203(b) of the Commercial Spectrum 
        Enhancement Act (Pub. L. 108-494; 118 Stat. 3993)), as 
        paragraph (16) of such section; and
            (2) in the first paragraph (15) of such section (as added 
        by section 3(a) of the Auction Reform Act of 2002 (Pub. L. 107-
        195; 116 Stat. 716)), by adding at the end of subparagraph (C) 
        the following new clauses:
                            ``(v) Additional deadlines for recovered 
                        analog spectrum.--Notwithstanding subparagraph 
                        (B), the Commission shall conduct the auction 
                        of the licenses for recovered analog spectrum 
                        by commencing the bidding not later than 
                        January 28, 2008, and shall deposit the 
                        proceeds of such auction in accordance with 
                        paragraph (8)(E)(ii) not later than June 30, 
                        2008.
                            ``(vi) Recovered analog spectrum.--For 
                        purposes of clause (v), the term `recovered 
                        analog spectrum' means the spectrum between 
                        channels 52 and 69, inclusive (between 
                        frequencies 698 and 806 megahertz, inclusive) 
                        reclaimed from analog television service 
                        broadcasting under paragraph (14), other than--
                                    ``(I) the spectrum required by 
                                section 337 to be made available for 
                                public safety services; and
                                    ``(II) the spectrum auctioned prior 
                                to the date of enactment of the Digital 
                                Television Transition and Public Safety 
                                Act of 2005.''.
    (b) Extension of Auction Authority.--Section 309(j)(11) of such Act 
(47 U.S.C. 309(j)(11)) is amended by striking ``2007'' and inserting 
``2011''.

SEC. 3004. RESERVATION OF AUCTION PROCEEDS.

    Section 309(j)(8) of the Communications Act of 1934 (47 U.S.C. 
309(j)(8)) is amended--
            (1) in subparagraph (A), by striking ``subparagraph (B) or 
        subparagraph (D)'' and inserting ``subparagraphs (B), (D), and 
        (E)'';
            (2) in subparagraph (C)(i), by inserting before the 
        semicolon at the end the following: ``, except as otherwise 
        provided in subparagraph (E)(ii)''; and
            (3) by adding at the end the following new subparagraph:
                    ``(E) Transfer of receipts.--
                            ``(i) Establishment of fund.--There is 
                        established in the Treasury of the United 
                        States a fund to be known as the Digital 
                        Television Transition and Public Safety Fund.
                            ``(ii) Proceeds for funds.--Notwithstanding 
                        subparagraph (A), the proceeds (including 
                        deposits and upfront payments from successful 
                        bidders) from the use of a competitive bidding 
                        system under this subsection with respect to 
                        recovered analog spectrum shall be deposited in 
                        the Digital Television Transition and Public 
                        Safety Fund.
                            ``(iii) Transfer of amount to treasury.--On 
                        September 30, 2009, the Secretary shall 
                        transfer $7,363,000,000 from the Digital 
                        Television Transition and Public Safety Fund to 
                        the general fund of the Treasury.
                            ``(iv) Recovered analog spectrum.--For 
                        purposes of clause (i), the term `recovered 
                        analog spectrum' has the meaning provided in 
                        paragraph (15)(C)(vi).''.

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

    (a) Creation of Program.--The Assistant Secretary shall--
            (1) implement and administer a program through which 
        households in the United States may obtain coupons that can be 
        applied toward the purchase of digital-to-analog converter 
        boxes; and
            (2) make payments of not to exceed $990,000,000, in the 
        aggregate, through fiscal year 2009 to carry out that program 
        from the Digital Television Transition and Public Safety Fund 
        established under section 309(j)(8)(E) of the Communications 
        Act of 1934 (47 U.S.C. 309(j)(8)(E)).
    (b) Credit.--The Assistant Secretary may borrow from the Treasury 
beginning on October 1, 2006 such sums as may be necessary, but not to 
exceed $1,500,000,000, to implement this section. The Assistant 
Secretary shall reimburse the Treasury, without interest, as funds are 
deposited into the Digital Television Transition and Public Safety 
Fund.
    (c) Program Specifications.--
            (1) Limitations.--
                    (A) Two-per-household maximum.--A household may 
                obtain coupons by making a request as required by the 
                regulations under this section between January 1, 2008, 
                and March 31, 2009, inclusive. The Assistant Secretary 
                shall ensure that each requesting household receives, 
                via the United States Postal Service, no more than two 
                coupons.
                    (B) No combinations of coupons.--Two coupons may 
                not be used in combination toward the purchase of a 
                single digital-to-analog converter box.
                    (C) Duration.--All coupons shall expire 3 months 
                after issuance.
            (2) Distribution of coupons.--The Assistant Secretary shall 
        expend not more than $100,000,000 on administrative expenses 
        and shall ensure that the sum of--
                    (A) all administrative expenses for the program, 
                including not more than $5,000,000 for consumer 
                education concerning the digital television transition 
                and the availability of the digital-to-analog converter 
                box program; and
                    (B) the total maximum value of all the coupons 
                redeemed, and issued but not expired, does not exceed 
                $990,000,000.
            (3) Use of additional amount.--If the Assistant Secretary 
        transmits to the Committee on Energy and Commerce of the House 
        of Representatives and Committee on Commerce, Science, and 
        Transportation of the Senate a statement certifying that the 
        sum permitted to be expended under paragraph (2) will be 
        insufficient to fulfill the requests for coupons from eligible 
        households--
                    (A) paragraph (2) shall be applied--
                            (i) by substituting ``$160,000,000'' for 
                        ``$100,000,000''; and
                            (ii) by substituting ``$1,500,000,000'' for 
                        ``$990,000,000'';
                    (B) subsection (a)(2) shall be applied by 
                substituting ``$1,500,000,000'' for ``$990,000,000''; 
                and
                    (C) the additional amount permitted to be expended 
                shall be available 60 days after the Assistant 
                Secretary sends such statement.
            (4) Coupon value.--The value of each coupon shall be $40.
    (d) Definition of Digital-to-Analog Converter Box.--For purposes of 
this section, the term ``digital-to-analog converter box'' means a 
stand-alone device that does not contain features or functions except 
those necessary to enable a consumer to convert any channel broadcast 
in the digital television service into a format that the consumer can 
display on television receivers designed to receive and display signals 
only in the analog television service, but may also include a remote 
control device.

SEC. 3006. PUBLIC SAFETY INTEROPERABLE COMMUNICATIONS.

    (a) Creation of Program.--The Assistant Secretary, in consultation 
with the Secretary of the Department of Homeland Security--
            (1) may take such administrative action as is necessary to 
        establish and implement a grant program to assist public safety 
        agencies in the acquisition of, deployment of, or training for 
        the use of interoperable communications systems that utilize, 
        or enable interoperability with communications systems that can 
        utilize, reallocated public safety spectrum for radio 
        communication; and
            (2) shall make payments of not to exceed $1,000,000,000, in 
        the aggregate, through fiscal year 2010 to carry out that 
        program from the Digital Television Transition and Public 
        Safety Fund established under section 309(j)(8)(E) of the 
        Communications Act of 1934 (47 U.S.C. 309(j)(8)(E)).
    (b) Credit.--The Assistant Secretary may borrow from the Treasury 
beginning on October 1, 2006 such sums as may be necessary, but not to 
exceed $1,000,000,000, to implement this section. The Assistant 
Secretary shall reimburse the Treasury, without interest, as funds are 
deposited into the Digital Television Transition and Public Safety 
Fund.
    (c) Condition of Grants.--In order to obtain a grant under the 
grant program, a public safety agency shall agree to provide, from non-
Federal sources, not less than 20 percent of the costs of acquiring and 
deploying the interoperable communications systems funded under the 
grant program.
    (d) Definitions.--For purposes of this section:
            (1) Public safety agency.--The term ``public safety 
        agency'' means any State, local, or tribal government entity, 
        or nongovernmental organization authorized by such entity, 
        whose sole or principal purpose is to protect the safety of 
        life, health, or property.
            (2) Interoperable communications systems.--The term 
        ``interoperable communications systems'' means communications 
        systems which enable public safety agencies to share 
        information amongst local, State, Federal, and tribal public 
        safety agencies in the same area via voice or data signals.
            (3) Reallocated public safety spectrum.--The term 
        ``reallocated public safety spectrum'' means the bands of 
        spectrum located at 764-776 megahertz and 794-806 megahertz, 
        inclusive.

SEC. 3007. NYC 9/11 DIGITAL TRANSITION.

    (a) Funds Available.--From the Digital Television Transition and 
Public Safety Fund established under section 309(j)(8)(E) of the 
Communications Act of 1934 (47 U.S.C. 309(j)(8)(E)) the Assistant 
Secretary shall make payments of not to exceed $30,000,000, in the 
aggregate, which shall be available to carry out this section for 
fiscal years 2007 through 2008. The Assistant Secretary may borrow from 
the Treasury beginning October 1, 2006 such sums as may be necessary 
not to exceed $30,000,000 to implement and administer the program in 
accordance with this section. The Assistant Secretary shall reimburse 
the Treasury, without interest, as funds are deposited into the Digital 
Television Transition and Public Safety Fund.
    (b) Use of Funds.--The sums available under subsection (a) shall be 
made available by the Assistant Secretary by grant to be used to 
reimburse the Metropolitan Television Alliance for costs incurred in 
the design and deployment of a temporary digital television broadcast 
system to ensure that, until a permanent facility atop the Freedom 
Tower is constructed, the members of the Metropolitan Television 
Alliance can provide the New York City area with an adequate digital 
television signal as determined by the Federal Communications 
Commission.
    (c) Definitions.--For purposes of this section:
            (1) Metropolitan television alliance.--The term 
        ``Metropolitan Television Alliance'' means the organization 
        formed by New York City television broadcast station licensees 
        to locate new shared facilities as a result of the attacks on 
        September 11, 2001 and the loss of use of shared facilities 
        that housed broadcast equipment.
            (2) New york city area.--The term ``New York City area'' 
        means the five counties comprising New York City and counties 
        of northern New Jersey in immediate proximity to New York City 
        (Bergen, Essex, Union, and Hudson Counties) .

SEC. 3008. LOW-POWER TELEVISION AND TRANSLATOR DIGITAL-TO-ANALOG 
              CONVERSION.

    (a) Creation of Program.--The Assistant Secretary shall make 
payments of not to exceed $10,000,000, in the aggregate, during the 
fiscal year 2008 and 2009 period from the Digital Television Transition 
and Public Safety Fund established under section 309(j)(8)(E) of the 
Communications Act of 1934 (47 U.S.C. 309(j)(8)(E)) to implement and 
administer a program through which each eligible low-power television 
station may receive compensation toward the cost of the purchase of a 
digital-to-analog conversion device that enables it to convert the 
incoming digital signal of its corresponding full-power television 
station to analog format for transmission on the low-power television 
station's analog channel. An eligible low-power television station may 
receive such compensation only if it submits a request for such 
compensation on or before February 17, 2009. Priority compensation 
shall be given to eligible low-power television stations in which the 
license is held by a non-profit corporation and eligible low-power 
television stations that serve rural areas of fewer than 10,000 
viewers.
    (b) Credit.--The Assistant Secretary may borrow from the Treasury 
beginning October 1, 2006 such sums as may be necessary, but not to 
exceed $10,000,000, to implement this section. The Assistant Secretary 
shall reimburse the Treasury, without interest, as funds are deposited 
into the Digital Television Transition and Public Safety Fund.
    (c) Eligible Stations.--For purposes of this section, the term 
``eligible low-power television station'' means a low-power television 
broadcast station, Class A television station, television translator 
station, or television booster station--
            (1) that is itself broadcasting exclusively in analog 
        format; and
            (2) that has not purchased a digital-to-analog conversion 
        device prior to the date of enactment of the Digital Television 
        Transition and Public Safety Act of 2005.

SEC. 3009. LOW-POWER TELEVISION AND TRANSLATOR UPGRADE PROGRAM.

    (a) Establishment.--The Assistant Secretary shall make payments of 
not to exceed $65,000,000, in the aggregate, during fiscal year 2009 
the Digital Television Transition and Public Safety Fund established 
under section 309(j)(8)(E) of the Communications Act of 1934 (47 U.S.C. 
309(j)(8)(E)) to implement and administer a program through which each 
licensee of an eligible low-power television station may receive 
reimbursement for equipment to upgrade low-power television stations 
from analog to digital in eligible rural communities, as that term is 
defined in section 610(b)(2) of the Rural Electrification Act of 1937 
(7 U.S.C. 950bb(b)(2)). Such reimbursements shall be issued to eligible 
stations no earlier than October 1, 2010. Priority reimbursements shall 
be given to eligible low-power television stations in which the license 
is held by a non-profit corporation and eligible low-power television 
stations that serve rural areas of fewer than 10,000 viewers.
    (b) Eligible Stations.--For purposes of this section, the term 
``eligible low-power television station'' means a low-power television 
broadcast station, Class A television station, television translator 
station, or television booster station--
            (1) that is itself broadcasting exclusively in analog 
        format; and
            (2) that has not converted from analog to digital 
        operations prior to the date of enactment of the Digital 
        Television Transition and Public Safety Act of 2005.

SEC. 3010. NATIONAL ALERT AND TSUNAMI WARNING PROGRAM.

    The Assistant Secretary shall make payments of not to exceed 
$156,000,000, in the aggregate, during the fiscal year 2007 through 
2012 period from the Digital Television Transition and Public Safety 
Fund established under section 309(j)(8)(E) of the Communications Act 
of 1934 (47 U.S.C. 309(j)(8)(E)) to implement a unified national alert 
system capable of alerting the public, on a national, regional, or 
local basis to emergency situations by using a variety of 
communications technologies. The Assistant Secretary shall use 
$50,000,000 of such amounts to implement a tsunami warning and coastal 
vulnerability program.

SEC. 3011. ENHANCE 911.

    The Assistant Secretary shall make payments of not to exceed 
$43,500,000, in the aggregate, from the Digital Television Transition 
and Public Safety Fund established under section 309(j)(8)(E) of the 
Communications Act of 1934 (47 U.S.C. 309(j)(8)(E)) to implement the 
ENHANCE 911 Act of 2004.

SEC. 3012. ESSENTIAL AIR SERVICE PROGRAM.

    (a) In General.--If the amount appropriated to carry out the 
essential air service program under subchapter II of chapter 417 of 
title 49, United States Code, equals or exceeds $110,000,000 for fiscal 
year 2007 or 2008, then the Secretary of Commerce shall make 
$15,000,000 available, from the Digital Television Transition and 
Public Safety Fund established by section 309(j)(8)(E) of the 
Communications Act of 1934 (47 U.S.C. 309(j)(8)(E)), to the Secretary 
of Transportation for use in carrying out the essential air service 
program for that fiscal year.
    (b) Application With Other Funds.--Amounts made available under 
subsection (a) for any fiscal year shall be in addition to any 
amounts--
            (1) appropriated for that fiscal year; or
            (2) derived from fees collected pursuant to section 
        45301(a)(1) of title 49, United States Code, that are made 
        available for obligation and expenditure to carry out the 
        essential air service program for that fiscal year.
    (c) Advances.--The Secretary of Transportation may borrow from the 
Treasury such sums as may be necessary, but not to exceed $30,000,000 
on a temporary and reimbursable basis to implement subsection (a). The 
Secretary of Transportation shall reimburse the Treasury, without 
interest, as funds are deposited into the Digital Television Transition 
and Public Safety Fund under section 309(j)(8)(E) of the Communications 
Act of 1934 (47 U.S.C. 309(j)(8)(E)) and made available to the 
Secretary under subsection (a).

SEC. 3013. SUPPLEMENTAL LICENSE FEES.

    In addition to any fees assessed under the Communications Act of 
1934 (47 U.S.C. 151 et seq.), the Federal Communications Commission 
shall assess extraordinary fees for licenses in the aggregate amount of 
$10,000,000, which shall be deposited in the Treasury during fiscal 
year 2006 as offsetting receipts.

                  TITLE IV--TRANSPORTATION PROVISIONS

SEC. 4001. EXTENSION OF VESSEL TONNAGE DUTIES.

    (a) Extension of Duties.--Section 36 of the Act entitled ``An Act 
to provide revenue, equalize duties and encourage the industries of the 
United States, and for other purposes'', approved August 5, 1909 (36 
Stat. 111; 46 U.S.C. App. 121), is amended--
            (1) by striking ``9 cents per ton'' and all that follows 
        through ``2002,'' the first place it appears and inserting 
        ``4.5 cents per ton, not to exceed in the aggregate 22.5 cents 
        per ton in any one year, for fiscal years 2006 through 2010,''; 
        and
            (2) by striking ``27 cents per ton'' and all that follows 
        through ``2002,'' and inserting ``13.5 cents per ton, not to 
        exceed 67.5 cents per ton per annum, for fiscal years 2006 
        through 2010,''.
    (b) Conforming Amendment.--The Act entitled ``An Act concerning 
tonnage duties on vessels entering otherwise than by sea'', approved 
March 8, 1910 (36 Stat. 234; 46 U.S.C. App. 132), is amended by 
striking ``9 cents per ton'' and all that follows through ``and 2 
cents'' and inserting ``4.5 cents per ton, not to exceed in the 
aggregate 22.5 cents per ton in any one year, for fiscal years 2006 
through 2010, and 2 cents''.

                           TITLE V--MEDICARE

               Subtitle A--Provisions Relating to Part A

SEC. 5001. HOSPITAL QUALITY IMPROVEMENT.

    (a) Submission of Hospital Data.--Section 1886(b)(3)(B) of the 
Social Security Act (42 U.S.C. 1395ww(b)(3)(B)) is amended--
            (1) in clause (i)--
                    (A) in subclause (XIX), by striking ``2007'' and 
                inserting ``2006''; and
                    (B) in subclause (XX), by striking ``for fiscal 
                year 2008 and each subsequent fiscal year,'' and 
                inserting ``for each subsequent fiscal year, subject to 
                clause (viii),'';
            (2) in clause (vii)--
                    (A) in subclause (I), by striking ``for each of 
                fiscal years 2005 through 2007'' and inserting ``for 
                fiscal years 2005 and 2006''; and
                    (B) in subclause (II), by striking ``Each'' and 
                inserting ``For fiscal years 2005 and 2006, each''; and
            (3) by adding at the end the following new clauses:
                            ``(viii)(I) For purposes of clause (i) for 
                        fiscal year 2007 and each subsequent fiscal 
                        year, in the case of a subsection (d) hospital 
                        that does not submit, to the Secretary in 
                        accordance with this clause, data required to 
                        be submitted on measures selected under this 
                        clause with respect to such a fiscal year, the 
                        applicable percentage increase under clause (i) 
                        for such fiscal year shall be reduced by 2.0 
                        percentage points. Such reduction shall apply 
                        only with respect to the fiscal year involved 
                        and the Secretary shall not take into account 
                        such reduction in computing the applicable 
                        percentage increase under clause (i) for a 
                        subsequent fiscal year, and the Secretary and 
                        the Medicare Payment Advisory Commission shall 
                        carry out the requirements under section 
                        5001(b) of the Deficit Reduction Act of 2005.
                            ``(II) Each subsection (d) hospital shall 
                        submit data on measures selected under this 
                        clause to the Secretary in a form and manner, 
                        and at a time, specified by the Secretary for 
                        purposes of this clause.
                            ``(III) The Secretary shall expand, beyond 
                        the measures specified under clause (vii)(II) 
                        and consistent with the succeeding subclauses, 
                        the set of measures that the Secretary 
                        determines to be appropriate for the 
                        measurement of the quality of care furnished by 
                        hospitals in inpatient settings.
                            ``(IV) Effective for payments beginning 
                        with fiscal year 2007, in expanding the number 
                        of measures under subclause (III), the 
                        Secretary shall begin to adopt the baseline set 
                        of performance measures as set forth in the 
                        November 2005 report by the Institute of 
                        Medicine of the National Academy of Sciences 
                        under section 238(b) of the Medicare 
                        Prescription Drug, Improvement, and 
                        Modernization Act of 2003.
                            ``(V) Effective for payments beginning with 
                        fiscal year 2008, the Secretary shall add other 
                        measures that reflect consensus among affected 
                        parties and, to the extent feasible and 
                        practicable, shall include measures set forth 
                        by one or more national consensus building 
                        entities.
                            ``(VI) For purposes of this clause and 
                        clause (vii), the Secretary may replace any 
                        measures or indicators in appropriate cases, 
                        such as where all hospitals are effectively in 
                        compliance or the measures or indicators have 
                        been subsequently shown not to represent the 
                        best clinical practice.
                            ``(VII) The Secretary shall establish 
                        procedures for making data submitted under this 
                        clause available to the public. Such procedures 
                        shall ensure that a hospital has the 
                        opportunity to review the data that are to be 
                        made public with respect to the hospital prior 
                        to such data being made public. The Secretary 
                        shall report quality measures of process, 
                        structure, outcome, patients' perspectives on 
                        care, efficiency, and costs of care that relate 
                        to services furnished in inpatient settings in 
                        hospitals on the Internet website of the 
                        Centers for Medicare & Medicaid Services.''.
    (b) Plan for Hospital Value Based Purchasing Program.--
            (1) In general.--The Secretary of Health and Human Services 
        shall develop a plan to implement a value based purchasing 
        program for payments under the Medicare program for subsection 
        (d) hospitals beginning with fiscal year 2009.
            (2) Details.--Such a plan shall include consideration of 
        the following issues:
                    (A) The on-going development, selection, and 
                modification process for measures of quality and 
                efficiency in hospital inpatient settings.
                    (B) The reporting, collection, and validation of 
                quality data.
                    (C) The structure of value based payment 
                adjustments, including the determination of thresholds 
                or improvements in quality that would substantiate a 
                payment adjustment, the size of such payments, and the 
                sources of funding for the value based payments.
                    (D) The disclosure of information on hospital 
                performance.
        In developing such a plan, the Secretary shall consult with 
        relevant affected parties and shall consider experience with 
        such demonstrations that are relevant to the value based 
        purchasing program under this subsection.
    (c) Quality Adjustment in DRG Payments for Certain Hospital 
Acquired Infections.--
            (1) In general.--Section 1886(d)(4) of the Social Security 
        Act (42 U.S.C. 1395ww(d)(4)) is amended by adding at the end 
        the following new subparagraph:
    ``(D)(i) For discharges occurring on or after October 1, 2008, the 
diagnosis-related group to be assigned under this paragraph for a 
discharge described in clause (ii) shall be a diagnosis-related group 
that does not result in higher payment based on the presence of a 
secondary diagnosis code described in clause (iv).
    ``(ii) A discharge described in this clause is a discharge which 
meets the following requirements:
            ``(I) The discharge includes a condition identified by a 
        diagnosis code selected under clause (iv) as a secondary 
        diagnosis.
            ``(II) But for clause (i), the discharge would have been 
        classified to a diagnosis-related group that results in a 
        higher payment based on the presence of a secondary diagnosis 
        code selected under clause (iv).
            ``(III) At the time of admission, no code selected under 
        clause (iv) was present.
    ``(iii) As part of the information required to be reported by a 
hospital with respect to a discharge of an individual in order for 
payment to be made under this subsection, for discharges occurring on 
or after October 1, 2007, the information shall include the secondary 
diagnosis of the individual at admission.
    ``(iv) By not later than October 1, 2007, the Secretary shall 
select diagnosis codes associated with at least two conditions, each of 
which codes meets all of the following requirements (as determined by 
the Secretary):
            ``(I) Cases described by such code have a high cost or high 
        volume, or both, under this title.
            ``(II) The code results in the assignment of a case to a 
        diagnosis-related group that has a higher payment when the code 
        is present as a secondary diagnosis.
            ``(III) The code describes such conditions that could 
        reasonably have been prevented through the application of 
        evidence-based guidelines.
The Secretary may from time to time revise (through addition or 
deletion of codes) the diagnosis codes selected under this clause so 
long as there are diagnosis codes associated with at least two 
conditions selected for discharges occurring during any fiscal year.
    ``(v) In selecting and revising diagnosis codes under clause (iv), 
the Secretary shall consult with the Centers for Disease Control and 
Prevention and other appropriate entities.
    ``(vi) Any change resulting from the application of this 
subparagraph shall not be taken into account in adjusting the weighting 
factors under subparagraph (C)(i) or in applying budget neutrality 
under subparagraph (C)(iii).''.
            (2) No judicial review.--Section 1886(d)(7)(B) of such Act 
        (42 U.S.C. 1395ww(d)(7)(B)) is amended by inserting before the 
        period the following: ``, including the selection and revision 
        of codes under paragraph (4)(D)''.

SEC. 5002. CLARIFICATION OF DETERMINATION OF MEDICAID PATIENT DAYS FOR 
              DSH COMPUTATION.

    (a) In General.--Section 1886(d)(5)(F)(vi) of the Social Security 
Act (42 U.S.C. 1395ww(d)(5)(F)(vi)) is amended by adding after and 
below subclause (II) the following:
``In determining under subclause (II) the number of the hospital's 
patient days for such period which consist of patients who (for such 
days) were eligible for medical assistance under a State plan approved 
under title XIX, the Secretary may, to the extent and for the period 
the Secretary determines appropriate, include patient days of patients 
not so eligible but who are regarded as such because they receive 
benefits under a demonstration project approved under title XI.''.
    (b) Ratification and Prospective Application of Previous 
Regulations.--
            (1) In general.--Subject to paragraph (2), regulations 
        described in paragraph (3), insofar as such regulations provide 
        for the treatment of individuals eligible for medical 
        assistance under a demonstration project approved under title 
        XI of the Social Security Act under section 1886(d)(5)(F)(vi) 
        of such Act, are hereby ratified, effective as of the date of 
        their respective promulgations.
            (2) No application to closed cost reports.--Paragraph (1) 
        shall not be applied in a manner that requires the reopening of 
        any cost reports which are closed as of the date of the 
        enactment of this Act.
            (3) Regulations described.--For purposes of paragraph (1), 
        the regulations described in this paragraph are as follows:
                    (A) 2000 regulation.--Regulations promulgated on 
                January 20, 2000, at 65 Federal Register 3136 et seq., 
                including the policy in such regulations regarding 
                discharges occurring prior to January 20, 2000.
                    (B) 2003 regulation.--Regulations promulgated on 
                August 1, 2003, at 68 Federal Register 45345 et seq.

SEC. 5003. IMPROVEMENTS TO THE MEDICARE-DEPENDENT HOSPITAL (MDH) 
              PROGRAM.

    (a) 5-Year Extension.--
            (1) Extension of Payment Methodology.--Section 
        1886(d)(5)(G) of the Social Security Act (42 U.S.C. 
        1395ww(d)(5)(G)) is amended--
                    (A) in clause (i), by striking ``October 1, 2006'' 
                and inserting ``October 1, 2011''; and
                    (B) in clause (ii)(II)--
                            (i) by striking ``October 1, 2006'' and 
                        inserting ``October 1, 2011''; and
                            (ii) by inserting ``or for discharges in 
                        the fiscal year'' after ``for the cost 
                        reporting period''.
            (2) Conforming amendments.--
                    (A) Extension of target amount.--Section 
                1886(b)(3)(D) of such Act (42 U.S.C. 1395ww(b)(3)(D)) 
                is amended--
                            (i) in the matter preceding clause (i)--
                                    (I) by striking ``beginning'' and 
                                inserting ``occurring''; and
                                    (II) by striking ``October 1, 
                                2006'' and inserting ``October 1, 
                                2011''; and
                            (ii) in clause (iv), by striking ``through 
                        fiscal year 2005'' and inserting ``through 
                        fiscal year 2011''.
                    (B) Permitting hospitals to decline 
                reclassification.--Section 13501(e)(2) of the Omnibus 
                Budget Reconciliation Act of 1993 (42 U.S.C. 1395ww 
                note) is amended by striking ``through fiscal year 
                2005'' and inserting ``through fiscal year 2011''.
    (b) Option To Use 2002 as Base Year.--Section 1886(b)(3) of such 
Act (42 U.S.C. 1395ww(b)(3)) is amended--
            (1) in subparagraph (D), by inserting ``subject to 
        subparagraph (K),'' after ``(d)(5)(G)),''; and
            (2) by adding at the end the following new subparagraph:
    ``(K)(i) With respect to discharges occurring on or after October 
1, 2006, in the case of a medicare-dependent, small rural hospital, for 
purposes of applying subparagraph (D)--
            ``(I) there shall be substituted for the base cost 
        reporting period described in subparagraph (D)(i) the 12-month 
        cost reporting period beginning during fiscal year 2002; and
            ``(II) any reference in such subparagraph to the `first 
        cost reporting period' described in such subparagraph is deemed 
        a reference to the first cost reporting period beginning on or 
        after October 1, 2006.
    ``(ii) This subparagraph shall only apply to a hospital if the 
substitution described in clause (i)(I) results in an increase in the 
target amount under subparagraph (D) for the hospital.''.
    (c) Enhanced Payment for Amount by Which the Target Exceeds the PPS 
Rate.--Section 1886(d)(5)(G)(ii)(II) of such Act (42 U.S.C. 
1395ww(d)(5)(G)(iv)(II)) is amended by inserting ``(or 75 percent in 
the case of discharges occurring on or after October 1, 2006)'' after 
``50 percent''.
    (d) Enhanced Disproportionate Share Hospital (DSH) Treatment for 
Medicare-Dependent Hospitals.--Section 1886(d)(5)(F)(xiv)(II) of such 
Act (42 U.S.C. 1395ww(d)(5)(F)(xiv)(II)) is amended by inserting ``or, 
in the case of discharges occurring on or after October 1, 2006, as a 
medicare-dependent, small rural hospital under subparagraph (G)(iv)'' 
before the period at the end.

SEC. 5004. REDUCTION IN PAYMENTS TO SKILLED NURSING FACILITIES FOR BAD 
              DEBT.

    (a) In General.--Section 1861(v)(1) of the Social Security Act (42 
U.S.C. 1395x(v)(1)) is amended by adding at the end the following new 
subparagraph:
    ``(V) In determining such reasonable costs for skilled nursing 
facilities with respect to cost reporting periods beginning on or after 
October 1, 2005, the amount of bad debts otherwise treated as allowed 
costs which are attributable to the coinsurance amounts under this 
title for individuals who are entitled to benefits under part A and--
            ``(i) are not described in section 1935(c)(6)(A)(ii) shall 
        be reduced by 30 percent of such amount otherwise allowable; 
        and
            ``(ii) are described in such section shall not be 
        reduced.''.
    (b) Technical Amendment.--Section 1861(v)(1)(T) of such Act (42 
U.S.C. 1395x(v)(1)(T)) is amended by striking ``section 1833(t)(5)(B)'' 
and inserting ``section 1833(t)(8)(B)''.

SEC. 5005. EXTENDED PHASE-IN OF THE INPATIENT REHABILITATION FACILITY 
              CLASSIFICATION CRITERIA.

    (a) In General.--Notwithstanding section 412.23(b)(2) of title 42, 
Code of Federal Regulations, the Secretary of Health and Human Services 
shall apply the applicable percent specified in subsection (b) in the 
classification criterion used under the IRF regulation (as defined in 
subsection (c)) to determine whether a hospital or unit of a hospital 
is an inpatient rehabilitation facility under the Medicare program 
under title XVIII of the Social Security Act.
    (b) Applicable Percent.--For purposes of subsection (a), the 
applicable percent specified in this subsection for cost reporting 
periods--
            (1) beginning during the 12-month period beginning on July 
        1, 2006, is 60 percent;
            (2) beginning during the 12-month period beginning on July 
        1, 2007, is 65 percent; and
            (3) beginning on or after July 1, 2008, is 75 percent.
    (c) IRF Regulation.--For purposes of subsection (a), the term ``IRF 
regulation'' means the rule published in the Federal Register on May 7, 
2004, entitled ``Medicare Program; Final Rule; Changes to the Criteria 
for Being Classified as an Inpatient Rehabilitation Facility'' (69 Fed. 
Reg. 25752).

SEC. 5006. DEVELOPMENT OF A STRATEGIC PLAN REGARDING PHYSICIAN 
              INVESTMENT IN SPECIALTY HOSPITALS.

    (a) Development.--
            (1) In general.--The Secretary of Health and Human Services 
        (in this section referred to as the ``Secretary'') shall 
        develop a strategic and implementing plan to address issues 
        described in paragraph (2) regarding physician investment in 
        specialty hospitals (as defined in section 1877(h)(7)(A) of the 
        Social Security Act (42 U.S.C. 1395nn(h)(7)(A)).
            (2) Issues described.--The issues described in this 
        paragraph are the following:
                    (A) Proportionality of investment return.
                    (B) Bona fide investment.
                    (C) Annual disclosure of investment information.
                    (D) The provision by specialty hospitals of--
                            (i) care to patients who are eligible for 
                        medical assistance under a State plan approved 
                        under title XIX of the Social Security Act, 
                        including patients not so eligible but who are 
                        regarded as such because they receive benefits 
                        under a demonstration project approved under 
                        title XI of such Act; and
                            (ii) charity care.
                    (E) Appropriate enforcement.
    (b) Reports.--
            (1) Interim report.--Not later than 3 months after the date 
        of the enactment of this Act, the Secretary shall submit an 
        interim report to the appropriate committees of jurisdiction of 
        Congress on the status of the development of the plan under 
        subsection (a).
            (2) Final report.--Not later than six months after the date 
        of the enactment of this Act, the Secretary shall submit a 
        final report to the appropriate committees of jurisdiction of 
        Congress on the plan developed under subsection (a) together 
        with recommendations for such legislation and administrative 
        actions as the Secretary considers appropriate.
    (c) Continuation of Suspension on Enrollment.--
            (1) In general.--Subject to paragraph (2), the Secretary 
        shall continue the suspension on enrollment of new specialty 
        hospitals (as so defined) under title XVIII of the Social 
        Security Act until the earlier of--
                    (A) the date that the Secretary submits the final 
                report under subsection (b)(2); or
                    (B) the date that is six months after the date of 
                the enactment of this Act.
            (2) Extension of suspension.--If the Secretary fails to 
        submit the final report described in subsection (b)(2) by the 
        date required under such subsection, the Secretary shall--
                    (A) extend the suspension on enrollment under 
                paragraph (1) for an additional two months; and
                    (B) provide a certification to the appropriate 
                committees of jurisdiction of Congress of such failure.
    (d) Waiver.--In developing the plan and report required under this 
section, the Secretary may waive such requirements of section 553 of 
title 5, United States Code, as the Secretary determines necessary.
    (e) Funding.--Out of any funds in the Treasury not otherwise 
appropriated, there are appropriated to the Secretary for fiscal year 
2006, $2,000,000 to carry out this section.

SEC. 5007. MEDICARE DEMONSTRATION PROJECTS TO PERMIT GAINSHARING 
              ARRANGEMENTS.

    (a) Establishment.--The Secretary shall establish under this 
section a qualified gainsharing demonstration program under which the 
Secretary shall approve demonstration projects by not later than 
November 1, 2006, to test and evaluate methodologies and arrangements 
between hospitals and physicians designed to govern the utilization of 
inpatient hospital resources and physician work to improve the quality 
and efficiency of care provided to Medicare beneficiaries and to 
develop improved operational and financial hospital performance with 
sharing of remuneration as specified in the project. Such projects 
shall be operational by not later than January 1, 2007.
    (b) Requirements Described.--A demonstration project under this 
section shall meet the following requirements for purposes of 
maintaining or improving quality while achieving cost savings:
            (1) Arrangement for remuneration as share of savings.--The 
        demonstration project shall involve an arrangement between a 
        hospital and a physician under which the hospital provides 
        remuneration to the physician that represents solely a share of 
        the savings incurred directly as a result of collaborative 
        efforts between the hospital and the physician.
            (2) Written plan agreement.--The demonstration project 
        shall be conducted pursuant to a written agreement that--
                    (A) is submitted to the Secretary prior to 
                implementation of the project; and
                    (B) includes a plan outlining how the project will 
                achieve improvements in quality and efficiency.
            (3) Patient notification.--The demonstration project shall 
        include a notification process to inform patients who are 
        treated in a hospital participating in the project of the 
        participation of the hospital in such project.
            (4) Monitoring quality and efficiency of care.--The 
        demonstration project shall provide measures to ensure that the 
        quality and efficiency of care provided to patients who are 
        treated in a hospital participating in the demonstration 
        project is continuously monitored to ensure that such quality 
        and efficiency is maintained or improved.
            (5) Independent review.--The demonstration project shall 
        certify, prior to implementation, that the elements of the 
        demonstration project are reviewed by an organization that is 
        not affiliated with the hospital or the physician participating 
        in the project.
            (6) Referral limitations.--The demonstration project shall 
        not be structured in such a manner as to reward any physician 
        participating in the project on the basis of the volume or 
        value of referrals to the hospital by the physician.
    (c) Waiver of Certain Restrictions.--
            (1) In general.--An incentive payment made by a hospital to 
        a physician under and in accordance with a demonstration 
        project shall not constitute--
                    (A) remuneration for purposes of section 1128B of 
                the Social Security Act (42 U.S.C. 1320a-7b);
                    (B) a payment intended to induce a physician to 
                reduce or limit services to a patient entitled to 
                benefits under Medicare or a State plan approved under 
                title XIX of such Act in violation of section 1128A of 
                such Act (42 U.S.C. 1320a-7a); or
                    (C) a financial relationship for purposes of 
                section 1877 of such Act (42 U.S.C. 1395nn).
            (2) Protection for existing arrangements.--In no case shall 
        the failure to comply with the requirements described in 
        paragraph (1) affect a finding made by the Inspector General of 
        the Department of Health and Human Services prior to the date 
        of the enactment of this Act that an arrangement between a 
        hospital and a physician does not violate paragraph (1) or (2) 
        of section 1128A(a) of the Social Security Act (42 U.S.C. 
        1320a-7(a)).
    (d) Program Administration.--
            (1) Solicitation of applications.--By not later than 90 
        days after the date of the enactment of this Act, the Secretary 
        shall solicit applications for approval of a demonstration 
        project, in such form and manner, and at such time specified by 
        the Secretary.
            (2) Number of projects approved.--The Secretary shall 
        approve not more than 6 demonstration projects, at least 2 of 
        which shall be located in a rural area.
            (3) Duration.--The qualified gainsharing demonstration 
        program under this section shall be conducted for the period 
        beginning on January 1, 2007, and ending on December 31, 2009.
    (e) Reports.--
            (1) Initial report.--By not later than December 1, 2006, 
        the Secretary shall submit to Congress a report on the number 
        of demonstration projects that will be conducted under this 
        section.
            (2) Project update.--By not later than December 1, 2007, 
        the Secretary shall submit to Congress a report on the details 
        of such projects (including the project improvements towards 
        quality and efficiency described in subsection (b)(2)(B)).
            (3) Quality improvement and savings.--By not later than 
        December 1, 2008, the Secretary shall submit to Congress a 
        report on quality improvement and savings achieved as a result 
        of the qualified gainsharing demonstration program established 
        under subsection (a).
            (4) Final report.--By not later than May 1, 2010, the 
        Secretary shall submit to Congress a final report on the 
        information described in paragraph (3).
    (f) Funding.--
            (1) In general.--Out of any funds in the Treasury not 
        otherwise appropriated, there are appropriated to the Secretary 
        for fiscal year 2006 $6,000,000, to carry out this section.
            (2) Availability.--Funds appropriated under paragraph (1) 
        shall remain available for expenditure through fiscal year 
        2010.
    (g) Definitions.--For purposes of this section:
            (1) Demonstration project.--The term ``demonstration 
        project'' means a project implemented under the qualified 
        gainsharing demonstration program established under subsection 
        (a).
            (2) Hospital.--The term ``hospital'' means a hospital that 
        receives payment under section 1886(d) of the Social Security 
        Act (42 U.S.C. 1395ww(d)), and does not include a critical 
        access hospital (as defined in section 1861(mm) of such Act (42 
        U.S.C. 1395x(mm))).
            (3) Medicare.--The term ``Medicare'' means the programs 
        under title XVIII of the Social Security Act.
            (4) Physician.--The term ``physician'' means, with respect 
        to a demonstration project, a physician described in paragraph 
        (1) or (3) of section 1861(r) of the Social Security Act (42 
        U.S.C. 1395x(r)) who is licensed as such a physician in the 
        area in which the project is located and meets requirements to 
        provide services for which benefits are provided under 
        Medicare. Such term shall be deemed to include a practitioner 
        described in section 1842(e)(18)(C) of such Act (42 U.S.C. 
        1395u(e)(18)(C)).
            (5) Secretary.--The term ``Secretary'' means the Secretary 
        of Health and Human Services.

SEC. 5008. POST-ACUTE CARE PAYMENT REFORM DEMONSTRATION PROGRAM.

    (a) Establishment.--
            (1) In general.--By not later than January 1, 2008, the 
        Secretary of Health and Human Services (in this section 
        referred to as the ``Secretary'') shall establish a 
        demonstration program for purposes of understanding costs and 
        outcomes across different post-acute care sites. Under such 
        program, with respect to diagnoses specified by the Secretary, 
        an individual who receives treatment from a provider for such a 
        diagnosis shall receive a single comprehensive assessment on 
        the date of discharge from a subsection (d) hospital (as 
        defined in section 1886(d)(1)(B) of the Social Security Act (42 
        U.S.C. 1395ww(d)(1)(B))) of the needs of the patient and the 
        clinical characteristics of the diagnosis to determine the 
        appropriate placement of such patient in a post-acute care 
        site. The Secretary shall use a standardized patient assessment 
        instrument across all post-acute care sites to measure 
        functional status and other factors during the treatment and at 
        discharge from each provider. Participants in the program shall 
        provide information on the fixed and variable costs for each 
        individual. An additional comprehensive assessment shall be 
        provided at the end of the episode of care.
            (2) Number of sites.--The Secretary shall conduct the 
        demonstration program under this section with sufficient 
        numbers to determine statistically reliable results.
            (3) Duration.--The Secretary shall conduct the 
        demonstration program under this section for a 3-year period.
    (b) Waiver Authority.--The Secretary may waive such requirements of 
titles XI and XVIII of the Social Security Act (42 U.S.C. 1301 et seq.; 
42 U.S.C. 1395 et seq.) as may be necessary for the purpose of carrying 
out the demonstration program under this section.
    (c) Report.--Not later than 6 months after the completion of the 
demonstration program under this section, the Secretary shall submit to 
Congress a report on such program, that includes the results of the 
program and recommendations for such legislation and administrative 
action as the Secretary determines to be appropriate.
    (d) Funding.--The Secretary shall provide for the transfer from the 
Federal Hospital Insurance Trust Fund established under section 1817 of 
the Social Security Act (42 U.S.C. 1395i), $6,000,000 for the costs of 
carrying out the demonstration program under this section.

               Subtitle B--Provisions Relating to Part B

                     CHAPTER 1--PAYMENT PROVISIONS

SEC. 5101. BENEFICIARY OWNERSHIP OF CERTAIN DURABLE MEDICAL EQUIPMENT 
              (DME).

    (a) DME.--
            (1) In general.--Section 1834(a)(7)(A) of the Social 
        Security Act (42 U.S.C. 1395m(a)(7)(A)) is amended to read as 
        follows:
                    ``(A) Payment.--In the case of an item of durable 
                medical equipment not described in paragraphs (2) 
                through (6), the following rules shall apply:
                            ``(i) Rental.--
                                    ``(I) In general.--Except as 
                                provided in clause (iii), payment for 
                                the item shall be made on a monthly 
                                basis for the rental of the item during 
                                the period of medical need (but 
                                payments under this clause may not 
                                extend over a period of continuous use 
                                (as determined by the Secretary) of 
                                longer than 36 months).
                                    ``(II) Payment amount.--Subject to 
                                subparagraph (B), the amount recognized 
                                for the item, for each of the first 3 
                                months of such period, is 10 percent of 
                                the purchase price recognized under 
                                paragraph (8) with respect to the item, 
                                and, for each of the remaining months 
                                of such period, is 7.5 percent of such 
                                purchase price.
                            ``(ii) Ownership after rental.--On the 
                        first day that begins after the 36th continuous 
                        month during which payment is made for the 
                        rental of an item under clause (i), the 
                        supplier of the item shall transfer title to 
                        the item to the individual.
                            ``(iii) Purchase agreement option for 
                        power-driven wheelchairs.--In the case of a 
                        power-driven wheelchair, at the time the 
                        supplier furnishes the item, the supplier shall 
                        offer the individual the option to purchase the 
                        item, and payment for such item shall be made 
                        on a lump-sum basis if the individual exercises 
                        such option.
                            ``(iv) Maintenance and servicing.--After 
                        the supplier transfers title to the item under 
                        clause (ii) or in the case of a power-driven 
                        wheelchair for which a purchase agreement has 
                        been entered into under clause (iii), 
                        maintenance and servicing payments shall, if 
                        the Secretary determines such payments are 
                        reasonable and necessary, be made (for parts 
                        and labor not covered by the supplier's or 
                        manufacturer's warranty, as determined by the 
                        Secretary to be appropriate for the particular 
                        type of durable medical equipment), and such 
                        payments shall be in an amount determined to be 
                        appropriate by the Secretary.''.
            (2) Effective date.--The amendment made by paragraph (1) 
        shall apply to items furnished for which the first rental month 
        occurs on or after January 1, 2006.
    (b) Oxygen Equipment.--
            (1) In general.--Section 1834(a)(5) of such Act (42 U.S.C. 
        1395m(a)(5)) is amended--
                    (A) in subparagraph (A), by striking ``and (E)'' 
                and inserting ``(E), and (F)''; and
                    (B) by adding at the end the following new 
                subparagraph:
                    ``(F) Ownership of Equipment.--
                            ``(i) In general.--Payment for oxygen 
                        equipment (including portable oxygen equipment) 
                        under this paragraph may not extend over a 
                        period of continuous use (as determined by the 
                        Secretary) of longer than 36 months.
                            ``(ii) Ownership.--
                                    ``(I) Transfer of title.--On the 
                                first day that begins after the 36th 
                                continuous month during which payment 
                                is made for the equipment under this 
                                paragraph, the supplier of the 
                                equipment shall transfer title to the 
                                equipment to the individual.
                                    ``(II) Payments for oxygen and 
                                maintenance and servicing.--After the 
                                supplier transfers title to the 
                                equipment under subclause (I)--
                                            ``(aa) payments for oxygen 
                                        shall continue to be made in 
                                        the amount recognized for 
                                        oxygen under paragraph (9) for 
                                        the period of medical need; and
                                            ``(bb) maintenance and 
                                        servicing payments shall, if 
                                        the Secretary determines such 
                                        payments are reasonable and 
                                        necessary, be made (for parts 
                                        and labor not covered by the 
                                        supplier's or manufacturer's 
                                        warranty, as determined by the 
                                        Secretary to be appropriate for 
                                        the equipment), and such 
                                        payments shall be in an amount 
                                        determined to be appropriate by 
                                        the Secretary.''.
            (2) Effective date.--
                    (A) In general.--The amendments made by paragraph 
                (1) shall take effect on January 1, 2006.
                    (B) Application to certain individuals.--In the 
                case of an individual receiving oxygen equipment on 
                December 31, 2005, for which payment is made under 
                section 1834(a) of the Social Security Act (42 U.S.C. 
                1395m(a)), the 36-month period described in paragraph 
                (5)(F)(i) of such section, as added by paragraph (1), 
                shall begin on January 1, 2006.

SEC. 5102. ADJUSTMENTS IN PAYMENT FOR IMAGING SERVICES.

    (a) Multiple Procedure Payment Reduction for Imaging Exempted From 
Budget Neutrality.--Section 1848(c)(2)(B) of the Social Security Act 
(42 U.S.C. 1395w-4(c)(2)(B)) is amended--
            (1) in clause (ii)(II), by striking ``clause (iv)'' and 
        inserting ``clauses (iv) and (v)'';
            (2) in clause (iv) in the heading, by inserting ``of 
        certain additional expenditures'' after ``Exemption''; and
            (3) by adding at the end the following new clause:
                            ``(v) Exemption of certain reduced 
                        expenditures from budget-neutrality 
                        calculation.--The following reduced 
                        expenditures, as estimated by the Secretary, 
                        shall not be taken into account in applying 
                        clause (ii)(II):
                                    ``(I) Reduced payment for multiple 
                                imaging procedures.--Effective for fee 
                                schedules established beginning with 
                                2007, reduced expenditures attributable 
                                to the multiple procedure payment 
                                reduction for imaging under the final 
                                rule published by the Secretary in the 
                                Federal Register on November 21, 2005 
                                (42 CFR 405, et al.) insofar as it 
                                relates to the physician fee schedules 
                                for 2006 and 2007.''.
    (b) Reduction in Physician Fee Schedule to OPD Payment Amount for 
Imaging Services.--Section 1848 of such Act (42 U.S.C. 1395w-4) is 
amended--
            (1) in subsection (b), by adding at the end the following 
        new paragraph:
            ``(4) Special rule for imaging services.--
                    ``(A) In general.--In the case of imaging services 
                described in subparagraph (B) furnished on or after 
                January 1, 2007, if--
                            ``(i) the technical component (including 
                        the technical component portion of a global 
                        fee) of the service established for a year 
                        under the fee schedule described in paragraph 
                        (1) without application of the geographic 
                        adjustment factor described in paragraph 
                        (1)(C), exceeds
                            ``(ii) the Medicare OPD fee schedule amount 
                        established under the prospective payment 
                        system for hospital outpatient department 
                        services under paragraph (3)(D) of section 
                        1833(t) for such service for such year, 
                        determined without regard to geographic 
                        adjustment under paragraph (2)(D) of such 
                        section,
                the Secretary shall substitute the amount described in 
                clause (ii), adjusted by the geographic adjustment 
                factor described in paragraph (1)(C), for the fee 
                schedule amount for such technical component for such 
                year.
                    ``(B) Imaging services described.--For purposes of 
                subparagraph (A), imaging services described in this 
                subparagraph are imaging and computer-assisted imaging 
                services, including X-ray, ultrasound (including 
                echocardiography), nuclear medicine (including positron 
                emission tomography), magnetic resonance imaging, 
                computed tomography, and fluoroscopy, but excluding 
                diagnostic and screening mammography.''; and
            (2) in subsection (c)(2)(B)(v), as added by subsection 
        (a)(3), by adding at the end the following new subclause:
                                    ``(II) OPD payment cap for imaging 
                                services.--Effective for fee schedules 
                                established beginning with 2007, 
                                reduced expenditures attributable to 
                                subsection (b)(4).''.

SEC. 5103. LIMITATION ON PAYMENTS FOR PROCEDURES IN AMBULATORY SURGICAL 
              CENTERS.

    Section 1833(i)(2) of the Social Security Act (42 U.S.C. 
1395l(i)(2)) is amended--
            (1) in subparagraph (A), by inserting ``subject to 
        subparagraph (E),'' after ``subparagraph (D),'';
            (2) in subparagraph (D)(ii), by inserting before the period 
        at the end the following: ``and taking into account reduced 
        expenditures that would apply if subparagraph (E) were to 
        continue to apply, as estimated by the Secretary''; and
            (3) by adding at the end the following new subparagraph:
    ``(E) With respect to surgical procedures furnished on or after 
January 1, 2007, and before the effective date of the implementation of 
a revised payment system under subparagraph (D), if--
            ``(i) the standard overhead amount under subparagraph (A) 
        for a facility service for such procedure, without the 
        application of any geographic adjustment, exceeds
            ``(ii) the Medicare OPD fee schedule amount established 
        under the prospective payment system for hospital outpatient 
        department services under paragraph (3)(D) of section 1833(t) 
        for such service for such year, determined without regard to 
        geographic adjustment under paragraph (2)(D) of such section,
the Secretary shall substitute under subparagraph (A) the amount 
described in clause (ii) for the standard overhead amount for such 
service referred to in clause (i).''.

SEC. 5104. UPDATE FOR PHYSICIANS' SERVICES FOR 2006.

    (a) Update for 2006.--Section 1848(d) of the Social Security Act 
(42 U.S.C. 1395w-4(d)) is amended--
            (1) in paragraph (4)(B), in the matter preceding clause 
        (i), by striking ``paragraph (5)'' and inserting ``paragraphs 
        (5) and (6)''; and
            (2) by adding at the end the following new paragraph:
            ``(6) Update for 2006.--The update to the single conversion 
        factor established in paragraph (1)(C) for 2006 shall be 0 
        percent.''.
    (b) Not Treated as Change in Law and Regulation in Sustainable 
Growth Rate Determination.--The amendments made by subsection (a) shall 
not be treated as a change in law for purposes of applying section 
1848(f)(2)(D) of the Social Security Act (42 U.S.C. 1395w-4(f)(2)(D)).
    (c) MedPAC Report.--
            (1) In general.--By not later than March 1, 2007, the 
        Medicare Payment Advisory Commission shall submit a report to 
        Congress on mechanisms that could be used to replace the 
        sustainable growth rate system under section 1848(f) of the 
        Social Security Act (42 U.S.C. 1395w-4(f)).
            (2) Requirements.--The report required under paragraph (1) 
        shall--
                    (A) identify and examine alternative methods for 
                assessing volume growth;
                    (B) review options to control the volume of 
                physicians' services under the Medicare program while 
                maintaining access to such services by Medicare 
                beneficiaries;
                    (C) examine the application of volume controls 
                under the Medicare physician fee schedule under section 
                1848 of the Social Security Act (42 U.S.C. 1395w-4);
                    (D) identify levels of application of volume 
                controls, such as group practice, hospital medical 
                staff, type of service, geographic area, and outliers;
                    (E) examine the administrative feasibility of 
                implementing the options reviewed under subparagraph 
                (B), including the availability of data and time lags;
                    (F) examine the extent to which the alternative 
                methods identified and examined under subparagraph (A) 
                should be specified in such section 1848; and
                    (G) identify the appropriate level of discretion 
                for the Secretary of Health and Human Services to 
                change payment rates under the Medicare physician fee 
                schedule or otherwise take steps that affect physician 
                behavior.
        Such report shall include such recommendations on alternative 
        mechanisms to replace the sustainable growth rate system as the 
        Medicare Payment Advisory Commission determines appropriate.
            (3) Funding.--Out of any funds in the Treasury not 
        otherwise appropriated, there are appropriated to the Medicare 
        Payment Advisory Commission $550,000, to carry out this 
        subsection.

SEC. 5105. THREE-YEAR TRANSITION OF HOLD HARMLESS PAYMENTS FOR SMALL 
              RURAL HOSPITALS UNDER THE PROSPECTIVE PAYMENT SYSTEM FOR 
              HOSPITAL OUTPATIENT DEPARTMENT SERVICES.

    Section 1833(t)(7)(D)(i) of the Social Security Act (42 U.S.C. 
1395l(t)(7)(D)(i)) is amended--
            (1) by inserting ``(I)'' before ``In the case''; and
            (2) by adding at the end the following new subclause:
                            ``(II) In the case of a hospital located in 
                        a rural area and that has not more than 100 
                        beds and that is not a sole community hospital 
                        (as defined in section 1886(d)(5)(D)(iii)), for 
                        covered OPD services furnished on or after 
                        January 1, 2006, and before January 1, 2009, 
                        for which the PPS amount is less than the pre-
                        BBA amount, the amount of payment under this 
                        subsection shall be increased by the applicable 
                        percentage of the amount of such difference. 
                        For purposes of the previous sentence, with 
                        respect to covered OPD services furnished 
                        during 2006, 2007, or 2008, the applicable 
                        percentage shall be 95 percent, 90 percent, and 
                        85 percent, respectively.''.

SEC. 5106. UPDATE TO THE COMPOSITE RATE COMPONENT OF THE BASIC CASE-MIX 
              ADJUSTED PROSPECTIVE PAYMENT SYSTEM FOR DIALYSIS 
              SERVICES.

    Section 1881(b)(12) of the Social Security Act (42 U.S.C. 
1395rr(b)(12)) is amended--
            (1) in subparagraph (F), in the flush matter at the end, by 
        striking ``Nothing'' and inserting ``Except as provided in 
        subparagraph (G), nothing'';
            (2) by redesignating subparagraph (G) as subparagraph (H); 
        and
            (3) by inserting after subparagraph (F) the following new 
        subparagraph:
    ``(G) The Secretary shall increase the amount of the composite rate 
component of the basic case-mix adjusted system under subparagraph (B) 
for dialysis services furnished on or after January 1, 2006, by 1.6 
percent above the amount of such composite rate component for such 
services furnished on December 31, 2005.''.

SEC. 5107. REVISIONS TO PAYMENTS FOR THERAPY SERVICES.

    (a) Exception to Caps for 2006.--
            (1) In general.--Section 1833(g) of the Social Security Act 
        (42 U.S.C. 1395l(g)) is amended--
                    (A) in each of paragraphs (1) and (3), by striking 
                ``paragraph (4)'' and inserting ``paragraphs (4) and 
                (5)''; and
                    (B) by adding at the end the following new 
                paragraph:
    ``(5) With respect to expenses incurred during 2006 for services, 
the Secretary shall implement a process under which an individual 
enrolled under this part may, upon request of the individual or a 
person on behalf of the individual, obtain an exception from the 
uniform dollar limitation specified in paragraph (2), for services 
described in paragraphs (1) and (3) if the provision of such services 
is determined to be medically necessary. Under such process, if the 
Secretary does not make a decision on such a request for an exception 
within 10 business days of the date of the Secretary's receipt of the 
request, the Secretary shall be deemed to have found the services to be 
medically necessary.''.
            (2) Timely implementation.--The Secretary of Health and 
        Human Services shall waive such provisions of law and 
        regulation (including those described in section 110(c) of Pub. 
        L. 108-173) as are necessary to implement the amendments made 
        by paragraph (1) on a timely basis and, notwithstanding any 
        other provision of law, may implement such amendments by 
        program instruction or otherwise. There shall be no 
        administrative or judicial review under section 1869 or section 
        1878 of the Social Security Act (42 U.S.C. 1395ff and 1395oo), 
        or otherwise of the process (including the establishment of the 
        process) under section 1833(g)(5) of such Act, as added by 
        paragraph (1).
    (b) Implementation of Clinically Appropriate Code Edits In Order To 
Identify and Eliminate Improper Payments for Therapy Services.--By not 
later than July 1, 2006, the Secretary of Health and Human Services 
shall implement clinically appropriate code edits with respect to 
payments under part B of title XVIII of the Social Security Act for 
physical therapy services, occupational therapy services, and speech-
language pathology services in order to identify and eliminate improper 
payments for such services, including edits of clinically illogical 
combinations of procedure codes and other edits to control 
inappropriate billings.

                        CHAPTER 2--MISCELLANEOUS

SEC. 5111. ACCELERATED IMPLEMENTATION OF INCOME-RELATED REDUCTION IN 
              PART B PREMIUM SUBSIDY.

    Section 1839(i)(3)(B) of the Social Security Act (42 U.S.C. 
1395r(i)(3)(B)) is amended--
            (1) in the heading, by striking ``5-year'' and inserting 
        ``3-year'';
            (2) in the matter preceding clause (i), by striking 
        ``2011'' and inserting ``2009'';
            (3) in clause (i), by striking ``20 percent'' and inserting 
        ``33 percent'';
            (4) in clause (ii), by striking ``40 percent'' and 
        inserting ``67 percent''; and
            (5) by striking clauses (iii) and (iv).

SEC. 5112. MEDICARE COVERAGE OF ULTRASOUND SCREENING FOR ABDOMINAL 
              AORTIC ANEURYSMS.

    (a) In General.--Section 1861 of the Social Security Act (42 U.S.C. 
1395x) is amended--
            (1) in subsection (s)(2)--
                    (A) by striking ``and'' at the end of subparagraph 
                (Y);
                    (B) by adding ``and'' at the end of subparagraph 
                (Z) and moving such subparagraph 2 ems to the left; and
                    (C) by adding at the end the following new 
                subparagraph:
            ``(AA) ultrasound screening for abdominal aortic aneurysm 
        (as defined in subsection (bbb)) for an individual--
                    ``(i) who receives a referral for such an 
                ultrasound screening as a result of an initial 
                preventive physical examination (as defined in section 
                1861(ww)(1));
                    ``(ii) who has not been previously furnished such 
                an ultrasound screening under this title; and
                    ``(iii) who--
                            ``(I) has a family history of abdominal 
                        aortic aneurysm; or
                            ``(II) manifests risk factors included in a 
                        beneficiary category recommended for screening 
                        by the United States Preventive Services Task 
                        Force regarding abdominal aortic aneurysms;''; 
                        and
            (2) by adding at the end the following new subsection:

          ``Ultrasound Screening for Abdominal Aortic Aneurysm

    ``(bbb) The term `ultrasound screening for abdominal aortic 
aneurysm' means--
            ``(1) a procedure using sound waves (or such other 
        procedures using alternative technologies, of commensurate 
        accuracy and cost, that the Secretary may specify) provided for 
        the early detection of abdominal aortic aneurysm; and
            ``(2) includes a physician's interpretation of the results 
        of the procedure.''.
    (b) Inclusion of Ultrasound Screening for Abdominal Aortic Aneurysm 
in Initial Preventive Physical Examination.--Section 1861(ww)(2) of 
such Act (42 U.S.C. 1395x(ww)(2)) is amended by adding at the end the 
following new subparagraph:
            ``(L) Ultrasound screening for abdominal aortic aneurysm as 
        defined in section 1861(bbb).''.
    (c) Payment for Ultrasound Screening for Abdominal Aortic 
Aneurysm.--Section 1848(j)(3) of such Act (42 U.S.C. 1395w-4(j)(3)) is 
amended by inserting ``(2)(AA),'' after ``(2)(W),''.
    (d) Frequency.--Section 1862(a)(1) of such Act (42 U.S.C. 
1395y(a)(1)) is amended--
            (1) by striking ``and'' at the end of subparagraph (L);
            (2) by striking the semicolon at the end of subparagraph 
        (M) and inserting ``, and''; and
            (3) by adding at the end the following new subparagraph:
            ``(N) in the case of ultrasound screening for abdominal 
        aortic aneurysm which is performed more frequently than is 
        provided for under section 1861(s)(2)(AA);''.
    (e) Non-Application of Part B Deductible.--Section 1833(b) of such 
Act (42 U.S.C. 1395l(b)) is amended in the first sentence--
            (1) by striking ``and'' before ``(6)''; and
            (2) by inserting ``, and (7) such deductible shall not 
        apply with respect to ultrasound screening for abdominal aortic 
        aneurysm (as defined in section 1861(bbb))'' before the period 
        at the end.
    (f) Effective Date.--The amendments made by this section shall 
apply to services furnished on or after January 1, 2007.

SEC. 5113. IMPROVING PATIENT ACCESS TO, AND UTILIZATION OF, COLORECTAL 
              CANCER SCREENING.

    (a) Non-Application of Deductible for Colorectal Cancer Screening 
Tests.--Section 1833(b) of the Social Security Act (42 U.S.C. 
1395l(b)), as amended by section 5112(e), is amended in the first 
sentence--
            (1) by striking ``and'' before ``(7)''; and
            (2) by inserting ``, and (8) such deductible shall not 
        apply with respect to colorectal cancer screening tests (as 
        described in section 1861(pp)(1))'' before the period at the 
        end.
    (b) Conforming Amendments.--Paragraphs (2)(C)(ii) and (3)(C)(ii) of 
section 1834(d) of such Act (42 U.S.C. 1395m(d)) are each amended--
            (1) by striking ``deductible and'' in the heading; and
            (2) in subclause (I), by striking ``deductible or'' each 
        place it appears.
    (c) Effective Date.--The amendments made by this section shall 
apply to services furnished on or after January 1, 2007.

SEC. 5114. DELIVERY OF SERVICES AT FEDERALLY QUALIFIED HEALTH CENTERS.

    (a) Coverage.--
            (1) In general.--Section 1861(aa)(3) of the Social Security 
        Act (42 U.S.C. 1395x(aa)(3)) is amended--
                    (A) in subparagraph (A), by striking ``, and'' and 
                inserting ``and services described in subsections (qq) 
                and (vv); and'';
                    (B) in subparagraph (B), by striking ``sections 
                329, 330, and 340'' and inserting ``section 330''; and
                    (C) in the flush matter at the end, by inserting 
                ``by the center or by a health care professional under 
                contract with the center'' after ``outpatient of a 
                Federally qualified health center''.
            (2) Consolidated billing.--The first sentence of section 
        1842(b)(6)(F) of such Act (42 U.S.C. 1395u(b)(6)(F)) is 
        amended--
                    (A) by striking ``and (G)'' and inserting ``(G)''; 
                and
                    (B) by inserting before the period at the end the 
                following: ``, and (H) in the case of services 
                described in section 1861(aa)(3) that are furnished by 
                a health care professional under contract with a 
                Federally qualified health center, payment shall be 
                made to the center''.
    (b) Technical Corrections.--Clauses (i) and (ii)(II) of section 
1861(aa)(4)(A) of such Act (42 U.S.C. 1395x(aa)(4)(A)) are each amended 
by striking ``(other than subsection (h))''.
    (c) Effective Dates.--The amendments made by this section shall 
apply to services furnished on or after January 1, 2006.

SEC. 5115. WAIVER OF PART B LATE ENROLLMENT PENALTY FOR CERTAIN 
              INTERNATIONAL VOLUNTEERS.

    (a) In General.--
            (1) Waiver of penalty.--Section 1839(b) of the Social 
        Security Act (42 U.S.C. 1395r(b)) is amended in the second 
        sentence by inserting the following before the period at the 
        end: ``or months for which the individual can demonstrate that 
        the individual was an individual described in section 
        1837(k)(3)''.
            (2) Special enrollment period.--
                    (A) In general.--Section 1837 of such Act (42 
                U.S.C. 1395p) is amended by adding at the end the 
                following new subsection:
    ``(k)(1) In the case of an individual who--
            ``(A) at the time the individual first satisfies paragraph 
        (1) or (2) of section 1836, is described in paragraph (3), and 
        has elected not to enroll (or to be deemed enrolled) under this 
        section during the individual's initial enrollment period; or
            ``(B) has terminated enrollment under this section during a 
        month in which the individual is described in paragraph (3),
there shall be a special enrollment period described in paragraph (2).
    ``(2) The special enrollment period described in this paragraph is 
the 6-month period beginning on the first day of the month which 
includes the date that the individual is no longer described in 
paragraph (3).
    ``(3) For purposes of paragraph (1), an individual described in 
this paragraph is an individual who--
            ``(A) is serving as a volunteer outside of the United 
        States through a program--
                    ``(i) that covers at least a 12-month period; and
                    ``(ii) that is sponsored by an organization 
                described in section 501(c)(3) of the Internal Revenue 
                Code of 1986 and exempt from taxation under section 
                501(a) of such Code; and
            ``(B) demonstrates health insurance coverage while serving 
        in the program.''.
                    (B) Coverage period.--Section 1838 of such Act (42 
                U.S.C. 1395q) is amended by adding at the end the 
                following new subsection:
    ``(f) Notwithstanding subsection (a), in the case of an individual 
who enrolls during a special enrollment period pursuant to section 
1837(k), the coverage period shall begin on the first day of the month 
following the month in which the individual so enrolls.''.
    (b) Effective Date.--The amendment made by subsection (a)(1) shall 
apply to months beginning with January 2007 and the amendments made by 
subsection (a)(2) shall take effect on January 1, 2007.

            Subtitle C--Provisions Relating to Parts A and B

SEC. 5201. HOME HEALTH PAYMENTS.

    (a) 2006 Update.--Section 1895(b)(3)(B)(ii) of the Social Security 
Act (42 U.S.C. 1395fff(b)(3)(B)(ii)) is amended--
            (1) in subclause (III), by striking ``each of 2005 and 
        2006'' and inserting ``all of 2005'';
            (2) by striking ``or'' at the end of subclause (III);
            (3) in subclause (IV), by striking ``2007 and'' and by 
        redesignating such subclause as subclause (V); and
            (4) by inserting after subclause (III) the following new 
        subclause:
                                    ``(IV) 2006, 0 percent; and''.
    (b) Applying Rural Add-On Policy for 2006.--Section 421(a) of 
Medicare Prescription Drug, Improvement, and Modernization Act of 2003 
(Pub. L. 108-173; 117 Stat. 2283) is amended by inserting ``and 
episodes and visits beginning on or after January 1, 2006, and before 
January 1, 2007,'' after ``April 1, 2005,''.
    (c) Home Health Care Quality Improvement.--Section 1895(b)(3)(B) of 
the Social Security Act (42 U.S.C. 1395fff(b)(3)(B)) is amended--
            (1) in clause (ii)(V), as redesignated by subsection 
        (a)(3), by inserting ``subject to clause (v),'' after 
        ``subsequent year,''; and
            (2) by adding at the end the following new clause:
                            ``(v) Adjustment if quality data not 
                        submitted.--
                                    ``(I) Adjustment.--For purposes of 
                                clause (ii)(V), for 2007 and each 
                                subsequent year, in the case of a home 
                                health agency that does not submit data 
                                to the Secretary in accordance with 
                                subclause (II) with respect to such a 
                                year, the home health market basket 
                                percentage increase applicable under 
                                such clause for such year shall be 
                                reduced by 2 percentage points. Such 
                                reduction shall apply only with respect 
                                to the year involved, and the Secretary 
                                shall not take into account such 
                                reduction in computing the prospective 
                                payment amount under this section for a 
                                subsequent year, and the Medicare 
                                Payment Advisory Commission shall carry 
                                out the requirements under section 
                                5201(d) of the Deficit Reduction Act of 
                                2005.
                                    ``(II) Submission of quality 
                                data.--For 2007 and each subsequent 
                                year, each home health agency shall 
                                submit to the Secretary such data that 
                                the Secretary determines are 
                                appropriate for the measurement of 
                                health care quality. Such data shall be 
                                submitted in a form and manner, and at 
                                a time, specified by the Secretary for 
                                purposes of this clause.
                                    ``(III) Public availability of data 
                                submitted.--The Secretary shall 
                                establish procedures for making data 
                                submitted under subclause (II) 
                                available to the public. Such 
                                procedures shall ensure that a home 
                                health agency has the opportunity to 
                                review the data that is to be made 
                                public with respect to the agency prior 
                                to such data being made public.''.
    (d) MedPAC Report on Value Based Purchasing.--
            (1) In general.--Not later than June 1, 2007, the Medicare 
        Payment Advisory Commission shall submit to Congress a report 
        that includes recommendations on a detailed structure of value 
        based payment adjustments for home health services under the 
        Medicare program under title XVIII of the Social Security Act. 
        Such report shall include recommendations concerning the 
        determination of thresholds, the size of such payments, sources 
        of funds, and the relationship of payments for improvement and 
        attainment of quality.
            (2) Funding.--Out of any funds in the Treasury not 
        otherwise appropriated, there are appropriated to the Medicare 
        Payment Advisory Commission $550,000, to carry out this 
        subsection.

SEC. 5202. REVISION OF PERIOD FOR PROVIDING PAYMENT FOR CLAIMS THAT ARE 
              NOT SUBMITTED ELECTRONICALLY.

    (a) Revision.--
            (1) Part a.--Section 1816(c)(3)(B)(ii) of the Social 
        Security Act (42 U.S.C. 1395h(c)(3)(B)(ii)) is amended by 
        striking ``26 days'' and inserting ``28 days''.
            (2) Part b.--Section 1842(c)(3)(B)(ii) of such Act (42 
        U.S.C. 1395u(c)(3)(B)(ii)) is amended by striking ``26 days'' 
        and inserting ``28 days''.
    (b) Effective Date.--The amendments made by this section shall 
apply to claims submitted on or after January 1, 2006.

SEC. 5203. TIMEFRAME FOR PART A AND B PAYMENTS.

    Notwithstanding sections 1816(c) and 1842(c)(2) of the Social 
Security Act or any other provision of law--
            (1) any payment from the Federal Hospital Insurance Trust 
        Fund under section 1817 of the Social Security Act (42 U.S.C. 
        1395i) or from the Federal Supplementary Medical Insurance 
        Trust Fund under section 1841 of such Act (42 U.S.C. 1395t) for 
        claims submitted under part A or B of title XVIII of such Act 
        for items and services furnished under such part A or B, 
        respectively, that would otherwise be payable during the period 
        beginning on September 22, 2006, and ending on September 30, 
        2006, shall be paid on the first business day of October 2006; 
        and
            (2) no interest or late penalty shall be paid to an entity 
        or individual for any delay in a payment by reason of the 
        application of paragraph (1).

SEC. 5204. MEDICARE INTEGRITY PROGRAM FUNDING.

    Section 1817(k)(4) of the Social Security Act (42 U.S.C. 
1395i(k)(4)) is amended--
            (1) in subparagraph (B), by striking ``The amount'' and 
        inserting ``Subject to subparagraph (C), the amount''; and
            (2) by adding at the end the following new subparagraph:
                    ``(C) Adjustments.--The amount appropriated under 
                subparagraph (A) for a fiscal year is increased as 
                follows:
                            ``(i) For fiscal year 2006, 
                        $100,000,000.''.

               Subtitle D--Provisions Relating to Part C

SEC. 5301. PHASE-OUT OF RISK ADJUSTMENT BUDGET NEUTRALITY IN 
              DETERMINING THE AMOUNT OF PAYMENTS TO MEDICARE ADVANTAGE 
              ORGANIZATIONS.

    (a) In General.--Section 1853 of the Social Security Act (42 U.S.C. 
1395w-23) is amended--
            (1) in subsection (j)(1)--
                    (A) in subparagraph (A)--
                            (i) by inserting ``(or, beginning with 
                        2007, \1/12\ of the applicable amount 
                        determined under subsection (k)(1))'' after 
                        ``1853(c)(1)''; and
                            (ii) by inserting ``(for years before 
                        2007)'' after ``adjusted as appropriate'';
                    (B) in subparagraph (B), by inserting ``(for years 
                before 2007)'' after ``adjusted as appropriate''; and
            (2) by adding at the end the following new subsection:
    ``(k) Determination of Applicable Amount for Purposes of 
Calculating the Benchmark Amounts.--
            ``(1) Applicable amount defined.--For purposes of 
        subsection (j), subject to paragraph (2), the term `applicable 
        amount' means for an area--
                    ``(A) for 2007--
                            ``(i) if such year is not specified under 
                        subsection (c)(1)(D)(ii), an amount equal to 
                        the amount specified in subsection (c)(1)(C) 
                        for the area for 2006--
                                    ``(I) first adjusted by the 
                                rescaling factor for 2006 for the area 
                                (as made available by the Secretary in 
                                the announcement of the rates on April 
                                4, 2005, under subsection (b)(1), but 
                                excluding any national adjustment 
                                factors for coding intensity and risk 
                                adjustment budget neutrality that were 
                                included in such factor); and
                                    ``(II) then increased by the 
                                national per capita MA growth 
                                percentage, described in subsection 
                                (c)(6) for 2007, but not taking into 
                                account any adjustment under 
                                subparagraph (C) of such subsection for 
                                a year before 2004;
                            ``(ii) if such year is specified under 
                        subsection (c)(1)(D)(ii), an amount equal to 
                        the greater of--
                                    ``(I) the amount determined under 
                                clause (i) for the area for the year; 
                                or
                                    ``(II) the amount specified in 
                                subsection (c)(1)(D) for the area for 
                                the year; and
                    ``(B) for a subsequent year--
                            ``(i) if such year is not specified under 
                        subsection (c)(1)(D)(ii), an amount equal to 
                        the amount determined under this paragraph for 
                        the area for the previous year (determined 
                        without regard to paragraph (2)), increased by 
                        the national per capita MA growth percentage, 
                        described in subsection (c)(6) for that 
                        succeeding year, but not taking into account 
                        any adjustment under subparagraph (C) of such 
                        subsection for a year before 2004; and
                            ``(ii) if such year is specified under 
                        subsection (c)(1)(D)(ii), an amount equal to 
                        the greater of--
                                    ``(I) the amount determined under 
                                clause (i) for the area for the year; 
                                or
                                    ``(II) the amount specified in 
                                subsection (c)(1)(D) for the area for 
                                the year.
            ``(2) Phase-out of budget neutrality factor.--
                    ``(A) In general.--Except as provided in 
                subparagraph (D), in the case of 2007 through 2010, the 
                applicable amount determined under paragraph (1) shall 
                be multiplied by a factor equal to 1 plus the product 
                of--
                            ``(i) the percent determined under 
                        subparagraph (B) for the year; and
                            ``(ii) the applicable phase-out factor for 
                        the year under subparagraph (C).
                    ``(B) Percent determined.--
                            ``(i) In general.--For purposes of 
                        subparagraph (A)(i), subject to clause (iv), 
                        the percent determined under this subparagraph 
                        for a year is a percent equal to a fraction the 
                        numerator of which is described in clause (ii) 
                        and the denominator of which is described in 
                        clause (iii).
                            ``(ii) Numerator based on difference 
                        between demographic rate and risk rate.--
                                    ``(I) In general.--The numerator 
                                described in this clause is an amount 
                                equal to the amount by which the 
                                demographic rate described in subclause 
                                (II) exceeds the risk rate described in 
                                subclause (III).
                                    ``(II) Demographic rate.--The 
                                demographic rate described in this 
                                subclause is the Secretary's estimate 
                                of the total payments that would have 
                                been made under this part in the year 
                                if all the monthly payment amounts for 
                                all MA plans were equal to \1/12\ of 
                                the annual MA capitation rate under 
                                subsection (c)(1) for the area and 
                                year, adjusted pursuant to subsection 
                                (a)(1)(C).
                                    ``(III) Risk rate.--The risk rate 
                                described in this subclause is the 
                                Secretary's estimate of the total 
                                payments that would have been made 
                                under this part in the year if all the 
                                monthly payment amounts for all MA 
                                plans were equal to the amount 
                                described in subsection (j)(1)(A) 
                                (determined as if this paragraph had 
                                not applied) under subsection (j) for 
                                the area and year, adjusted pursuant to 
                                subsection (a)(1)(C).
                            ``(iii) Denominator based on risk rate.--
                        The denominator described in this clause is 
                        equal to the total amount estimated for the 
                        year under clause (ii)(III).
                            ``(iv) Requirements.--In estimating the 
                        amounts under the previous clauses, the 
                        Secretary shall--
                                    ``(I) use a complete set of the 
                                most recent and representative Medicare 
                                Advantage risk scores under subsection 
                                (a)(3) that are available from the risk 
                                adjustment model announced for the 
                                year;
                                    ``(II) adjust the risk scores to 
                                reflect changes in treatment and coding 
                                practices in the fee-for-service 
                                sector;
                                    ``(III) adjust the risk scores for 
                                differences in coding patterns between 
                                Medicare Advantage plans and providers 
                                under the original Medicare fee-for-
                                service program under parts A and B to 
                                the extent that the Secretary has 
                                identified such differences, as 
                                required in subsection (a)(1)(C);
                                    ``(IV) as necessary, adjust the 
                                risk scores for late data submitted by 
                                Medicare Advantage organizations;
                                    ``(V) as necessary, adjust the risk 
                                scores for lagged cohorts; and
                                    ``(VI) as necessary, adjust the 
                                risk scores for changes in enrollment 
                                in Medicare Advantage plans during the 
                                year.
                            ``(v) Authority.--In computing such amounts 
                        the Secretary may take into account the 
                        estimated health risk of enrollees in preferred 
                        provider organization plans (including MA 
                        regional plans) for the year.
                    ``(C) Applicable phase-out factor.--For purposes of 
                subparagraph (A)(ii), the term `applicable phase-out 
                factor' means--
                            ``(i) for 2007, 0.55;
                            ``(ii) for 2008, 0.40;
                            ``(iii) for 2009, 0.25; and
                            ``(iv) for 2010, 0.05.
                    ``(D) Termination of application.--Subparagraph (A) 
                shall not apply in a year if the amount estimated under 
                subparagraph (B)(ii)(III) for the year is equal to or 
                greater than the amount estimated under subparagraph 
                (B)(ii)(II) for the year.
            ``(3) No revision in percent.--
                    ``(A) In general.--The Secretary may not make any 
                adjustment to the percent determined under paragraph 
                (2)(B) for any year.
                    ``(B) Rule of construction.--Nothing in this 
                subsection shall be construed to limit the authority of 
                the Secretary to make adjustments to the applicable 
                amounts determined under paragraph (1) as appropriate 
                for purposes of updating data or for purposes of 
                adopting an improved risk adjustment methodology.''.
    (b) Refinements to Health Status Adjustment.--Section 1853(a)(1)(C) 
of such Act (42 U.S.C. 1395w-23) is amended--
            (1) by designating the matter after the heading as a clause 
        (i) with the following heading: ``In general.--'' and indenting 
        appropriately; and
            (2) by adding at the end the following:
                            ``(ii) Application during phase-out of 
                        budget neutrality factor.--For 2006 through 
                        2010:
                                    ``(I) In applying the adjustment 
                                under clause (i) for health status to 
                                payment amounts, the Secretary shall 
                                ensure that such adjustment reflects 
                                changes in treatment and coding 
                                practices in the fee-for-service sector 
                                and reflects differences in coding 
                                patterns between Medicare Advantage 
                                plans and providers under part A and B 
                                to the extent that the Secretary has 
                                identified such differences.
                                    ``(II) In order to ensure payment 
                                accuracy, the Secretary shall conduct 
                                an analysis of the differences 
                                described in subclause (I). The 
                                Secretary shall complete such analysis 
                                by a date necessary to ensure that the 
                                results of such analysis are 
                                incorporated into the risk scores only 
                                for 2008, 2009, and 2010. In conducting 
                                such analysis, the Secretary shall use 
                                data submitted with respect to 2004 and 
                                subsequent years, as available.''.

SEC. 5302. RURAL PACE PROVIDER GRANT PROGRAM.

    (a) Definitions.--In this section:
            (1) CMS.--The term ``CMS'' means the Centers for Medicare & 
        Medicaid Services.
            (2) PACE program.--The term ``PACE program'' has the 
        meaning given that term in sections 1894(a)(2) and 1934(a)(2) 
        of the Social Security Act (42 U.S.C. 1395eee(a)(2); 1396u-
        4(a)(2)).
            (3) PACE provider.--The term ``PACE provider'' has the 
        meaning given that term in section 1894(a)(3) or 1934(a)(3) of 
        the Social Security Act (42 U.S.C. 1395eee(a)(3); 1396u-
        4(a)(3)).
            (4) Rural area.--The term ``rural area'' has the meaning 
        given that term in section 1886(d)(2)(D) of the Social Security 
        Act (42 U.S.C. 1395ww(d)(2)(D)).
            (5) Rural pace pilot site.--The term ``rural PACE pilot 
        site'' means a PACE provider that has been approved to provide 
        services in a geographic service area that is, in whole or in 
        part, a rural area, and that has received a site development 
        grant under this section.
            (6) Secretary.--The term ``Secretary'' means the Secretary 
        of Health and Human Services.
    (b) Site Development Grants and Technical Assistance Program.--
            (1) Site development grants.--
                    (A) In general.--The Secretary shall establish a 
                process and criteria to award site development grants 
                to qualified PACE providers that have been approved to 
                serve a rural area.
                    (B) Amount per award.--A site development grant 
                awarded under subparagraph (A) to any individual rural 
                PACE pilot site shall not exceed $750,000.
                    (C) Number of awards.--Not more than 15 rural PACE 
                pilot sites shall be awarded a site development grant 
                under subparagraph (A).
                    (D) Use of funds.--Funds made available under a 
                site development grant awarded under subparagraph (A) 
                may be used for the following expenses only to the 
                extent such expenses are incurred in relation to 
                establishing or delivering PACE program services in a 
                rural area:
                            (i) Feasibility analysis and planning.
                            (ii) Interdisciplinary team development.
                            (iii) Development of a provider network, 
                        including contract development.
                            (iv) Development or adaptation of claims 
                        processing systems.
                            (v) Preparation of special education and 
                        outreach efforts required for the PACE program.
                            (vi) Development of expense reporting 
                        required for calculation of outlier payments or 
                        reconciliation processes.
                            (vii) Development of any special quality of 
                        care or patient satisfaction data collection 
                        efforts.
                            (viii) Establishment of a working capital 
                        fund to sustain fixed administrative, facility, 
                        or other fixed costs until the provider reaches 
                        sufficient enrollment size.
                            (ix) Startup and development costs incurred 
                        prior to the approval of the rural PACE pilot 
                        site's PACE provider application by CMS.
                            (x) Any other efforts determined by the 
                        rural PACE pilot site to be critical to its 
                        successful startup, as approved by the 
                        Secretary.
                    (E) Appropriation.--
                            (i) In general.--Out of funds in the 
                        Treasury not otherwise appropriated, there are 
                        appropriated to the Secretary to carry out this 
                        subsection for fiscal year 2006, $7,500,000.
                            (ii) Availability.--Funds appropriated 
                        under clause (i) shall remain available for 
                        expenditure through fiscal year 2008.
            (2) Technical assistance program.--The Secretary shall 
        establish a technical assistance program to provide--
                    (A) outreach and education to State agencies and 
                provider organizations interested in establishing PACE 
                programs in rural areas; and
                    (B) technical assistance necessary to support rural 
                PACE pilot sites.
    (c) Cost Outlier Protection for Rural PACE Pilot Sites.--
            (1) Establishment of fund for reimbursement of outlier 
        costs.--Notwithstanding any other provision of law, the 
        Secretary shall establish an outlier fund to reimburse rural 
        PACE pilot sites for recognized outlier costs (as defined in 
        paragraph (3)) incurred for eligible outlier participants (as 
        defined in paragraph (2)) in an amount, subject to paragraph 
        (4), equal to 80 percent of the amount by which the recognized 
        outlier costs exceeds $50,000.
            (2) Eligible outlier participant.--For purposes of this 
        subsection, the term ``eligible outlier participant'' means a 
        PACE program eligible individual (as defined in sections 
        1894(a)(5) and 1934(a)(5) of the Social Security Act (42 U.S.C. 
        1395eee(a)(5); 1396u-4(a)(5))) who resides in a rural area and 
        with respect to whom the rural PACE pilot site incurs more than 
        $50,000 in recognized costs in a 12-month period.
            (3) Recognized outlier costs defined.--
                    (A) In general.--For purposes of this subsection, 
                the term ``recognized outlier costs'' means, with 
                respect to services furnished to an eligible outlier 
                participant by a rural PACE pilot site, the least of 
                the following (as documented by the site to the 
                satisfaction of the Secretary) for the provision of 
                inpatient and related physician and ancillary services 
                for the eligible outlier participant in a given 12-
                month period:
                            (i) If the services are provided under a 
                        contract between the pilot site and the 
                        provider, the payment rate specified under the 
                        contract.
                            (ii) The payment rate established under the 
                        original Medicare fee-for-service program for 
                        such service.
                            (iii) The amount actually paid for the 
                        services by the pilot site.
                    (B) Inclusion in only one period.--Recognized 
                outlier costs may not be included in more than one 12-
                month period.
            (3) Outlier expense payment.--
                    (A) Payment for outlier costs.--Subject to 
                subparagraph (B), in the case of a rural PACE pilot 
                site that has incurred outlier costs for an eligible 
                outlier participant, the rural PACE pilot site shall 
                receive an outlier expense payment equal to 80 percent 
                of such costs that exceed $50,000.
            (4) Limitations.--
                    (A) Costs incurred per eligible outlier 
                participant.--The total amount of outlier expense 
                payments made under this subsection to a rural PACE 
                pilot site with respect to an eligible outlier 
                participant for any 12-month period shall not exceed 
                $100,000 for the 12-month period used to calculate the 
                payment.
                    (B) Costs incurred per provider.--No rural PACE 
                pilot site may receive more than $500,000 in total 
                outlier expense payments in a 12-month period.
                    (C) Limitation of outlier cost reimbursement 
                period.--A rural PACE pilot site shall only receive 
                outlier expense payments under this subsection with 
                respect to costs incurred during the first 3 years of 
                the site's operation.
            (5) Requirement to access risk reserves prior to payment.--
        A rural PACE pilot site shall access and exhaust any risk 
        reserves held or arranged for the provider (other than revenue 
        or reserves maintained to satisfy the requirements of section 
        460.80(c) of title 42, Code of Federal Regulations) and any 
        working capital established through a site development grant 
        awarded under subsection (b)(1), prior to receiving any payment 
        from the outlier fund.
            (6) Application.--In order to receive an outlier expense 
        payment under this subsection with respect to an eligible 
        outlier participant, a rural PACE pilot site shall submit an 
        application containing--
                    (A) documentation of the costs incurred with 
                respect to the participant;
                    (B) a certification that the site has complied with 
                the requirements under paragraph (4); and
                    (C) such additional information as the Secretary 
                may require.
            (7) Appropriation.--
                    (A) In general.--Out of funds in the Treasury not 
                otherwise appropriated, there are appropriated to the 
                Secretary to carry out this subsection for fiscal year 
                2006, $10,000,000.
                    (B) Availability.--Funds appropriated under 
                subparagraph (A) shall remain available for expenditure 
                through fiscal year 2010.
    (d) Evaluation of PACE Providers Serving Rural Service Areas.--Not 
later than 60 months after the date of enactment of this Act, the 
Secretary shall submit a report to Congress containing an evaluation of 
the experience of rural PACE pilot sites.
    (e) Amounts in Addition to Payments Under Social Security Act.--Any 
amounts paid under the authority of this section to a PACE provider 
shall be in addition to payments made to the provider under section 
1894 or 1934 of the Social Security Act (42 U.S.C. 1395eee; 1396u-4).

                      TITLE VI--MEDICAID AND SCHIP

                          Subtitle A--Medicaid

               CHAPTER 1--PAYMENT FOR PRESCRIPTION DRUGS

SEC. 6001. FEDERAL UPPER PAYMENT LIMIT FOR MULTIPLE SOURCE DRUGS AND 
              OTHER DRUG PAYMENT PROVISIONS.

    (a) Modification of Federal Upper Payment Limit for Multiple Source 
Drugs; Definition of Multiple Source Drugs.--Section 1927 of the Social 
Security Act (42 U.S.C. 1396r-8) is amended--
            (1) in subsection (e)(4)--
                    (A) by striking ``The Secretary'' and inserting 
                ``Subject to paragraph (5), the Secretary''; and
                    (B) by inserting ``(or, effective January 1, 2007, 
                two or more)'' after ``three or more'';
            (2) by adding at the end of subsection (e) the following 
        new paragraph:
            ``(5) Use of amp in upper payment limits.--Effective 
        January 1, 2007, in applying the Federal upper reimbursement 
        limit under paragraph (4) and section 447.332(b) of title 42 of 
        the Code of Federal Regulations, the Secretary shall substitute 
        250 percent of the average manufacturer price (as computed 
        without regard to customary prompt pay discounts extended to 
        wholesalers) for 150 percent of the published price.'';
            (3) in subsection (k)(7)(A)(i), in the matter preceding 
        subclause (I), by striking ``are 2 or more drug products'' and 
        inserting ``at least 1 other drug product''; and
            (4) in subclauses (I), (II), and (III) of subsection 
        (k)(7)(A)(i), by striking ``are'' and inserting ``is'' each 
        place it appears.
    (b) Disclosure of Price Information to States and the Public.--
Subsection (b)(3) of such section is amended--
            (1) in subparagraph (A)--
                    (A) in clause (i), by inserting ``month of a'' 
                after ``last day of each''; and
                    (B) by adding at the end the following: ``Beginning 
                July 1, 2006, the Secretary shall provide on a monthly 
                basis to States under subparagraph (D)(iv) the most 
                recently reported average manufacturer prices for 
                single source drugs and for multiple source drugs and 
                shall, on at least a quarterly basis, update the 
                information posted on the website under subparagraph 
                (D)(v).''; and
            (2) in subparagraph (D)--
                    (A) by striking ``and'' at the end of clause (ii);
                    (B) by striking the period at the end of clause 
                (iii) and inserting a comma; and
                    (C) by inserting after clause (iii) the following 
                new clauses:
                            ``(iv) to States to carry out this title, 
                        and
                            ``(v) to the Secretary to disclose (through 
                        a website accessible to the public) average 
                        manufacturer prices.''.
    (c) Definition of Average Manufacturer Price.--
            (1) Exclusion of customary prompt pay discounts extended to 
        wholesalers.--Subsection (k)(1) of such section is amended--
                    (A) by striking ``The term'' and inserting the 
                following:
                    ``(A) In general.--Subject to subparagraph (B), the 
                term'';
                    (B) by striking ``, after deducting customary 
                prompt pay discounts''; and
                    (C) by adding at the end the following:
                    ``(B) Exclusion of customary prompt pay discounts 
                extended to wholesalers.--The average manufacturer 
                price for a covered outpatient drug shall be determined 
                without regard to customary prompt pay discounts 
                extended to wholesalers.''.
            (2) Manufacturer reporting of prompt pay discounts.--
        Subsection (b)(3)(A)(i) of such section is amended by inserting 
        ``, customary prompt pay discounts extended to wholesalers,'' 
        after ``(k)(1))''.
            (3) Requirement to promulgate regulation.--
                    (A) Inspector general recommendations.--Not later 
                than June 1, 2006, the Inspector General of the 
                Department of Health and Human Services shall--
                            (i) review the requirements for, and manner 
                        in which, average manufacturer prices are 
                        determined under section 1927 of the Social 
                        Security Act, as amended by this section; and
                            (ii) shall submit to the Secretary of 
                        Health and Human Services and Congress such 
                        recommendations for changes in such 
                        requirements or manner as the Inspector General 
                        determines to be appropriate.
                    (B) Deadline for promulgation.--Not later than July 
                1, 2007, the Secretary of Health and Human Services 
                shall promulgate a regulation that clarifies the 
                requirements for, and manner in which, average 
                manufacturer prices are determined under section 1927 
                of the Social Security Act, taking into consideration 
                the recommendations submitted to the Secretary in 
                accordance with subparagraph (A)(ii).
    (d) Exclusion of Sales at a Nominal Price From Determination of 
Best Price.--
            (1) Manufacturer reporting of sales.--Subsection 
        (b)(3)(A)(iii) of such section is amended by inserting before 
        the period at the end the following: ``, and, for calendar 
        quarters beginning on or after January 1, 2007 and only with 
        respect to the information described in subclause (III), for 
        covered outpatient drugs''.
            (2) Limitation on sales at a nominal price.--Subsection 
        (c)(1) of such section is amended by adding at the end the 
        following new subparagraph:
                    ``(D) Limitation on sales at a nominal price.--
                            ``(i) In general.--For purposes of 
                        subparagraph (C)(ii)(III) and subsection 
                        (b)(3)(A)(iii)(III), only sales by a 
                        manufacturer of covered outpatient drugs at 
                        nominal prices to the following shall be 
                        considered to be sales at a nominal price or 
                        merely nominal in amount:
                                    ``(I) A covered entity described in 
                                section 340B(a)(4) of the Public Health 
                                Service Act.
                                    ``(II) An intermediate care 
                                facility for the mentally retarded.
                                    ``(III) A State-owned or operated 
                                nursing facility.
                                    ``(IV) Any other facility or entity 
                                that the Secretary determines is a 
                                safety net provider to which sales of 
                                such drugs at a nominal price would be 
                                appropriate based on the factors 
                                described in clause (ii).
                            ``(ii) Factors.--The factors described in 
                        this clause with respect to a facility or 
                        entity are the following:
                                    ``(I) The type of facility or 
                                entity.
                                    ``(II) The services provided by the 
                                facility or entity.
                                    ``(III) The patient population 
                                served by the facility or entity.
                                    ``(IV) The number of other 
                                facilities or entities eligible to 
                                purchase at nominal prices in the same 
                                service area.
                            ``(iii) Nonapplication.--Clause (i) shall 
                        not apply with respect to sales by a 
                        manufacturer at a nominal price of covered 
                        outpatient drugs pursuant to a master agreement 
                        under section 8126 of title 38, United States 
                        Code.''.
    (e) Retail Survey Prices; State Payment and Utilization Rates; and 
Performance Rankings.--Such section is further amended by inserting 
after subsection (e) the following new subsection:
    ``(f) Survey of Retail Prices; State Payment and Utilization Rates; 
and Performance Rankings.--
            ``(1) Survey of retail prices.--
                    ``(A) Use of vendor.--The Secretary may contract 
                services for--
                            ``(i) the determination on a monthly basis 
                        of retail survey prices for covered outpatient 
                        drugs that represent a nationwide average of 
                        consumer purchase prices for such drugs, net of 
                        all discounts and rebates (to the extent any 
                        information with respect to such discounts and 
                        rebates is available); and
                            ``(ii) the notification of the Secretary 
                        when a drug product that is therapeutically and 
                        pharmaceutically equivalent and bioequivalent 
                        becomes generally available.
                    ``(B) Secretary response to notification of 
                availability of multiple source products.--If 
                contractor notifies the Secretary under subparagraph 
                (A)(ii) that a drug product described in such 
                subparagraph has become generally available, the 
                Secretary shall make a determination, within 7 days 
                after receiving such notification, as to whether the 
                product is now described in subsection (e)(4).
                    ``(C) Use of competitive bidding.--In contracting 
                for such services, the Secretary shall competitively 
                bid for an outside vendor that has a demonstrated 
                history in--
                            ``(i) surveying and determining, on a 
                        representative nationwide basis, retail prices 
                        for ingredient costs of prescription drugs;
                            ``(ii) working with retail pharmacies, 
                        commercial payers, and States in obtaining and 
                        disseminating such price information; and
                            ``(iii) collecting and reporting such price 
                        information on at least a monthly basis.
                In contracting for such services, the Secretary may 
                waive such provisions of the Federal Acquisition 
                Regulation as are necessary for the efficient 
                implementation of this subsection, other than 
                provisions relating to confidentiality of information 
                and such other provisions as the Secretary determines 
                appropriate.
                    ``(D) Additional provisions.--A contract with a 
                vendor under this paragraph shall include such terms 
                and conditions as the Secretary shall specify, 
                including the following:
                            ``(i) The vendor must monitor the 
                        marketplace and report to the Secretary each 
                        time there is a new covered outpatient drug 
                        generally available.
                            ``(ii) The vendor must update the Secretary 
                        no less often than monthly on the retail survey 
                        prices for covered outpatient drugs.
                            ``(iii) The contract shall be effective for 
                        a term of 2 years.
                    ``(E) Availability of information to states.--
                Information on retail survey prices obtained under this 
                paragraph, including applicable information on single 
                source drugs, shall be provided to States on at least a 
                monthly basis. The Secretary shall devise and implement 
                a means for providing access to each State agency 
                designated under section 1902(a)(5) with responsibility 
                for the administration or supervision of the 
                administration of the State plan under this title of 
                the retail survey price determined under this 
                paragraph.
            ``(2) Annual state report.--Each State shall annually 
        report to the Secretary information on--
                    ``(A) the payment rates under the State plan under 
                this title for covered outpatient drugs;
                    ``(B) the dispensing fees paid under such plan for 
                such drugs; and
                    ``(C) utilization rates for noninnovator multiple 
                source drugs under such plan.
            ``(3) Annual state performance rankings.--
                    ``(A) Comparative analysis.--The Secretary annually 
                shall compare, for the 50 most widely prescribed drugs 
                identified by the Secretary, the national retail sales 
                price data (collected under paragraph (1)) for such 
                drugs with data on prices under this title for each 
                such drug for each State.
                    ``(B) Availability of information.--The Secretary 
                shall submit to Congress and the States full 
                information regarding the annual rankings made under 
                subparagraph (A).
            ``(4) Appropriation.--Out of any funds in the Treasury not 
        otherwise appropriated, there is appropriated to the Secretary 
        of Health and Human Services $5,000,000 for each of fiscal 
        years 2006 through 2010 to carry out this subsection.''.
    (f) Miscellaneous Amendments.--
            (1) In general.--Sections 1927(g)(1)(B)(i)(II) and 
        1861(t)(2)(B)(ii)(I) of such Act are each amended by inserting 
        ``(or its successor publications)'' after ``United States 
        Pharmacopoeia-Drug Information''.
            (2) Paperwork reduction.--The last sentence of section 
        1927(g)(2)(A)(ii) of such Act (42 U.S.C. 1396r-8(g)(2)(A)(ii)) 
        is amended by inserting before the period at the end the 
        following: ``, or to require verification of the offer to 
        provide consultation or a refusal of such offer''.
            (3) Effective date.--The amendments made by this subsection 
        shall take effect on the date of the enactment of this Act.
    (g) Effective Date.--Except as otherwise provided, the amendments 
made by this section shall take effect on January 1, 2007, without 
regard to whether or not final regulations to carry out such amendments 
have been promulgated by such date.

SEC. 6002. COLLECTION AND SUBMISSION OF UTILIZATION DATA FOR CERTAIN 
              PHYSICIAN ADMINISTERED DRUGS.

    (a) In General.--Section 1927(a) of the Social Security Act (42 
U.S.C. 1396r-8(a)) is amended by adding at the end the following new 
paragraph:
            ``(7) Requirement for submission of utilization data for 
        certain physician administered drugs.--
                    ``(A) Single source drugs.--In order for payment to 
                be available under section 1903(a) for a covered 
                outpatient drug that is a single source drug that is 
                physician administered under this title (as determined 
                by the Secretary), and that is administered on or after 
                January 1, 2006, the State shall provide for the 
                collection and submission of such utilization data and 
                coding (such as J-codes and National Drug Code numbers) 
                for each such drug as the Secretary may specify as 
                necessary to identify the manufacturer of the drug in 
                order to secure rebates under this section for drugs 
                administered for which payment is made under this 
                title.
                    ``(B) Multiple source drugs.--
                            ``(i) Identification of most frequently 
                        physician administered multiple source drugs.--
                        Not later than January 1, 2007, the Secretary 
                        shall publish a list of the 20 physician 
                        administered multiple source drugs that the 
                        Secretary determines have the highest dollar 
                        volume of physician administered drugs 
                        dispensed under this title. The Secretary may 
                        modify such list from year to year to reflect 
                        changes in such volume.
                            ``(ii) Requirement.--In order for payment 
                        to be available under section 1903(a) for a 
                        covered outpatient drug that is a multiple 
                        source drug that is physician administered (as 
                        determined by the Secretary), that is on the 
                        list published under clause (i), and that is 
                        administered on or after January 1, 2008, the 
                        State shall provide for the submission of such 
                        utilization data and coding (such as J-codes 
                        and National Drug Code numbers) for each such 
                        drug as the Secretary may specify as necessary 
                        to identify the manufacturer of the drug in 
                        order to secure rebates under this section.
                    ``(C) Use of ndc codes.--Not later than January 1, 
                2007, the information shall be submitted under 
                subparagraphs (A) and (B)(ii) using National Drug Code 
                codes unless the Secretary specifies that an 
                alternative coding system should be used.
                    ``(D) Hardship waiver.--The Secretary may delay the 
                application of subparagraph (A) or (B)(ii), or both, in 
                the case of a State to prevent hardship to States which 
                require additional time to implement the reporting 
                system required under the respective subparagraph.''.
    (b) Limitation on Payment.--Section 1903(i)(10) of such Act (42 
U.S.C. 1396b(i)(10)), is amended--
            (1) by striking ``and'' at the end of subparagraph (A);
            (2) by striking ``or'' at the end of subparagraph (B) and 
        inserting ``and''; and
            (3) by adding at the end the following new subparagraph:
                    ``(C) with respect to covered outpatient drugs 
                described in section 1927(a)(7), unless information 
                respecting utilization data and coding on such drugs 
                that is required to be submitted under such section is 
                submitted in accordance with such section; or''.

SEC. 6003. IMPROVED REGULATION OF DRUGS SOLD UNDER A NEW DRUG 
              APPLICATION APPROVED UNDER SECTION 505(C) OF THE FEDERAL 
              FOOD, DRUG, AND COSMETIC ACT.

    (a) Inclusion With Other Reported Average Manufacturer and Best 
Prices.--Section 1927(b)(3)(A) of the Social Security Act (42 U.S.C. 
1396r-8(b)(3)(A)) is amended--
            (1) by striking clause (i) and inserting the following:
                            ``(i) not later than 30 days after the last 
                        day of each rebate period under the agreement--
                                    ``(I) on the average manufacturer 
                                price (as defined in subsection (k)(1)) 
                                for covered outpatient drugs for the 
                                rebate period under the agreement 
                                (including for all such drugs that are 
                                sold under a new drug application 
                                approved under section 505(c) of the 
                                Federal Food, Drug, and Cosmetic Act); 
                                and
                                    ``(II) for single source drugs and 
                                innovator multiple source drugs 
                                (including all such drugs that are sold 
                                under a new drug application approved 
                                under section 505(c) of the Federal 
                                Food, Drug, and Cosmetic Act), on the 
                                manufacturer's best price (as defined 
                                in subsection (c)(1)(C)) for such drugs 
                                for the rebate period under the 
                                agreement;''; and
            (2) in clause (ii), by inserting ``(including for such 
        drugs that are sold under a new drug application approved under 
        section 505(c) of the Federal Food, Drug, and Cosmetic Act)'' 
        after ``drugs''.
    (b) Conforming Amendments.--Section 1927 of such Act (42 U.S.C. 
1396r-8) is amended--
            (1) in subsection (c)(1)(C)--
                    (A) in clause (i), in the matter preceding 
                subclause (I), by inserting after ``or innovator 
                multiple source drug of a manufacturer'' the following: 
                ``(including the lowest price available to any entity 
                for any such drug of a manufacturer that is sold under 
                a new drug application approved under section 505(c) of 
                the Federal Food, Drug, and Cosmetic Act)''; and
                    (B) in clause (ii)--
                            (i) in subclause (II), by striking ``and'' 
                        at the end;
                            (ii) in subclause (III), by striking the 
                        period at the end and inserting ``; and''; and
                            (iii) by adding at the end the following:
                                    ``(IV) in the case of a 
                                manufacturer that approves, allows, or 
                                otherwise permits any other drug of the 
                                manufacturer to be sold under a new 
                                drug application approved under section 
                                505(c) of the Federal Food, Drug, and 
                                Cosmetic Act, shall be inclusive of the 
                                lowest price for such authorized drug 
                                available from the manufacturer during 
                                the rebate period to any manufacturer, 
                                wholesaler, retailer, provider, health 
                                maintenance organization, nonprofit 
                                entity, or governmental entity within 
                                the United States, excluding those 
                                prices described in subclauses (I) 
                                through (IV) of clause (i).''; and
            (2) in subsection (k), as amended by section 6001(c)(1), by 
        adding at the end the following:
                    ``(C) Inclusion of section 505(c) drugs.--In the 
                case of a manufacturer that approves, allows, or 
                otherwise permits any drug of the manufacturer to be 
                sold under a new drug application approved under 
                section 505(c) of the Federal Food, Drug, and Cosmetic 
                Act, such term shall be inclusive of the average price 
                paid for such drug by wholesalers for drugs distributed 
                to the retail pharmacy class of trade.''.
    (c) Effective Date.--The amendments made by this section take 
effect on January 1, 2007.

SEC. 6004. CHILDREN'S HOSPITAL PARTICIPATION IN SECTION 340B DRUG 
              DISCOUNT PROGRAM.

    (a) In General.--Section 1927(a)(5)(B) of the Social Security Act 
(42 U.S.C. 1396r-8(a)(5)(B)) is amended by inserting before the period 
at the end the following: ``and a children's hospital described in 
section 1886(d)(1)(B)(iii) which meets the requirements of clauses (i) 
and (iii) of section 340B(b)(4)(L) of the Public Health Service Act and 
which would meet the requirements of clause (ii) of such section if 
that clause were applied by taking into account the percentage of care 
provided by the hospital to patients eligible for medical assistance 
under a State plan under this title''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to drugs purchased on or after the date of the enactment of this 
Act.

                CHAPTER 2--LONG-TERM CARE UNDER MEDICAID

              Subchapter A--Reform of Asset Transfer Rules

SEC. 6011. LENGTHENING LOOK-BACK PERIOD; CHANGE IN BEGINNING DATE FOR 
              PERIOD OF INELIGIBILITY.

    (a) Lengthening Look-Back Period for All Disposals to 5 Years.--
Section 1917(c)(1)(B)(i) of the Social Security Act (42 U.S.C. 
1396p(c)(1)(B)(i)) is amended by inserting ``or in the case of any 
other disposal of assets made on or after the date of the enactment of 
the Deficit Reduction Act of 2005'' before ``, 60 months''.
    (b) Change in Beginning Date for Period of Ineligibility.--Section 
1917(c)(1)(D) of such Act (42 U.S.C. 1396p(c)(1)(D)) is amended--
            (1) by striking ``(D) The date'' and inserting ``(D)(i) In 
        the case of a transfer of asset made before the date of the 
        enactment of the Deficit Reduction Act of 2005, the date''; and
            (2) by adding at the end the following new clause:
    ``(ii) In the case of a transfer of asset made on or after the date 
of the enactment of the Deficit Reduction Act of 2005, the date 
specified in this subparagraph is the first day of a month during or 
after which assets have been transferred for less than fair market 
value, or the date on which the individual is eligible for medical 
assistance under the State plan and would otherwise be receiving 
institutional level care described in subparagraph (C) based on an 
approved application for such care but for the application of the 
penalty period, whichever is later, and which does not occur during any 
other period of ineligibility under this subsection.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to transfers made on or after the date of the enactment of this 
Act.
    (d) Availability of Hardship Waivers.--Each State shall provide for 
a hardship waiver process in accordance with section 1917(c)(2)(D) of 
the Social Security Act (42 U.S.C. 1396p(c)(2)(D))--
            (1) under which an undue hardship exists when application 
        of the transfer of assets provision would deprive the 
        individual--
                    (A) of medical care such that the individual's 
                health or life would be endangered; or
                    (B) of food, clothing, shelter, or other 
                necessities of life; and
            (2) which provides for--
                    (A) notice to recipients that an undue hardship 
                exception exists;
                    (B) a timely process for determining whether an 
                undue hardship waiver will be granted; and
                    (C) a process under which an adverse determination 
                can be appealed.
    (e) Additional Provisions on Hardship Waivers.--
            (1) Application by facility.--Section 1917(c)(2) of the 
        Social Security Act (42 U.S.C. 1396p(c)(2)) is amended--
                    (A) by striking the semicolon at the end of 
                subparagraph (D) and inserting a period; and
                    (B) by adding after and below such subparagraph the 
                following:
        ``The procedures established under subparagraph (D) shall 
        permit the facility in which the institutionalized individual 
        is residing to file an undue hardship waiver application on 
        behalf of the individual with the consent of the individual or 
        the personal representative of the individual.''.
            (2) Authority to make bed hold payments for hardship 
        applicants.--Such section is further amended by adding at the 
        end the following: ``While an application for an undue hardship 
        waiver is pending under subparagraph (D) in the case of an 
        individual who is a resident of a nursing facility, if the 
        application meets such criteria as the Secretary specifies, the 
        State may provide for payments for nursing facility services in 
        order to hold the bed for the individual at the facility, but 
        not in excess of payments for 30 days.''.

SEC. 6012. DISCLOSURE AND TREATMENT OF ANNUITIES.

    (a) In General.--Section 1917 of the Social Security Act (42 U.S.C. 
1396p) is amended by redesignating subsection (e) as subsection (f) and 
by inserting after subsection (d) the following new subsection:
    ``(e)(1) In order to meet the requirements of this section for 
purposes of section 1902(a)(18), a State shall require, as a condition 
for the provision of medical assistance for services described in 
subsection (c)(1)(C)(i) (relating to long-term care services) for an 
individual, the application of the individual for such assistance 
(including any recertification of eligibility for such assistance) 
shall disclose a description of any interest the individual or 
community spouse has in an annuity (or similar financial instrument, as 
may be specified by the Secretary), regardless of whether the annuity 
is irrevocable or is treated as an asset. Such application or 
recertification form shall include a statement that under paragraph (2) 
the State becomes a remainder beneficiary under such an annuity or 
similar financial instrument by virtue of the provision of such medical 
assistance.
    ``(2)(A) In the case of disclosure concerning an annuity under 
subsection (c)(1)(F), the State shall notify the issuer of the annuity 
of the right of the State under such subsection as a preferred 
remainder beneficiary in the annuity for medical assistance furnished 
to the individual. Nothing in this paragraph shall be construed as 
preventing such an issuer from notifying persons with any other 
remainder interest of the State's remainder interest under such 
subsection.
    ``(B) In the case of such an issuer receiving notice under 
subparagraph (A), the State may require the issuer to notify the State 
when there is a change in the amount of income or principal being 
withdrawn from the amount that was being withdrawn at the time of the 
most recent disclosure described in paragraph (1). A State shall take 
such information into account in determining the amount of the State's 
obligations for medical assistance or in the individual's eligibility 
for such assistance.
    ``(3) The Secretary may provide guidance to States on categories of 
transactions that may be treated as a transfer of asset for less than 
fair market value.
    ``(4) Nothing in this subsection shall be construed as preventing a 
State from denying eligibility for medical assistance for an individual 
based on the income or resources derived from an annuity described in 
paragraph (1).''.
    (b) Requirement for State To Be Named as a Remainder Beneficiary.--
Section 1917(c)(1) of such Act (42 U.S.C. 1396p(c)(1)), is amended by 
adding at the end the following:
    ``(F) For purposes of this paragraph, the purchase of an annuity 
shall be treated as the disposal of an asset for less than fair market 
value unless--
            ``(i) the State is named as the remainder beneficiary in 
        the first position for at least the total amount of medical 
        assistance paid on behalf of the annuitant under this title; or
            ``(ii) the State is named as such a beneficiary in the 
        second position after the community spouse or minor or disabled 
        child and is named in the first position if such spouse or a 
        representative of such child disposes of any such remainder for 
        less than fair market value.''.
    (c) Inclusion of Transfers To Purchase Balloon Annuities.--Section 
1917(c)(1) of such Act (42 U.S.C. 1396p(c)(1)), as amended by 
subsection (b), is amended by adding at the end the following:
    ``(G) For purposes of this paragraph with respect to a transfer of 
assets, the term `assets' includes an annuity purchased by or on behalf 
of an annuitant who has applied for medical assistance with respect to 
nursing facility services or other long-term care services under this 
title unless--
            ``(i) the annuity is--
                    ``(I) an annuity described in subsection (b) or (q) 
                of section 408 of the Internal Revenue Code of 1986; or
                    ``(II) purchased with proceeds from--
                            ``(aa) an account or trust described in 
                        subsection (a), (c), or (p) of section 408 of 
                        such Code;
                            ``(bb) a simplified employee pension 
                        (within the meaning of section 408(k) of such 
                        Code); or
                            ``(cc) a Roth IRA described in section 408A 
                        of such Code; or
            ``(ii) the annuity--
                    ``(I) is irrevocable and nonassignable;
                    ``(II) is actuarially sound (as determined in 
                accordance with actuarial publications of the Office of 
                the Chief Actuary of the Social Security 
                Administration); and
                    ``(III) provides for payments in equal amounts 
                during the term of the annuity, with no deferral and no 
                balloon payments made.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to transactions (including the purchase of an annuity) occurring 
on or after the date of the enactment of this Act.

SEC. 6013. APPLICATION OF ``INCOME-FIRST'' RULE IN APPLYING COMMUNITY 
              SPOUSE'S INCOME BEFORE ASSETS IN PROVIDING SUPPORT OF 
              COMMUNITY SPOUSE.

    (a) In General.--Section 1924(d) of the Social Security Act (42 
U.S.C. 1396r-5(d)) is amended by adding at the end the following new 
subparagraph:
            ``(6) Application of `income first' rule to revision of 
        community spouse resource allowance.--For purposes of this 
        subsection and subsections (c) and (e), a State must consider 
        that all income of the institutionalized spouse that could be 
        made available to a community spouse, in accordance with the 
        calculation of the community spouse monthly income allowance 
        under this subsection, has been made available before the State 
        allocates to the community spouse an amount of resources 
        adequate to provide the difference between the minimum monthly 
        maintenance needs allowance and all income available to the 
        community spouse.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to transfers and allocations made on or after the date of the 
enactment of this Act by individuals who become institutionalized 
spouses on or after such date.

SEC. 6014. DISQUALIFICATION FOR LONG-TERM CARE ASSISTANCE FOR 
              INDIVIDUALS WITH SUBSTANTIAL HOME EQUITY.

    (a) In General.--Section 1917 of the Social Security Act, as 
amended by section 6012(a), is further amended by redesignating 
subsection (f) as subsection (g) and by inserting after subsection (e) 
the following new subsection:
    ``(f)(1)(A) Notwithstanding any other provision of this title, 
subject to subparagraphs (B) and (C) of this paragraph and paragraph 
(2), in determining eligibility of an individual for medical assistance 
with respect to nursing facility services or other long-term care 
services, the individual shall not be eligible for such assistance if 
the individual's equity interest in the individual's home exceeds 
$500,000.
    ``(B) A State may elect, without regard to the requirements of 
section 1902(a)(1) (relating to statewideness) and section 
1902(a)(10)(B) (relating to comparability), to apply subparagraph (A) 
by substituting for `$500,000', an amount that exceeds such amount, but 
does not exceed $750,000.
    ``(C) The dollar amounts specified in this paragraph shall be 
increased, beginning with 2011, from year to year based on the 
percentage increase in the consumer price index for all urban consumers 
(all items; United States city average), rounded to the nearest $1,000.
    ``(2) Paragraph (1) shall not apply with respect to an individual 
if--
            ``(A) the spouse of such individual, or
            ``(B) such individual's child who is under age 21, or (with 
        respect to States eligible to participate in the State program 
        established under title XVI) is blind or permanently and 
        totally disabled, or (with respect to States which are not 
        eligible to participate in such program) is blind or disabled 
        as defined in section 1614,
is lawfully residing in the individual's home.
    ``(3) Nothing in this subsection shall be construed as preventing 
an individual from using a reverse mortgage or home equity loan to 
reduce the individual's total equity interest in the home.
    ``(4) The Secretary shall establish a process whereby paragraph (1) 
is waived in the case of a demonstrated hardship.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to individuals who are determined eligible for medical assistance 
with respect to nursing facility services or other long-term care 
services based on an application filed on or after January 1, 2006.

SEC. 6015. ENFORCEABILITY OF CONTINUING CARE RETIREMENT COMMUNITIES 
              (CCRC) AND LIFE CARE COMMUNITY ADMISSION CONTRACTS.

    (a) Admission Policies of Nursing Facilities.--Section 1919(c)(5) 
of the Social Security Act (42 U.S.C. 1396r(c)(5)) is amended--
            (1) in subparagraph (A)(i)(II), by inserting ``subject to 
        clause (v),'' after ``(II)''; and
            (2) by adding at the end of subparagraph (B) the following 
        new clause:
                            ``(v) Treatment of continuing care 
                        retirement communities admission contracts.--
                        Notwithstanding subclause (II) of subparagraph 
                        (A)(i), subject to subsections (c) and (d) of 
                        section 1924, contracts for admission to a 
                        State licensed, registered, certified, or 
                        equivalent continuing care retirement community 
                        or life care community, including services in a 
                        nursing facility that is part of such 
                        community, may require residents to spend on 
                        their care resources declared for the purposes 
                        of admission before applying for medical 
                        assistance.''.
    (b) Treatment of Entrance Fees.--Section 1917 of such Act (42 
U.S.C. 1396p), as amended by sections 6012(a) and 6014(a), is amended 
by redesignating subsection (g) as subsection (h) and by inserting 
after subsection (f) the following new subsection:
    ``(g) Treatment of Entrance Fees of Individuals Residing in 
Continuing Care Retirement Communities.--
            ``(1) In general.--For purposes of determining an 
        individual's eligibility for, or amount of, benefits under a 
        State plan under this title, the rules specified in paragraph 
        (2) shall apply to individuals residing in continuing care 
        retirement communities or life care communities that collect an 
        entrance fee on admission from such individuals.
            ``(2) Treatment of entrance fee.--For purposes of this 
        subsection, an individual's entrance fee in a continuing care 
        retirement community or life care community shall be considered 
        a resource available to the individual to the extent that--
                    ``(A) the individual has the ability to use the 
                entrance fee, or the contract provides that the 
                entrance fee may be used, to pay for care should other 
                resources or income of the individual be insufficient 
                to pay for such care;
                    ``(B) the individual is eligible for a refund of 
                any remaining entrance fee when the individual dies or 
                terminates the continuing care retirement community or 
                life care community contract and leaves the community; 
                and
                    ``(C) the entrance fee does not confer an ownership 
                interest in the continuing care retirement community or 
                life care community.''.

SEC. 6016. ADDITIONAL REFORMS OF MEDICAID ASSET TRANSFER RULES.

    (a) Requirement To Impose Partial Months of Ineligibility.--Section 
1917(c)(1)(E) of the Social Security Act (42 U.S.C. 1396p(c)(1)(E)) is 
amended by adding at the end the following:
    ``(iv) A State shall not round down, or otherwise disregard any 
fractional period of ineligibility determined under clause (i) or (ii) 
with respect to the disposal of assets.''.
    (b) Authority for States To Accumulate Multiple Transfers Into One 
Penalty Period.--Section 1917(c)(1) of such Act (42 U.S.C. 
1396p(c)(1)), as amended by subsections (b) and (c) of section 6012, is 
amended by adding at the end the following:
    ``(H) Notwithstanding the preceding provisions of this paragraph, 
in the case of an individual (or individual's spouse) who makes 
multiple fractional transfers of assets in more than 1 month for less 
than fair market value on or after the applicable look-back date 
specified in subparagraph (B), a State may determine the period of 
ineligibility applicable to such individual under this paragraph by--
            ``(i) treating the total, cumulative uncompensated value of 
        all assets transferred by the individual (or individual's 
        spouse) during all months on or after the look-back date 
        specified in subparagraph (B) as 1 transfer for purposes of 
        clause (i) or (ii) (as the case may be) of subparagraph (E); 
        and
            ``(ii) beginning such period on the earliest date which 
        would apply under subparagraph (D) to any of such transfers.''.
    (c) Inclusion of Transfer of Certain Notes and Loans Assets.--
Section 1917(c)(1) of such Act (42 U.S.C. 1396p(c)(1)), as amended by 
subsection (b), is amended by adding at the end the following:
    ``(I) For purposes of this paragraph with respect to a transfer of 
assets, the term `assets' includes funds used to purchase a promissory 
note, loan, or mortgage unless such note, loan, or mortgage--
            ``(i) has a repayment term that is actuarially sound (as 
        determined in accordance with actuarial publications of the 
        Office of the Chief Actuary of the Social Security 
        Administration);
            ``(ii) provides for payments to be made in equal amounts 
        during the term of the loan, with no deferral and no balloon 
        payments made; and
            ``(iii) prohibits the cancellation of the balance upon the 
        death of the lender.
In the case of a promissory note, loan, or mortgage that does not 
satisfy the requirements of clauses (i) through (iii), the value of 
such note, loan, or mortgage shall be the outstanding balance due as of 
the date of the individual's application for medical assistance for 
services described in subparagraph (C).''.
    (d) Inclusion of Transfers To Purchase Life Estates.--Section 
1917(c)(1) of such Act (42 U.S.C. 1396p(c)(1)), as amended by 
subsection (c), is amended by adding at the end the following:
    ``(J) For purposes of this paragraph with respect to a transfer of 
assets, the term `assets' includes the purchase of a life estate 
interest in another individual's home unless the purchaser resides in 
the home for a period of at least 1 year after the date of the 
purchase.''.
    (e) Effective Dates.--
            (1) In general.--Except as provided in paragraphs (2) and 
        (3), the amendments made by this section shall apply to 
        payments under title XIX of the Social Security Act (42 U.S.C. 
        1396 et seq.) for calendar quarters beginning on or after the 
        date of enactment of this Act, without regard to whether or not 
        final regulations to carry out such amendments have been 
        promulgated by such date.
            (2) Exceptions.--The amendments made by this section shall 
        not apply--
                    (A) to medical assistance provided for services 
                furnished before the date of enactment;
                    (B) with respect to assets disposed of on or before 
                the date of enactment of this Act; or
                    (C) with respect to trusts established on or before 
                the date of enactment of this Act.
            (3) Extension of effective date for state law amendment.--
        In the case of a State plan under title XIX of the Social 
        Security Act (42 U.S.C. 1396 et seq.) which the Secretary of 
        Health and Human Services determines requires State legislation 
        in order for the plan to meet the additional requirements 
        imposed by the amendments made by a provision of this section, 
        the State plan shall not be regarded as failing to comply with 
        the requirements of such title solely on the basis of its 
        failure to meet these additional requirements before the first 
        day of the first calendar quarter beginning after the close of 
        the first regular session of the State legislature that begins 
        after the date of the enactment of this Act. For purposes of 
        the previous sentence, in the case of a State that has a 2-year 
        legislative session, each year of the session is considered to 
        be a separate regular session of the State legislature.

           Subchapter B--Expanded Access to Certain Benefits

SEC. 6021. EXPANSION OF STATE LONG-TERM CARE PARTNERSHIP PROGRAM.

    (a) Expansion Authority.--
            (1) In general.--Section 1917(b) of the Social Security Act 
        (42 U.S.C. 1396p(b)) is amended--
                    (A) in paragraph (1)(C)--
                            (i) in clause (ii), by inserting ``and 
                        which satisfies clause (iv), or which has a 
                        State plan amendment that provides for a 
                        qualified State long-term care insurance 
                        partnership (as defined in clause (iii))'' 
                        after ``1993,''; and
                            (ii) by adding at the end the following new 
                        clauses:
            ``(iii) For purposes of this paragraph, the term `qualified 
        State long-term care insurance partnership' means an approved 
        State plan amendment under this title that provides for the 
        disregard of any assets or resources in an amount equal to the 
        insurance benefit payments that are made to or on behalf of an 
        individual who is a beneficiary under a long-term care 
        insurance policy if the following requirements are met:
                    ``(I) The policy covers an insured who was a 
                resident of such State when coverage first became 
                effective under the policy.
                    ``(II) The policy is a qualified long-term care 
                insurance policy (as defined in section 7702B(b) of the 
                Internal Revenue Code of 1986) issued not earlier than 
                the effective date of the State plan amendment.
                    ``(III) The policy meets the model regulations and 
                the requirements of the model Act specified in 
                paragraph (5).
                    ``(IV) If the policy is sold to an individual who--
                            ``(aa) has not attained age 61 as of the 
                        date of purchase, the policy provides compound 
                        annual inflation protection;
                            ``(bb) has attained age 61 but has not 
                        attained age 76 as of such date, the policy 
                        provides some level of inflation protection; 
                        and
                            ``(cc) has attained age 76 as of such date, 
                        the policy may (but is not required to) provide 
                        some level of inflation protection.
                    ``(V) The State Medicaid agency under section 
                1902(a)(5) provides information and technical 
                assistance to the State insurance department on the 
                insurance department's role of assuring that any 
                individual who sells a long-term care insurance policy 
                under the partnership receives training and 
                demonstrates evidence of an understanding of such 
                policies and how they relate to other public and 
                private coverage of long-term care.
                    ``(VI) The issuer of the policy provides regular 
                reports to the Secretary, in accordance with 
                regulations of the Secretary, that include notification 
                regarding when benefits provided under the policy have 
                been paid and the amount of such benefits paid, 
                notification regarding when the policy otherwise 
                terminates, and such other information as the Secretary 
                determines may be appropriate to the administration of 
                such partnerships.
                    ``(VII) The State does not impose any requirement 
                affecting the terms or benefits of such a policy unless 
                the State imposes such requirement on long-term care 
                insurance policies without regard to whether the policy 
                is covered under the partnership or is offered in 
                connection with such a partnership.
        In the case of a long-term care insurance policy which is 
        exchanged for another such policy, subclause (I) shall be 
        applied based on the coverage of the first such policy that was 
        exchanged. For purposes of this clause and paragraph (5), the 
        term `long-term care insurance policy' includes a certificate 
        issued under a group insurance contract.
            ``(iv) With respect to a State which had a State plan 
        amendment approved as of May 14, 1993, such a State satisfies 
        this clause for purposes of clause (ii) if the Secretary 
        determines that the State plan amendment provides for consumer 
        protection standards which are no less stringent than the 
        consumer protection standards which applied under such State 
        plan amendment as of December 31, 2005.
            ``(v) The regulations of the Secretary required under 
        clause (iii)(VI) shall be promulgated after consultation with 
        the National Association of Insurance Commissioners, issuers of 
        long-term care insurance policies, States with experience with 
        long-term care insurance partnership plans, other States, and 
        representatives of consumers of long-term care insurance 
        policies, and shall specify the type and format of the data and 
        information to be reported and the frequency with which such 
        reports are to be made. The Secretary, as appropriate, shall 
        provide copies of the reports provided in accordance with that 
        clause to the State involved.
            ``(vi) The Secretary, in consultation with other 
        appropriate Federal agencies, issuers of long-term care 
        insurance, the National Association of Insurance Commissioners, 
        State insurance commissioners, States with experience with 
        long-term care insurance partnership plans, other States, and 
        representatives of consumers of long-term care insurance 
        policies, shall develop recommendations for Congress to 
        authorize and fund a uniform minimum data set to be reported 
        electronically by all issuers of long-term care insurance 
        policies under qualified State long-term care insurance 
        partnerships to a secure, centralized electronic query and 
        report-generating mechanism that the State, the Secretary, and 
        other Federal agencies can access.''; and
                    (B) by adding at the end the following:
    ``(5)(A) For purposes of clause (iii)(III), the model regulations 
and the requirements of the model Act specified in this paragraph are:
            ``(i) In the case of the model regulation, the following 
        requirements:
                    ``(I) Section 6A (relating to guaranteed renewal or 
                noncancellability), other than paragraph (5) thereof, 
                and the requirements of section 6B of the model Act 
                relating to such section 6A.
                    ``(II) Section 6B (relating to prohibitions on 
                limitations and exclusions) other than paragraph (7) 
                thereof.
                    ``(III) Section 6C (relating to extension of 
                benefits).
                    ``(IV) Section 6D (relating to continuation or 
                conversion of coverage).
                    ``(V) Section 6E (relating to discontinuance and 
                replacement of policies).
                    ``(VI) Section 7 (relating to unintentional lapse).
                    ``(VII) Section 8 (relating to disclosure), other 
                than sections 8F, 8G, 8H, and 8I thereof.
                    ``(VIII) Section 9 (relating to required disclosure 
                of rating practices to consumer).
                    ``(IX) Section 11 (relating to prohibitions against 
                post-claims underwriting).
                    ``(X) Section 12 (relating to minimum standards).
                    ``(XI) Section 14 (relating to application forms 
                and replacement coverage).
                    ``(XII) Section 15 (relating to reporting 
                requirements).
                    ``(XIII) Section 22 (relating to filing 
                requirements for marketing).
                    ``(XIV) Section 23 (relating to standards for 
                marketing), including inaccurate completion of medical 
                histories, other than paragraphs (1), (6), and (9) of 
                section 23C.
                    ``(XV) Section 24 (relating to suitability).
                    ``(XVI) Section 25 (relating to prohibition against 
                preexisting conditions and probationary periods in 
                replacement policies or certificates).
                    ``(XVII) The provisions of section 26 relating to 
                contingent nonforfeiture benefits, if the policyholder 
                declines the offer of a nonforfeiture provision 
                described in paragraph (4).
                    ``(XVIII) Section 29 (relating to standard format 
                outline of coverage).
                    ``(XIX) Section 30 (relating to requirement to 
                deliver shopper's guide).
            ``(ii) In the case of the model Act, the following:
                    ``(I) Section 6C (relating to preexisting 
                conditions).
                    ``(II) Section 6D (relating to prior 
                hospitalization).
                    ``(III) The provisions of section 8 relating to 
                contingent nonforfeiture benefits.
                    ``(IV) Section 6F (relating to right to return).
                    ``(V) Section 6G (relating to outline of coverage).
                    ``(VI) Section 6H (relating to requirements for 
                certificates under group plans).
                    ``(VII) Section 6J (relating to policy summary).
                    ``(VIII) Section 6K (relating to monthly reports on 
                accelerated death benefits).
                    ``(IX) Section 7 (relating to incontestability 
                period).
    ``(B) For purposes of this paragraph and paragraph (1)(C)--
            ``(i) the terms `model regulation' and `model Act' mean the 
        long-term care insurance model regulation, and the long-term 
        care insurance model Act, respectively, promulgated by the 
        National Association of Insurance Commissioners (as adopted as 
        of October 2000);
            ``(ii) any provision of the model regulation or model Act 
        listed under subparagraph (A) shall be treated as including any 
        other provision of such regulation or Act necessary to 
        implement the provision; and
            ``(iii) with respect to a long-term care insurance policy 
        issued in a State, the policy shall be deemed to meet 
        applicable requirements of the model regulation or the model 
        Act if the State plan amendment under paragraph (1)(C)(iii) 
        provides that the State insurance commissioner for the State 
        certifies (in a manner satisfactory to the Secretary) that the 
        policy meets such requirements.
    ``(C) Not later than 12 months after the National Association of 
Insurance Commissioners issues a revision, update, or other 
modification of a model regulation or model Act provision specified in 
subparagraph (A), or of any provision of such regulation or Act that is 
substantively related to a provision specified in such subparagraph, 
the Secretary shall review the changes made to the provision, determine 
whether incorporating such changes into the corresponding provision 
specified in such subparagraph would improve qualified State long-term 
care insurance partnerships, and if so, shall incorporate the changes 
into such provision.''.
            (2) State reporting requirements.--Nothing in clauses 
        (iii)(VI) and (v) of section 1917(b)(1)(C) of the Social 
        Security Act (as added by paragraph (1)) shall be construed as 
        prohibiting a State from requiring an issuer of a long-term 
        care insurance policy sold in the State (regardless of whether 
        the policy is issued under a qualified State long-term care 
        insurance partnership under section 1917(b)(1)(C)(iii) of such 
        Act) to require the issuer to report information or data to the 
        State that is in addition to the information or data required 
        under such clauses.
            (3) Effective date.--A State plan amendment that provides 
        for a qualified State long-term care insurance partnership 
        under the amendments made by paragraph (1) may provide that 
        such amendment is effective for long-term care insurance 
        policies issued on or after a date, specified in the amendment, 
        that is not earlier than the first day of the first calendar 
        quarter in which the plan amendment was submitted to the 
        Secretary of Health and Human Services.
    (b) Standards for Reciprocal Recognition Among Partnership 
States.--In order to permit portability in long-term care insurance 
policies purchased under State long-term care insurance partnerships, 
the Secretary of Health and Human Services shall develop, not later 
than January 1, 2007, and in consultation with the National Association 
of Insurance Commissioners, issuers of long-term care insurance 
policies, States with experience with long-term care insurance 
partnership plans, other States, and representatives of consumers of 
long-term care insurance policies, standards for uniform reciprocal 
recognition of such policies among States with qualified State long-
term care insurance partnerships under which--
            (1) benefits paid under such policies will be treated the 
        same by all such States; and
            (2) States with such partnerships shall be subject to such 
        standards unless the State notifies the Secretary in writing of 
        the State's election to be exempt from such standards.
    (c) Annual Reports to Congress.--
            (1) In general.--The Secretary of Health and Human Services 
        shall annually report to Congress on the long-term care 
        insurance partnerships established in accordance with section 
        1917(b)(1)(C)(ii) of the Social Security Act (42 U.S.C. 
        1396p(b)(1)(C)(ii)) (as amended by subsection (a)(1)). Such 
        reports shall include analyses of the extent to which such 
        partnerships expand or limit access of individuals to long-term 
        care and the impact of such partnerships on Federal and State 
        expenditures under the Medicare and Medicaid programs. Nothing 
        in this section shall be construed as requiring the Secretary 
        to conduct an independent review of each long-term care 
        insurance policy offered under or in connection with such a 
        partnership.
            (2) Appropriation.--Out of any funds in the Treasury not 
        otherwise appropriated, there is appropriated to the Secretary 
        of Health and Human Services, $1,000,000 for the period of 
        fiscal years 2006 through 2010 to carry out paragraph (1).
    (d) National Clearinghouse for Long-Term Care Information.--
            (1) Establishment.--The Secretary of Health and Human 
        Services shall establish a National Clearinghouse for Long-Term 
        Care Information. The Clearinghouse may be established through 
        a contract or interagency agreement.
            (2) Duties.--
                    (A) In general.--The National Clearinghouse for 
                Long-Term Care Information shall--
                            (i) educate consumers with respect to the 
                        availability and limitations of coverage for 
                        long-term care under the Medicaid program and 
                        provide contact information for obtaining 
                        State-specific information on long-term care 
                        coverage, including eligibility and estate 
                        recovery requirements under State Medicaid 
                        programs;
                            (ii) provide objective information to 
                        assist consumers with the decisionmaking 
                        process for determining whether to purchase 
                        long-term care insurance or to pursue other 
                        private market alternatives for purchasing 
                        long-term care and provide contact information 
                        for additional objective resources on planning 
                        for long-term care needs; and
                            (iii) maintain a list of States with State 
                        long-term care insurance partnerships under the 
                        Medicaid program that provide reciprocal 
                        recognition of long-term care insurance 
                        policies issued under such partnerships.
                    (B) Requirement.--In providing information to 
                consumers on long-term care in accordance with this 
                subsection, the National Clearinghouse for Long-Term 
                Care Information shall not advocate in favor of a 
                specific long-term care insurance provider or a 
                specific long-term care insurance policy.
            (3) Appropriation.--Out of any funds in the Treasury not 
        otherwise appropriated, there is appropriated to carry out this 
        subsection, $3,000,000 for each of fiscal years 2006 through 
        2010.

       CHAPTER 3--ELIMINATING FRAUD, WASTE, AND ABUSE IN MEDICAID

SEC. 6031. ENCOURAGING THE ENACTMENT OF STATE FALSE CLAIMS ACTS.

    (a) In General.--Title XIX of the Social Security Act (42 U.S.C. 
1396 et seq.) is amended by inserting after section 1908A the 
following:

  ``state false claims act requirements for increased state share of 
                               recoveries

    ``Sec. 1909. (a) In General.--Notwithstanding section 1905(b), if a 
State has in effect a law relating to false or fraudulent claims that 
meets the requirements of subsection (b), the Federal medical 
assistance percentage with respect to any amounts recovered under a 
State action brought under such law, shall be decreased by 10 
percentage points.
    ``(b) Requirements.--For purposes of subsection (a), the 
requirements of this subsection are that the Inspector General of the 
Department of Health and Human Services, in consultation with the 
Attorney General, determines that the State has in effect a law that 
meets the following requirements:
            ``(1) The law establishes liability to the State for false 
        or fraudulent claims described in section 3729 of title 31, 
        United States Code, with respect to any expenditure described 
        in section 1903(a).
            ``(2) The law contains provisions that are at least as 
        effective in rewarding and facilitating qui tam actions for 
        false or fraudulent claims as those described in sections 3730 
        through 3732 of title 31, United States Code.
            ``(3) The law contains a requirement for filing an action 
        under seal for 60 days with review by the State Attorney 
        General.
            ``(4) The law contains a civil penalty that is not less 
        than the amount of the civil penalty authorized under section 
        3729 of title 31, United States Code.
    ``(c) Deemed Compliance.--A State that, as of January 1, 2007, has 
a law in effect that meets the requirements of subsection (b) shall be 
deemed to be in compliance with such requirements for so long as the 
law continues to meet such requirements.
    ``(d) No Preclusion of Broader Laws.--Nothing in this section shall 
be construed as prohibiting a State that has in effect a law that 
establishes liability to the State for false or fraudulent claims 
described in section 3729 of title 31, United States Code, with respect 
to programs in addition to the State program under this title, or with 
respect to expenditures in addition to expenditures described in 
section 1903(a), from being considered to be in compliance with the 
requirements of subsection (a) so long as the law meets such 
requirements.''.
    (b) Effective Date.--Except as provided in section 6035(e), the 
amendments made by this section take effect on January 1, 2007.

SEC. 6032. EMPLOYEE EDUCATION ABOUT FALSE CLAIMS RECOVERY.

    (a) In General.--Section 1902(a) of the Social Security Act (42 
U.S.C. 1396a(a)) is amended--
            (1) in paragraph (66), by striking ``and'' at the end;
            (2) in paragraph (67) by striking the period at the end and 
        inserting ``; and''; and
            (3) by inserting after paragraph (67) the following:
            ``(68) provide that any entity that receives or makes 
        annual payments under the State plan of at least $5,000,000, as 
        a condition of receiving such payments, shall--
                    ``(A) establish written policies for all employees 
                of the entity (including management), and of any 
                contractor or agent of the entity, that provide 
                detailed information about the False Claims Act 
                established under sections 3729 through 3733 of title 
                31, United States Code, administrative remedies for 
                false claims and statements established under chapter 
                38 of title 31, United States Code, any State laws 
                pertaining to civil or criminal penalties for false 
                claims and statements, and whistleblower protections 
                under such laws, with respect to the role of such laws 
                in preventing and detecting fraud, waste, and abuse in 
                Federal health care programs (as defined in section 
                1128B(f));
                    ``(B) include as part of such written policies, 
                detailed provisions regarding the entity's policies and 
                procedures for detecting and preventing fraud, waste, 
                and abuse; and
                    ``(C) include in any employee handbook for the 
                entity, a specific discussion of the laws described in 
                subparagraph (A), the rights of employees to be 
                protected as whistleblowers, and the entity's policies 
                and procedures for detecting and preventing fraud, 
                waste, and abuse.''.
    (b) Effective Date.--Except as provided in section 6035(e), the 
amendments made by subsection (a) take effect on January 1, 2007.

SEC. 6033. PROHIBITION ON RESTOCKING AND DOUBLE BILLING OF PRESCRIPTION 
              DRUGS.

    (a) In General.--Section 1903(i)(10) of the Social Security Act (42 
U.S.C. 1396b(i)), as amended by section 6002(b), is amended--
            (1) in subparagraph (B), by striking ``and'' at the end;
            (2) in subparagraph (C), by striking ``; or'' at the end 
        and inserting ``, and''; and
            (3) by adding at the end the following:
            ``(D) with respect to any amount expended for reimbursement 
        to a pharmacy under this title for the ingredient cost of a 
        covered outpatient drug for which the pharmacy has already 
        received payment under this title (other than with respect to a 
        reasonable restocking fee for such drug); or''.
    (b) Effective Date.--The amendments made by subsection (a) take 
effect on the first day of the first fiscal year quarter that begins 
after the date of enactment of this Act.

SEC. 6034. MEDICAID INTEGRITY PROGRAM.

    (a) Establishment of Medicaid Integrity Program.--Title XIX of the 
Social Security Act (42 U.S.C. 1396 et seq.) is amended--
            (1) by redesignating section 1936 as section 1937; and
            (2) by inserting after section 1935 the following:

                      ``medicaid integrity program

    ``Sec. 1936. (a) In General.--There is hereby established the 
Medicaid Integrity Program (in this section referred to as the 
`Program') under which the Secretary shall promote the integrity of the 
program under this title by entering into contracts in accordance with 
this section with eligible entities to carry out the activities 
described in subsection (b).
    ``(b) Activities Described--Activities described in this subsection 
are as follows:
            ``(1) Review of the actions of individuals or entities 
        furnishing items or services (whether on a fee-for-service, 
        risk, or other basis) for which payment may be made under a 
        State plan approved under this title (or under any waiver of 
        such plan approved under section 1115) to determine whether 
        fraud, waste, or abuse has occurred, is likely to occur, or 
        whether such actions have any potential for resulting in an 
        expenditure of funds under this title in a manner which is not 
        intended under the provisions of this title.
            ``(2) Audit of claims for payment for items or services 
        furnished, or administrative services rendered, under a State 
        plan under this title, including--
                    ``(A) cost reports;
                    ``(B) consulting contracts; and
                    ``(C) risk contracts under section 1903(m).
            ``(3) Identification of overpayments to individuals or 
        entities receiving Federal funds under this title.
            ``(4) Education of providers of services, managed care 
        entities, beneficiaries, and other individuals with respect to 
        payment integrity and quality of care.
    ``(c) Eligible Entity and Contracting Requirements.--
            ``(1) In general.--An entity is eligible to enter into a 
        contract under the Program to carry out any of the activities 
        described in subsection (b) if the entity satisfies the 
        requirements of paragraphs (2) and (3).
            ``(2) Eligibility requirements.--The requirements of this 
        paragraph are the following:
                    ``(A) The entity has demonstrated capability to 
                carry out the activities described in subsection (b).
                    ``(B) In carrying out such activities, the entity 
                agrees to cooperate with the Inspector General of the 
                Department of Health and Human Services, the Attorney 
                General, and other law enforcement agencies, as 
                appropriate, in the investigation and deterrence of 
                fraud and abuse in relation to this title and in other 
                cases arising out of such activities.
                    ``(C) The entity complies with such conflict of 
                interest standards as are generally applicable to 
                Federal acquisition and procurement.
                    ``(D) The entity meets such other requirements as 
                the Secretary may impose.
            ``(3) Contracting requirements.--The entity has contracted 
        with the Secretary in accordance with such procedures as the 
        Secretary shall by regulation establish, except that such 
        procedures shall include the following:
                    ``(A) Procedures for identifying, evaluating, and 
                resolving organizational conflicts of interest that are 
                generally applicable to Federal acquisition and 
                procurement.
                    ``(B) Competitive procedures to be used--
                            ``(i) when entering into new contracts 
                        under this section;
                            ``(ii) when entering into contracts that 
                        may result in the elimination of 
                        responsibilities under section 202(b) of the 
                        Health Insurance Portability and Accountability 
                        Act of 1996; and
                            ``(iii) at any other time considered 
                        appropriate by the Secretary.
                    ``(C) Procedures under which a contract under this 
                section may be renewed without regard to any provision 
                of law requiring competition if the contractor has met 
                or exceeded the performance requirements established in 
                the current contract.
        The Secretary may enter into such contracts without regard to 
        final rules having been promulgated.
            ``(4) Limitation on contractor liability.--The Secretary 
        shall by regulation provide for the limitation of a 
        contractor's liability for actions taken to carry out a 
        contract under the Program, and such regulation shall, to the 
        extent the Secretary finds appropriate, employ the same or 
        comparable standards and other substantive and procedural 
        provisions as are contained in section 1157.
    ``(d) Comprehensive Plan for Program Integrity.--
            ``(1) 5-year plan.--With respect to the 5-fiscal year 
        period beginning with fiscal year 2006, and each such 5-fiscal 
        year period that begins thereafter, the Secretary shall 
        establish a comprehensive plan for ensuring the integrity of 
        the program established under this title by combatting fraud, 
        waste, and abuse.
            ``(2) Consultation.--Each 5-fiscal year plan established 
        under paragraph (1) shall be developed by the Secretary in 
        consultation with the Attorney General, the Director of the 
        Federal Bureau of Investigation, the Comptroller General of the 
        United States, the Inspector General of the Department of 
        Health and Human Services, and State officials with 
        responsibility for controlling provider fraud and abuse under 
        State plans under this title.
    ``(e) Appropriation.--
            ``(1) In general.--Out of any money in the Treasury of the 
        United States not otherwise appropriated, there are 
        appropriated to carry out the Medicaid Integrity Program under 
        this section, without further appropriation--
                    ``(A) for fiscal year 2006, $5,000,000;
                    ``(B) for each of fiscal years 2007 and 2008, 
                $50,000,000; and
                    ``(C) for each fiscal year thereafter, $75,000,000.
            ``(2) Availability.--Amounts appropriated pursuant to 
        paragraph (1) shall remain available until expended.
            ``(3) Increase in cms staffing devoted to protecting 
        medicaid program integrity.--From the amounts appropriated 
        under paragraph (1), the Secretary shall increase by 100 the 
        number of full-time equivalent employees whose duties consist 
        solely of protecting the integrity of the Medicaid program 
        established under this section by providing effective support 
        and assistance to States to combat provider fraud and abuse.
            ``(4) Annual report.--Not later than 180 days after the end 
        of each fiscal year (beginning with fiscal year 2006), the 
        Secretary shall submit a report to Congress which identifies--
                    ``(A) the use of funds appropriated pursuant to 
                paragraph (1); and
                    ``(B) the effectiveness of the use of such 
                funds.''.
    (b) State Requirement To Cooperate With Integrity Program 
Efforts.--Section 1902(a) of such Act (42 U.S.C. 1396a(a)), as amended 
by section 6033(a), is amended--
            (1) in paragraph (67), by striking ``and'' at the end;
            (2) in paragraph (68), by striking the period at the end 
        and inserting ``; and''; and
            (3) by inserting after paragraph (68), the following:
            ``(69) provide that the State must comply with any 
        requirements determined by the Secretary to be necessary for 
        carrying out the Medicaid Integrity Program established under 
        section 1936.''.
    (c) Increased Funding for Medicaid Fraud and Abuse Control 
Activities.--
            (1) In general.--Out of any money in the Treasury of the 
        United States not otherwise appropriated, there are 
        appropriated to the Office of the Inspector General of the 
        Department of Health and Human Services, without further 
        appropriation, $25,000,000 for each of fiscal years 2006 
        through 2010, for activities of such Office with respect to the 
        Medicaid program under title XIX of the Social Security Act (42 
        U.S.C. 1396 et seq.).
            (2) Availability; amounts in addition to other amounts 
        appropriated for such activities.--Amounts appropriated 
        pursuant to paragraph (1) shall--
                    (A) remain available until expended; and
                    (B) be in addition to any other amounts 
                appropriated or made available to the Office of the 
                Inspector General of the Department of Health and Human 
                Services for activities of such Office with respect to 
                the Medicaid program.
            (3) Annual report.--Not later than 180 days after the end 
        of each fiscal year (beginning with fiscal year 2006), the 
        Inspector General of the Department of Health and Human 
        Services shall submit a report to Congress which identifies--
                    (A) the use of funds appropriated pursuant to 
                paragraph (1); and
                    (B) the effectiveness of the use of such funds.
    (d) National Expansion of the Medicare-Medicaid (Medi-Medi) Data 
Match Pilot Program.--
            (1) Requirement of the medicare integrity program.--Section 
        1893 of the Social Security Act (42 U.S.C. 1395ddd) is 
        amended--
                    (A) in subsection (b), by adding at the end the 
                following:
            ``(6) The Medicare-Medicaid Data Match Program in 
        accordance with subsection (g).''; and
                    (B) by adding at the end the following:
    ``(g) Medicare-Medicaid Data Match Program.--
            ``(1) Expansion of program.--
                    ``(A) In general.--The Secretary shall enter into 
                contracts with eligible entities for the purpose of 
                ensuring that, beginning with 2006, the Medicare-
                Medicaid Data Match Program (commonly referred to as 
                the `Medi-Medi Program') is conducted with respect to 
                the program established under this title and State 
                Medicaid programs under title XIX for the purpose of--
                            ``(i) identifying program vulnerabilities 
                        in the program established under this title and 
                        the Medicaid program established under title 
                        XIX through the use of computer algorithms to 
                        look for payment anomalies (including billing 
                        or billing patterns identified with respect to 
                        service, time, or patient that appear to be 
                        suspect or otherwise implausible);
                            ``(ii) working with States, the Attorney 
                        General, and the Inspector General of the 
                        Department of Health and Human Services to 
                        coordinate appropriate actions to protect the 
                        Federal and State share of expenditures under 
                        the Medicaid program under title XIX, as well 
                        as the program established under this title; 
                        and
                            ``(iii) increasing the effectiveness and 
                        efficiency of both such programs through cost 
                        avoidance, savings, and recoupments of 
                        fraudulent, wasteful, or abusive expenditures.
                    ``(B) Reporting requirements.--The Secretary shall 
                make available in a timely manner any data and 
                statistical information collected by the Medi-Medi 
                Program to the Attorney General, the Director of the 
                Federal Bureau of Investigation, the Inspector General 
                of the Department of Health and Human Services, and the 
                States (including a Medicaid fraud and abuse control 
                unit described in section 1903(q)). Such information 
                shall be disseminated no less frequently than 
                quarterly.
            ``(2) Limited waiver authority.--The Secretary shall waive 
        only such requirements of this section and of titles XI and XIX 
        as are necessary to carry out paragraph (1).''.
            (2) Funding.--Section 1817(k)(4) of such Act (42 U.S.C. 
        1395i(k)(4)), as amended by section 5204 of this Act, is 
        amended--
                    (A) in subparagraph (A), by striking ``subparagraph 
                (B)'' and inserting ``subparagraphs (B), (C), and 
                (D)''; and
                    (B) by adding at the end the following:
                    ``(D) Expansion of the medicare-medicaid data match 
                program.--The amount appropriated under subparagraph 
                (A) for a fiscal year is further increased as follows 
                for purposes of carrying out section 1893(b)(6) for the 
                respective fiscal year:
                            ``(i) $12,000,000 for fiscal year 2006.
                            ``(ii) $24,000,000 for fiscal year 2007.
                            ``(iii) $36,000,000 for fiscal year 2008.
                            ``(iv) $48,000,000 for fiscal year 2009.
                            ``(v) $60,000,000 for fiscal year 2010 and 
                        each fiscal year thereafter.''.
    (e) Delayed Effective Date for Chapter.--Except as otherwise 
provided in this chapter, in the case of a State plan under title XIX 
of the Social Security Act which the Secretary determines requires 
State legislation in order for the plan to meet the additional 
requirements imposed by the amendments made by a provision of this 
chapter, the State plan shall not be regarded as failing to comply with 
the requirements of such Act solely on the basis of its failure to meet 
these additional requirements before the first day of the first 
calendar quarter beginning after the close of the first regular session 
of the State legislature that begins after the date of enactment of 
this Act. For purposes of the previous sentence, in the case of a State 
that has a 2-year legislative session, each year of the session shall 
be considered to be a separate regular session of the State 
legislature.

SEC. 6035. ENHANCING THIRD PARTY IDENTIFICATION AND PAYMENT.

    (a) Clarification of Third Parties Legally Responsible for Payment 
of a Claim for a Health Care Item or Service.--Section 1902(a)(25) of 
the Social Security Act (42 U.S.C. 1396a(a)(25)) is amended--
            (1) in subparagraph (A), in the matter preceding clause 
        (i)--
                    (A) by inserting ``, self-insured plans'' after 
                ``health insurers''; and
                    (B) by striking ``and health maintenance 
                organizations'' and inserting ``managed care 
                organizations, pharmacy benefit managers, or other 
                parties that are, by statute, contract, or agreement, 
                legally responsible for payment of a claim for a health 
                care item or service''; and
            (2) in subparagraph (G)--
                    (A) by inserting ``a self-insured plan,'' after 
                ``1974,''; and
                    (B) by striking ``and a health maintenance 
                organization'' and inserting ``a managed care 
                organization, a pharmacy benefit manager, or other 
                party that is, by statute, contract, or agreement, 
                legally responsible for payment of a claim for a health 
                care item or service''.
     (b) Requirement for Third Parties To Provide the State With 
Coverage Eligibility and Claims Data.--Section 1902(a)(25) of such Act 
(42 U.S.C. 1396a(a)(25)) is amended--
            (1) in subparagraph (G), by striking ``and'' at the end;
            (2) in subparagraph (H), by adding ``and'' after the 
        semicolon at the end; and
            (3) by inserting after subparagraph (H), the following:
                    ``(I) that the State shall provide assurances 
                satisfactory to the Secretary that the State has in 
                effect laws requiring health insurers, including self-
                insured plans, group health plans (as defined in 
                section 607(1) of the Employee Retirement Income 
                Security Act of 1974), service benefit plans, managed 
                care organizations, pharmacy benefit managers, or other 
                parties that are, by statute, contract, or agreement, 
                legally responsible for payment of a claim for a health 
                care item or service, as a condition of doing business 
                in the State, to--
                            ``(i) provide, with respect to individuals 
                        who are eligible for, or are provided, medical 
                        assistance under the State plan, upon the 
                        request of the State, information to determine 
                        during what period the individual or their 
                        spouses or their dependents may be (or may have 
                        been) covered by a health insurer and the 
                        nature of the coverage that is or was provided 
                        by the health insurer (including the name, 
                        address, and identifying number of the plan) in 
                        a manner prescribed by the Secretary;
                            ``(ii) accept the State's right of recovery 
                        and the assignment to the State of any right of 
                        an individual or other entity to payment from 
                        the party for an item or service for which 
                        payment has been made under the State plan;
                            ``(iii) respond to any inquiry by the State 
                        regarding a claim for payment for any health 
                        care item or service that is submitted not 
                        later than 3 years after the date of the 
                        provision of such health care item or service; 
                        and
                            ``(iv) agree not to deny a claim submitted 
                        by the State solely on the basis of the date of 
                        submission of the claim, the type or format of 
                        the claim form, or a failure to present proper 
                        documentation at the point-of-sale that is the 
                        basis of the claim, if--
                                    ``(I) the claim is submitted by the 
                                State within the 3-year period 
                                beginning on the date on which the item 
                                or service was furnished; and
                                    ``(II) any action by the State to 
                                enforce its rights with respect to such 
                                claim is commenced within 6 years of 
                                the State's submission of such 
                                claim;''.
    (c) Effective Date.--Except as provided in section 6035(e), the 
amendments made by this section take effect on January 1, 2006.

SEC. 6036. IMPROVED ENFORCEMENT OF DOCUMENTATION REQUIREMENTS.

    (a) In General.--Section 1903 of the Social Security Act (42 U.S.C. 
1396b) is amended--
            (1) in subsection (i), as amended by section 104 of Public 
        Law 109-91--
                    (A) by striking ``or'' at the end of paragraph 
                (20);
                    (B) by striking the period at the end of paragraph 
                (21) and inserting ``; or''; and
                    (C) by inserting after paragraph (21) the following 
                new paragraph:
            ``(22) with respect to amounts expended for medical 
        assistance for an individual who declares under section 
        1137(d)(1)(A) to be a citizen or national of the United States 
        for purposes of establishing eligibility for benefits under 
        this title, unless the requirement of subsection (x) is met.''; 
        and
            (2) by adding at the end the following new subsection:
    ``(x)(1) For purposes of subsection (i)(23), the requirement of 
this subsection is, with respect to an individual declaring to be a 
citizen or national of the United States, that, subject to paragraph 
(2), there is presented satisfactory documentary evidence of 
citizenship or nationality (as defined in paragraph (3)) of the 
individual.
    ``(2) The requirement of paragraph (1) shall not apply to an alien 
who is eligible for medical assistance under this title--
            ``(A) and is entitled to or enrolled for benefits under any 
        part of title XVIII;
            ``(B) on the basis of receiving supplemental security 
        income benefits under title XVI; or
            ``(C) on such other basis as the Secretary may specify 
        under which satisfactory documentary evidence of citizenship or 
        nationality had been previously presented.
    ``(3)(A) For purposes of this subsection, the term `satisfactory 
documentary evidence of citizenship or nationality' means--
            ``(i) any document described in subparagraph (B); or
            ``(ii) a document described in subparagraph (C) and a 
        document described in subparagraph (D).
    ``(B) The following are documents described in this subparagraph:
            ``(i) A United States passport.
            ``(ii) Form N-550 or N-570 (Certificate of Naturalization).
            ``(iii) Form N-560 or N-561 (Certificate of United States 
        Citizenship).
            ``(iv) A valid State-issued driver's license or other 
        identity document described in section 274A(b)(1)(D) of the 
        Immigration and Nationality Act, but only if the State issuing 
        the license or such document requires proof of United States 
        citizenship before issuance of such license or document or 
        obtains a social security number from the applicant and 
        verifies before certification that such number is valid and 
        assigned to the applicant who is a citizen.
            ``(v) Such other document as the Secretary may specify, by 
        regulation, that provides proof of United States citizenship or 
        nationality and that provides a reliable means of documentation 
        of personal identity.
    ``(C) The following are documents described in this subparagraph:
            ``(i) A certificate of birth in the United States.
            ``(ii) Form FS-545 or Form DS-1350 (Certification of Birth 
        Abroad).
            ``(iii) Form I-97 (United States Citizen Identification 
        Card).
            ``(iv) Form FS-240 (Report of Birth Abroad of a Citizen of 
        the United States).
            ``(v) Such other document (not described in subparagraph 
        (B)(iv)) as the Secretary may specify that provides proof of 
        United States citizenship or nationality.
    ``(D) The following are documents described in this subparagraph:
            ``(i) Any identity document described in section 
        274A(b)(1)(D) of the Immigration and Nationality Act.
            ``(ii) Any other documentation of personal identity of such 
        other type as the Secretary finds, by regulation, provides a 
        reliable means of identification.
    ``(E) A reference in this paragraph to a form includes a reference 
to any successor form.''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
apply to determinations of initial eligibility for medical assistance 
made on or after July 1, 2006, and to redeterminations of eligibility 
made on or after such date in the case of individuals for whom the 
requirement of section 1903(z) of the Social Security Act, as added by 
such amendments, was not previously met.
    (c) Implementation Requirement.--As soon as practicable after the 
date of enactment of this Act, the Secretary of Health and Human 
Services shall establish an outreach program that is designed to 
educate individuals who are likely to be affected by the requirements 
of subsections (i)(23) and (x) of section 1903 of the Social Security 
Act (as added by subsection (a)) about such requirements and how they 
may be satisfied.

          CHAPTER 4--FLEXIBILITY IN COST SHARING AND BENEFITS

SEC. 6041. STATE OPTION FOR ALTERNATIVE MEDICAID PREMIUMS AND COST 
              SHARING.

    (a) In General.--Title XIX of the Social Security Act is amended by 
inserting after section 1916 the following new section:

        ``state option for alternative premiums and cost sharing

    ``Sec. 1916A. (a) State Flexibility.--
            ``(1) In general.--Notwithstanding sections 1916 and 
        1902(a)(10)(B), a State, at its option and through a State plan 
        amendment, may impose premiums and cost sharing for any group 
        of individuals (as specified by the State) and for any type of 
        services (other than drugs for which cost sharing may be 
        imposed under subsection (c)), and may vary such premiums and 
        cost sharing among such groups or types, consistent with the 
        limitations established under this section. Nothing in this 
        section shall be construed as superseding (or preventing the 
        application of) section 1916(g).
            ``(2) Definitions.--In this section:
                    ``(A) Premium.--The term `premium' includes any 
                enrollment fee or similar charge.
                    ``(B) Cost sharing.--The term `cost sharing' 
                includes any deduction, copayment, or similar charge.
    ``(b) Limitations on Exercise of Authority.--
            ``(1) Individuals with family income between 100 and 150 
        percent of the poverty line.--In the case of an individual 
        whose family income exceeds 100 percent, but does not exceed 
        150 percent, of the poverty line applicable to a family of the 
        size involved, subject to subsections (c)(2) and (e)(2)(A)--
                    ``(A) no premium may be imposed under the plan; and
                    ``(B) with respect to cost sharing--
                            ``(i) the cost sharing imposed under 
                        subsection (a) with respect to any item or 
                        service may not exceed 10 percent of the cost 
                        of such item or service; and
                            ``(ii) the total aggregate amount of cost 
                        sharing imposed under this section (including 
                        any cost sharing imposed under subsection (c) 
                        or (e)) for all individuals in the family may 
                        not exceed 5 percent of the family income of 
                        the family involved, as applied on a quarterly 
                        or monthly basis (as specified by the State).
            ``(2) Individuals with family income above 150 percent of 
        the poverty line.--In the case of an individual whose family 
        income exceeds 150 percent of the poverty line applicable to a 
        family of the size involved, subject to subsections (c)(2) and 
        (e)(2)(A)--
                    ``(A) the total aggregate amount of premiums and 
                cost sharing imposed under this section (including any 
                cost sharing imposed under subsection (c) or (e)) for 
                all individuals in the family may not exceed 5 percent 
                of the family income of the family involved, as applied 
                on a quarterly or monthly basis (as specified by the 
                State); and
                    ``(B) with respect to cost sharing, the cost 
                sharing imposed with respect to any item or service 
                under subsection (a) may not exceed 20 percent of the 
                cost of such item or service.
            ``(3) Additional limitations.--
                    ``(A) Premiums.--No premiums shall be imposed under 
                this section with respect to the following:
                            ``(i) Individuals under 18 years of age 
                        that are required to be provided medical 
                        assistance under section 1902(a)(10)(A)(i), and 
                        including individuals with respect to whom aid 
                        or assistance is made available under part B of 
                        title IV to children in foster care and 
                        individuals with respect to whom adoption or 
                        foster care assistance is made available under 
                        part E of such title, without regard to age.
                            ``(ii) Pregnant women.
                            ``(iii) Any terminally ill individual who 
                        is receiving hospice care (as defined in 
                        section 1905(o)).
                            ``(iv) Any individual who is an inpatient 
                        in a hospital, nursing facility, intermediate 
                        care facility for the mentally retarded, or 
                        other medical institution, if such individual 
                        is required, as a condition of receiving 
                        services in such institution under the State 
                        plan, to spend for costs of medical care all 
                        but a minimal amount of the individual's income 
                        required for personal needs.
                            ``(v) Women who are receiving medical 
                        assistance by virtue of the application of 
                        sections 1902(a)(10)(A)(ii)(XVIII) and 
                        1902(aa).
                    ``(B) Cost sharing.--Subject to the succeeding 
                provisions of this section, no cost sharing shall be 
                imposed under subsection (a) with respect to the 
                following:
                            ``(i) Services furnished to individuals 
                        under 18 years of age that are required to be 
                        provided medical assistance under section 
                        1902(a)(10)(A)(i), and including services 
                        furnished to individuals with respect to whom 
                        aid or assistance is made available under part 
                        B of title IV to children in foster care and 
                        individuals with respect to whom adoption or 
                        foster care assistance is made available under 
                        part E of such title, without regard to age.
                            ``(ii) Preventive services (such as well 
                        baby and well child care and immunizations) 
                        provided to children under 18 years of age 
                        regardless of family income.
                            ``(iii) Services furnished to pregnant 
                        women, if such services relate to the pregnancy 
                        or to any other medical condition which may 
                        complicate the pregnancy.
                            ``(iv) Services furnished to a terminally 
                        ill individual who is receiving hospice care 
                        (as defined in section 1905(o)).
                            ``(v) Services furnished to any individual 
                        who is an inpatient in a hospital, nursing 
                        facility, intermediate care facility for the 
                        mentally retarded, or other medical 
                        institution, if such individual is required, as 
                        a condition of receiving services in such 
                        institution under the State plan, to spend for 
                        costs of medical care all but a minimal amount 
                        of the individual's income required for 
                        personal needs.
                            ``(vi) Emergency services (as defined by 
                        the Secretary for purposes of section 
                        1916(a)(2)(D)).
                            ``(vii) Family planning services and 
                        supplies described in section 1905(a)(4)(C).
                            ``(viii) Services furnished to women who 
                        are receiving medical assistance by virtue of 
                        the application of sections 
                        1902(a)(10)(A)(ii)(XVIII) and 1902(aa).
                    ``(C) Construction.--Nothing in this paragraph 
                shall be construed as preventing a State from exempting 
                additional classes of individuals from premiums under 
                this section or from exempting additional individuals 
                or services from cost sharing under subsection (a).
            ``(4) Determinations of family income.--In applying this 
        subsection, family income shall be determined in a manner 
        specified by the State for purposes of this subsection, 
        including the use of such disregards as the State may provide. 
        Family income shall be determined for such period and at such 
        periodicity as the State may provide under this title.
            ``(5) Poverty line defined.--For purposes of this section, 
        the term `poverty line' has the meaning given such term in 
        section 673(2) of the Community Services Block Grant Act (42 
        U.S.C. 9902(2)), including any revision required by such 
        section.
            ``(6) Construction.--Nothing in this section shall be 
        construed--
                    ``(A) as preventing a State from further limiting 
                the premiums and cost sharing imposed under this 
                section beyond the limitations provided under this 
                section;
                    ``(B) as affecting the authority of the Secretary 
                through waiver to modify limitations on premiums and 
                cost sharing under this section; or
                    ``(C) as affecting any such waiver of requirements 
                in effect under this title before the date of the 
                enactment of this section with regard to the imposition 
                of premiums and cost sharing.
    ``(d) Enforceability of Premiums and Other Cost Sharing.--
            ``(1) Premiums.--Notwithstanding section 1916(c)(3) and 
        section 1902(a)(10)(B), a State may, at its option, condition 
        the provision of medical assistance for an individual upon 
        prepayment of a premium authorized to be imposed under this 
        section, or may terminate eligibility for such medical 
        assistance on the basis of failure to pay such a premium but 
        shall not terminate eligibility of an individual for medical 
        assistance under this title on the basis of failure to pay any 
        such premium until such failure continues for a period of not 
        less than 60 days. A State may apply the previous sentence for 
        some or all groups of beneficiaries as specified by the State 
        and may waive payment of any such premium in any case where the 
        State determines that requiring such payment would create an 
        undue hardship.
            ``(2) Cost sharing.--Notwithstanding section 1916(e) or any 
        other provision of law, a State may permit a provider 
        participating under the State plan to require, as a condition 
        for the provision of care, items, or services to an individual 
        entitled to medical assistance under this title for such care, 
        items, or services, the payment of any cost sharing authorized 
        to be imposed under this section with respect to such care, 
        items, or services. Nothing in this paragraph shall be 
        construed as preventing a provider from reducing or waiving the 
        application of such cost sharing on a case-by-case basis.''.
    (b) Indexing Nominal Cost Sharing and Conforming Amendment.--
Section 1916 of such Act (42 U.S.C. 1396o) is amended--
            (1) in subsection (f), by inserting ``and section 1916A'' 
        after ``(b)(3)''; and
            (2) by adding at the end the following new subsection:
    ``(h) In applying this section and subsections (c) and (e) of 
section 1916A, with respect to cost sharing that is `nominal' in 
amount, the Secretary shall increase such `nominal' amounts for each 
year (beginning with 2006) by the annual percentage increase in the 
medical care component of the consumer price index for all urban 
consumers (U.S. city average) as rounded up in an appropriate 
manner.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to cost sharing imposed for items and services furnished on or 
after March 31, 2006.

SEC. 6042. SPECIAL RULES FOR COST SHARING FOR PRESCRIPTION DRUGS.

    (a) In General.--Section 1916A of the Social Security Act, as 
inserted by section 6041(a), is amended by inserting after subsection 
(b) the following new subsection:
    ``(c) Special Rules for Cost Sharing for Prescription Drugs.--
            ``(1) In general.--In order to encourage beneficiaries to 
        use drugs (in this subsection referred to as `preferred drugs') 
        identified by the State as the least (or less) costly effective 
        prescription drugs within a class of drugs (as defined by the 
        State), with respect to one or more groups of beneficiaries 
        specified by the State, subject to paragraph (2), the State 
        may--
                    ``(A) provide cost sharing (instead of the level of 
                cost sharing otherwise permitted under section 1916, 
                but subject to paragraphs (2) and (3)) with respect to 
                drugs that are not preferred drugs within a class; and
                    ``(B) waive or reduce the cost sharing otherwise 
                applicable for preferred drugs within such class and 
                shall not apply any such cost sharing for such 
                preferred drugs for individuals for whom cost sharing 
                may not otherwise be imposed under subsection 
                (b)(3)(B).
            ``(2) Limitations.--
                    ``(A) By income group.--In no case may the cost 
                sharing under paragraph (1)(A) with respect to a non-
                preferred drug exceed--
                            ``(i) in the case of an individual whose 
                        family income does not exceed 150 percent of 
                        the poverty line applicable to a family of the 
                        size involved, the amount of nominal cost 
                        sharing (as otherwise determined under section 
                        1916); or
                            ``(ii) in the case of an individual whose 
                        family income exceeds 150 percent of the 
                        poverty line applicable to a family of the size 
                        involved, 20 percent of the cost of the drug.
                    ``(B) Limitation to nominal for exempt 
                populations.--In the case of an individual who is 
                otherwise not subject to cost sharing due to the 
                application of subsection (b)(3)(B), any cost sharing 
                under paragraph (1)(A) with respect to a non-preferred 
                drug may not exceed a nominal amount (as otherwise 
                determined under section 1916).
                    ``(C) Continued application of aggregate cap.--In 
                addition to the limitations imposed under subparagraphs 
                (A) and (B), any cost sharing under paragraph (1)(A) 
                continues to be subject to the aggregate cap on cost 
                sharing applied under paragraph (1) or (2) of 
                subsection (b), as the case may be.
            ``(3) Waiver.--In carrying out paragraph (1), a State shall 
        provide for the application of cost sharing levels applicable 
        to a preferred drug in the case of a drug that is not a 
        preferred drug if the prescribing physician determines that the 
        preferred drug for treatment of the same condition either would 
        not be as effective for the individual or would have adverse 
        effects for the individual or both.
            ``(4) Exclusion authority.--Nothing in this subsection 
        shall be construed as preventing a State from excluding 
        specified drugs or classes of drugs from the application of 
        paragraph (1).''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to cost sharing imposed for items and services furnished on or 
after March 31, 2006.

SEC. 6043. EMERGENCY ROOM COPAYMENTS FOR NON-EMERGENCY CARE.

    (a) In General.--Section 1916A of the Social Security Act, as 
inserted by section 6041 and as amended by section 6042, is further 
amended by adding at the end the following new subsection:
    ``(e) State Option for Permitting Hospitals To Impose Cost Sharing 
for Non-Emergency Care Furnished in an Emergency Department.--
            ``(1) In general.--Notwithstanding section 1916 and section 
        1902(a)(1) or the previous provisions of this section, but 
        subject to the limitations of paragraph (2), a State may, by 
        amendment to its State plan under this title, permit a hospital 
        to impose cost sharing for non-emergency services furnished to 
        an individual (within one or more groups of individuals 
        specified by the State) in the hospital emergency department 
        under this subsection if the following conditions are met:
                    ``(A) Access to non-emergency room provider.--The 
                individual has actually available and accessible (as 
                such terms are applied by the Secretary under section 
                1916(b)(3)) an alternate non-emergency services 
                provider with respect to such services.
                    ``(B) Notice.--The hospital must inform the 
                beneficiary after receiving an appropriate medical 
                screening examination under section 1867 and after a 
                determination has been made that the individual does 
                not have an emergency medical condition, but before 
                providing the non-emergency services, of the following:
                            ``(i) The hospital may require the payment 
                        of the State specified cost sharing before the 
                        service can be provided.
                            ``(ii) The name and location of an 
                        alternate non-emergency services provider 
                        (described in subparagraph (A)) that is 
                        actually available and accessible (as described 
                        in such subparagraph).
                            ``(iii) The fact that such alternate 
                        provider can provide the services without the 
                        imposition of cost sharing described in clause 
                        (i).
                            ``(iv) The hospital provides a referral to 
                        coordinate scheduling of this treatment.
                Nothing in this subsection shall be construed as 
                preventing a State from applying (or waiving) cost 
                sharing otherwise permissible under this section to 
                services described in clause (iii).
            ``(2) Limitations.--
                    ``(A) For poorest beneficiaries.--In the case of an 
                individual described in subsection (b)(1), the cost 
                sharing imposed under this subsection may not exceed 
                twice the amount determined to be nominal under section 
                1916, subject to the percent of income limitation 
                otherwise applicable under subsection (b)(1).
                    ``(B) Application to exempt populations.--In the 
                case of an individual who is otherwise not subject to 
                cost sharing under subsection (b)(3), a State may 
                impose cost sharing under paragraph (1) for care in an 
                amount that does not exceed a nominal amount (as 
                otherwise determined under section 1916) so long as no 
                cost sharing is imposed to receive such care through an 
                outpatient department or other alternative health care 
                provider in the geographic area of the hospital 
                emergency department involved.
                    ``(C) Continued application of aggregate cap; 
                relation to other cost sharing.--In addition to the 
                limitations imposed under subparagraphs (A) and (B), 
                any cost sharing under paragraph (1) is subject to the 
                aggregate cap on cost sharing applied under paragraph 
                (1) or (2) of subsection (b), as the case may be. Cost 
                sharing imposed for services under this subsection 
                shall be instead of any cost sharing that may be 
                imposed for such services under subsection (a).
            ``(3) Construction.--Nothing in this section shall be 
        construed--
                    ``(A) to limit a hospital's obligations with 
                respect to screening and stabilizing treatment of an 
                emergency medical condition under section 1867; or
                    ``(B) to modify any obligations under either State 
                or Federal standards relating to the application of a 
                prudent-layperson standard with respect to payment or 
                coverage of emergency services by any managed care 
                organization.
            ``(4) Definitions.--For purposes of this subsection:
                    ``(A) Non-emergency services.--The term `non-
                emergency services' means any care or services 
                furnished in an emergency department of a hospital that 
                the physician determines do not constitute an 
                appropriate medical screening examination or 
                stabilizing examination and treatment required to be 
                provided by the hospital under section 1867.
                    ``(B) Alternate non-emergency services provider.--
                The term `alternative non-emergency services provider' 
                means, with respect to non-emergency services for the 
                diagnosis or treatment of a condition, a health care 
                provider, such as a physician's office, health care 
                clinic, community health center, hospital outpatient 
                department, or similar health care provider, that can 
                provide clinically appropriate services for the 
                diagnosis or treatment of a condition contemporaneously 
                with the provision of the non-emergency services that 
                would be provided in an emergency department of a 
                hospital for the diagnosis or treatment of a condition, 
                and that is participating in the program under this 
                title.''.
    (b) Grant Funds for Establishment of Alternate Non-Emergency 
Services Providers.--Section 1903 of the Social Security Act (42 U.S.C. 
1396b), as amended by section 6037(a)(2), is amended by adding at the 
end the following new subsection:
    ``(y) Payments for Establishment of Alternate Non-Emergency 
Services Providers.--
            ``(1) Payments.--In addition to the payments otherwise 
        provided under subsection (a), subject to paragraph (2), the 
        Secretary shall provide for payments to States under such 
        subsection for the establishment of alternate non-emergency 
        service providers (as defined in section 1916A(e)(5)(B)), or 
        networks of such providers.
            ``(2) Limitation.--The total amount of payments under this 
        subsection shall not exceed $50,000,000 during the 4-year 
        period beginning with 2006. This subsection constitutes budget 
        authority in advance of appropriations Acts and represents the 
        obligation of the Secretary to provide for the payment of 
        amounts provided under this subsection.
            ``(3) Preference.--In providing for payments to States 
        under this subsection, the Secretary shall provide preference 
        to States that establish, or provide for, alternate non-
        emergency services providers or networks of such providers 
        that--
                    ``(A) serve rural or underserved areas where 
                beneficiaries under this title may not have regular 
                access to providers of primary care services; or
                    ``(B) are in partnership with local community 
                hospitals.
            ``(4) Form and manner of payment.--Payment to a State under 
        this subsection shall be made only upon the filing of such 
        application in such form and in such manner as the Secretary 
        shall specify. Payment to a State under this subsection shall 
        be made in the same manner as other payments under section 
        1903(a).''.
    (c) Effective Date.--The amendments made by this section shall 
apply to non-emergency services furnished on or after January 1, 2007.

SEC. 6044. USE OF BENCHMARK BENEFIT PACKAGES.

    (a) In General.--Title XIX of the Social Security Act, as amended 
by section 6035, is amended by redesignating section 1937 as section 
1938 and by inserting after section 1936 the following new section:

                ``state flexibility in benefit packages

    ``Sec. 1937. (a) State Option of Providing Benchmark Benefits.--
            ``(1) Authority.--
                    ``(A) In general.--Notwithstanding any other 
                provision of this title, a State, at its option as a 
                State plan amendment, may provide for medical 
                assistance under this title to individuals within one 
                or more groups of individuals specified by the State 
                through enrollment in coverage that provides--
                            ``(i) benchmark coverage described in 
                        subsection (b)(1) or benchmark equivalent 
                        coverage described in subsection (b)(2); and
                            ``(ii) for any child under 19 years of age 
                        who is covered under the State plan under 
                        section 1902(a)(10)(A), wrap-around benefits to 
                        the benchmark coverage or benchmark equivalent 
                        coverage consisting of early and periodic 
                        screening, diagnostic, and treatment services 
                        defined in section 1905(r).
                    ``(B) Limitation.--The State may only exercise the 
                option under subparagraph (A) for an individual 
                eligible under an eligibility category that had been 
                established under the State plan on or before the date 
                of the enactment of this section.
                    ``(C) Option of wrap-around benefits.--In the case 
                of coverage described in subparagraph (A), a State, at 
                its option, may provide such wrap-around or additional 
                benefits as the State may specify.
                    ``(D) Treatment as medical assistance.--Payment of 
                premiums for such coverage under this subsection shall 
                be treated as payment of other insurance premiums 
                described in the third sentence of section 1905(a).
            ``(2) Application.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), a State may require that a full-
                benefit eligible individual (as defined in subparagraph 
                (C)) within a group obtain benefits under this title 
                through enrollment in coverage described in paragraph 
                (1)(A). A State may apply the previous sentence to 
                individuals within 1 or more groups of such 
                individuals.
                    ``(B) Limitation on application.--A State may not 
                require under subparagraph (A) an individual to obtain 
                benefits through enrollment described in paragraph 
                (1)(A) if the individual is within one of the following 
                categories of individuals:
                            ``(i) Mandatory pregnant women.--The 
                        individual is a pregnant woman who is required 
                        to be covered under the State plan under 
                        section 1902(a)(10)(A)(i).
                            ``(ii) Blind or disabled individuals.--The 
                        individual qualifies for medical assistance 
                        under the State plan on the basis of being 
                        blind or disabled (or being treated as being 
                        blind or disabled) without regard to whether 
                        the individual is eligible for supplemental 
                        security income benefits under title XVI on the 
                        basis of being blind or disabled and including 
                        an individual who is eligible for medical 
                        assistance on the basis of section 1902(e)(3).
                            ``(iii) Dual eligibles.--The individual is 
                        entitled to benefits under any part of title 
                        XVIII.
                            ``(iv) Terminally ill hospice patients.--
                        The individual is terminally ill and is 
                        receiving benefits for hospice care under this 
                        title.
                            ``(v) Eligible on basis of 
                        institutionalization.--The individual is an 
                        inpatient in a hospital, nursing facility, 
                        intermediate care facility for the mentally 
                        retarded, or other medical institution, and is 
                        required, as a condition of receiving services 
                        in such institution under the State plan, to 
                        spend for costs of medical care all but a 
                        minimal amount of the individual's income 
                        required for personal needs.
                            ``(vi) Medically frail and special medical 
                        needs individuals.--The individual is medically 
                        frail or otherwise an individual with special 
                        medical needs (as identified in accordance with 
                        regulations of the Secretary).
                            ``(vii) Beneficiaries qualifying for long-
                        term care services.--The individual qualifies 
                        based on medical condition for medical 
                        assistance for long-term care services 
                        described in section 1917(c)(1)(C).
                            ``(viii) Children in foster care receiving 
                        child welfare services and children receiving 
                        foster care or adoption assistance.--The 
                        individual is an individual with respect to 
                        whom aid or assistance is made available under 
                        part B of title IV to children in foster care 
                        and individuals with respect to whom adoption 
                        or foster care assistance is made available 
                        under part E of such title, without regard to 
                        age.
                            ``(ix) TANF and section 1931 parents.--The 
                        individual qualifies for medical assistance on 
                        the basis of eligibility to receive assistance 
                        under a State plan funded under part A of title 
                        IV (as in effect on or after the welfare reform 
                        effective date defined in section 1931(i)).
                            ``(x) Women in the breast or cervical 
                        cancer program.--The individual is a woman who 
                        is receiving medical assistance by virtue of 
                        the application of sections 
                        1902(a)(10)(A)(ii)(XVIII) and 1902(aa).
                            ``(xi) Limited services beneficiaries.--The 
                        individual--
                                    ``(I) qualifies for medical 
                                assistance on the basis of section 
                                1902(a)(10)(A)(ii)(XII); or
                                    ``(II) is not a qualified alien (as 
                                defined in section 431 of the Personal 
                                Responsibility and Work Opportunity 
                                Reconciliation Act of 1996) and 
                                receives care and services necessary 
                                for the treatment of an emergency 
                                medical condition in accordance with 
                                section 1903(v).
                    ``(C) Full-benefit eligible individuals.--
                            ``(i) In general.--For purposes of this 
                        paragraph, subject to clause (ii), the term 
                        `full-benefit eligible individual' means for a 
                        State for a month an individual who is 
                        determined eligible by the State for medical 
                        assistance for all services defined in section 
                        1905(a) which are covered under the State plan 
                        under this title for such month under section 
                        1902(a)(10)(A) or under any other category of 
                        eligibility for medical assistance for all such 
                        services under this title, as determined by the 
                        Secretary.
                            ``(ii) Exclusion of medically needy and 
                        spend-down populations.--Such term shall not 
                        include an individual determined to be eligible 
                        by the State for medical assistance under 
                        section 1902(a)(10)(C) or by reason of section 
                        1902(f) or otherwise eligible based on a 
                        reduction of income based on costs incurred for 
                        medical or other remedial care.
    ``(b) Benchmark Benefit Packages.--
            ``(1) In general.--For purposes of subsection (a)(1), each 
        of the following coverages shall be considered to be benchmark 
        coverage:
                    ``(A) FEHBP-equivalent health insurance coverage.--
                The standard Blue Cross/Blue Shield preferred provider 
                option service benefit plan, described in and offered 
                under section 8903(1) of title 5, United States Code.
                    ``(B) State employee coverage.--A health benefits 
                coverage plan that is offered and generally available 
                to State employees in the State involved.
                    ``(C) Coverage offered through hmo.--The health 
                insurance coverage plan that--
                            ``(i) is offered by a health maintenance 
                        organization (as defined in section 2791(b)(3) 
                        of the Public Health Service Act), and
                            ``(ii) has the largest insured commercial, 
                        non-medicaid enrollment of covered lives of 
                        such coverage plans offered by such a health 
                        maintenance organization in the State involved.
                    ``(D) Secretary-approved coverage.--Any other 
                health benefits coverage that the Secretary determines, 
                upon application by a State, provides appropriate 
                coverage for the population proposed to be provided 
                such coverage.
            ``(2) Benchmark-equivalent coverage.--For purposes of 
        subsection (a)(1), coverage that meets the following 
        requirement shall be considered to be benchmark-equivalent 
        coverage:
                    ``(A) Inclusion of basic services.--The coverage 
                includes benefits for items and services within each of 
                the following categories of basic services:
                            ``(i) Inpatient and outpatient hospital 
                        services.
                            ``(ii) Physicians' surgical and medical 
                        services.
                            ``(iii) Laboratory and x-ray services.
                            ``(iv) Well-baby and well-child care, 
                        including age-appropriate immunizations.
                            ``(v) Other appropriate preventive 
                        services, as designated by the Secretary.
                    ``(B) Aggregate actuarial value equivalent to 
                benchmark package.--The coverage has an aggregate 
                actuarial value that is at least actuarially equivalent 
                to one of the benchmark benefit packages described in 
                paragraph (1).
                    ``(C) Substantial actuarial value for additional 
                services included in benchmark package.--With respect 
                to each of the following categories of additional 
                services for which coverage is provided under the 
                benchmark benefit package used under subparagraph (B), 
                the coverage has an actuarial value that is equal to at 
                least 75 percent of the actuarial value of the coverage 
                of that category of services in such package:
                            ``(i) Coverage of prescription drugs.
                            ``(ii) Mental health services.
                            ``(iii) Vision services.
                            ``(iv) Hearing services.
            ``(3) Determination of actuarial value.--The actuarial 
        value of coverage of benchmark benefit packages shall be set 
        forth in an actuarial opinion in an actuarial report that has 
        been prepared--
                    ``(A) by an individual who is a member of the 
                American Academy of Actuaries;
                    ``(B) using generally accepted actuarial principles 
                and methodologies;
                    ``(C) using a standardized set of utilization and 
                price factors;
                    ``(D) using a standardized population that is 
                representative of the population involved;
                    ``(E) applying the same principles and factors in 
                comparing the value of different coverage (or 
                categories of services);
                    ``(F) without taking into account any differences 
                in coverage based on the method of delivery or means of 
                cost control or utilization used; and
                    ``(G) taking into account the ability of a State to 
                reduce benefits by taking into account the increase in 
                actuarial value of benefits coverage offered under this 
                title that results from the limitations on cost sharing 
                under such coverage.
        The actuary preparing the opinion shall select and specify in 
        the memorandum the standardized set and population to be used 
        under subparagraphs (C) and (D).
            ``(4) Coverage of rural health clinic and fqhc services.--
        Notwithstanding the previous provisions of this section, a 
        State may not provide for medical assistance through enrollment 
        of an individual with benchmark coverage or benchmark 
        equivalent coverage under this section unless--
                    ``(A) the individual has access, through such 
                coverage or otherwise, to services described in 
                subparagraphs (B) and (C) of section 1905(a)(2); and
                    ``(B) payment for such services is made in 
                accordance with the requirements of section 
                1902(bb).''.
    (b) Effective Date.--The amendment made by subsection (a) takes 
effect on March 31, 2006.

               CHAPTER 5--STATE FINANCING UNDER MEDICAID

SEC. 6051. MANAGED CARE ORGANIZATION PROVIDER TAX REFORM.

    (a) In General.--Section 1903(w)(7)(A)(viii) of the Social Security 
Act (42 U.S.C. 1396b(w)(7)(A)(viii)) is amended to read as follows:
                    ``(viii) Services of managed care organizations 
                (including health maintenance organizations, preferred 
                provider organizations, and such other similar 
                organizations as the Secretary may specify by 
                regulation).''.
    (b) Effective Date.--
            (1) In general.--Subject to paragraph (2), the amendment 
        made by subsection (a) shall be effective as of the date of the 
        enactment of this Act.
            (2) Delay in effective date.--
                    (A) In general.--Subject to subparagraph (B), in 
                the case of a State specified in subparagraph (B), the 
                amendment made by subsection (a) shall be effective as 
                of October 1, 2009.
                    (B) Specified states.--For purposes of subparagraph 
                (A), the States specified in this subparagraph are 
                States that have enacted a law providing for a tax on 
                the services of a Medicaid managed care organization 
                with a contract under section 1903(m) of the Social 
                Security Act as of December 8, 2005.
    (c) Clarification Regarding Non-Regulation of Transfers.--
            (1) In general.--Nothing in section 1903(w) of the Social 
        Security Act (42 U.S.C. 1396b(w)) shall be construed by the 
        Secretary of Health and Human Services as prohibiting a State's 
        use of funds as the non-Federal share of expenditures under 
        title XIX of such Act where such funds are transferred from or 
        certified by a publicly-owned regional medical center located 
        in another State and described in paragraph (2), so long as the 
        Secretary determines that such use of funds is proper and in 
        the interest of the program under title XIX.
            (2) Center described.--A center described in this paragraph 
        is a publicly-owned regional medical center that--
                    (A) provides level 1 trauma and burn care services;
                    (B) provides level 3 neonatal care services;
                    (C) is obligated to serve all patients, regardless 
                of State of origin;
                    (D) is located within a Standard Metropolitan 
                Statistical Area (SMSA) that includes at least 3 
                States, including the States described in paragraph 
                (1);
                    (E) serves as a tertiary care provider for patients 
                residing within a 125-mile radius; and
                    (F) meets the criteria for a disproportionate share 
                hospital under section 1923 of such Act in at least one 
                State other than the one in which the center is 
                located.
            (3) Effective period.--This subsection shall apply through 
        December 31, 2006.

SEC. 6052. REFORMS OF CASE MANAGEMENT AND TARGETED CASE MANAGEMENT.

    (a) In General.--Section 1915(g) of the Social Security Act (42 
U.S.C. 1396n(g)(2)) is amended by striking paragraph (2) and inserting 
the following:
    ``(2) For purposes of this subsection:
            ``(A)(i) The term `case management services' means services 
        which will assist individuals eligible under the plan in 
        gaining access to needed medical, social, educational, and 
        other services.
            ``(ii) Such term includes the following:
                    ``(I) Assessment of an eligible individual to 
                determine service needs, including activities that 
                focus on needs identification, to determine the need 
                for any medical, educational, social, or other 
                services. Such assessment activities include the 
                following:
                            ``(aa) Taking client history.
                            ``(bb) Identifying the needs of the 
                        individual, and completing related 
                        documentation.
                            ``(cc) Gathering information from other 
                        sources such as family members, medical 
                        providers, social workers, and educators, if 
                        necessary, to form a complete assessment of the 
                        eligible individual.
                    ``(II) Development of a specific care plan based on 
                the information collected through an assessment, that 
                specifies the goals and actions to address the medical, 
                social, educational, and other services needed by the 
                eligible individual, including activities such as 
                ensuring the active participation of the eligible 
                individual and working with the individual (or the 
                individual's authorized health care decision maker) and 
                others to develop such goals and identify a course of 
                action to respond to the assessed needs of the eligible 
                individual.
                    ``(III) Referral and related activities to help an 
                individual obtain needed services, including activities 
                that help link eligible individuals with medical, 
                social, educational providers or other programs and 
                services that are capable of providing needed services, 
                such as making referrals to providers for needed 
                services and scheduling appointments for the 
                individual.
                    ``(IV) Monitoring and followup activities, 
                including activities and contacts that are necessary to 
                ensure the care plan is effectively implemented and 
                adequately addressing the needs of the eligible 
                individual, and which may be with the individual, 
                family members, providers, or other entities and 
                conducted as frequently as necessary to help determine 
                such matters as--
                            ``(aa) whether services are being furnished 
                        in accordance with an individual's care plan;
                            ``(bb) whether the services in the care 
                        plan are adequate; and
                            ``(cc) whether there are changes in the 
                        needs or status of the eligible individual, and 
                        if so, making necessary adjustments in the care 
                        plan and service arrangements with providers.
            ``(iii) Such term does not include the direct delivery of 
        an underlying medical, educational, social, or other service to 
        which an eligible individual has been referred, including, with 
        respect to the direct delivery of foster care services, 
        services such as (but not limited to) the following:
                    ``(I) Research gathering and completion of 
                documentation required by the foster care program.
                    ``(II) Assessing adoption placements.
                    ``(III) Recruiting or interviewing potential foster 
                care parents.
                    ``(IV) Serving legal papers.
                    ``(V) Home investigations.
                    ``(VI) Providing transportation.
                    ``(VII) Administering foster care subsidies.
                    ``(VIII) Making placement arrangements.
            ``(B) The term `targeted case management services' are case 
        management services that are furnished without regard to the 
        requirements of section 1902(a)(1) and section 1902(a)(10)(B) 
        to specific classes of individuals or to individuals who reside 
        in specified areas.
    ``(3) With respect to contacts with individuals who are not 
eligible for medical assistance under the State plan or, in the case of 
targeted case management services, individuals who are eligible for 
such assistance but are not part of the target population specified in 
the State plan, such contacts--
            ``(A) are considered an allowable case management activity, 
        when the purpose of the contact is directly related to the 
        management of the eligible individual's care; and
            ``(B) are not considered an allowable case management 
        activity if such contacts relate directly to the identification 
        and management of the noneligible or nontargeted individual's 
        needs and care.
    ``(4)(A) In accordance with section 1902(a)(25), Federal financial 
participation only is available under this title for case management 
services or targeted case management services if there are no other 
third parties liable to pay for such services, including as 
reimbursement under a medical, social, educational, or other program.
    ``(B) A State shall allocate the costs of any part of such services 
which are reimbursable under another federally funded program in 
accordance with OMB Circular A-87 (or any related or successor guidance 
or regulations regarding allocation of costs among federally funded 
programs) under an approved cost allocation program.
    ``(5) Nothing in this subsection shall be construed as affecting 
the application of rules with respect to third party liability under 
programs, or activities carried out under title XXVI of the Public 
Health Service Act or by the Indian Health Service.''.
    (b) Regulations.--The Secretary shall promulgate regulations to 
carry out the amendment made by subsection (a) which may be effective 
and final immediately on an interim basis as of the date of publication 
of the interim final regulation. If the Secretary provides for an 
interim final regulation, the Secretary shall provide for a period of 
public comments on such regulation after the date of publication. The 
Secretary may change or revise such regulation after completion of the 
period of public comment.
    (c) Effective Date.--The amendment made by subsection (a) shall 
take effect on January 1, 2006.

SEC. 6053. ADDITIONAL FMAP ADJUSTMENTS.

    (a) Hold Harmless for Certain Decrease.--Notwithstanding the first 
sentence of section 1905(b) of the Social Security Act (42 U.S.C. 
1396d(b)), if, for purposes of titles XIX and XXI of the Social 
Security Act (42 U.S.C. 1396 et seq., 1397aa et seq.), the Federal 
medical assistance percentage determined for the State specified in 
section 4725(a) of Public Law 105-33 for fiscal year 2006 or fiscal 
year 2007 is less than the Federal medical assistance percentage 
determined for such State for fiscal year 2005, the Federal medical 
assistance percentage determined for such State for fiscal year 2005 
shall be substituted for the Federal medical assistance percentage 
otherwise determined for such State for fiscal year 2006 or fiscal year 
2007, as the case may be.
    (b) Hold Harmless for Katrina Impact.--Notwithstanding any other 
provision of law, for purposes of titles XIX and XXI of the Social 
Security Act, the Secretary of Health and Human Services, in computing 
the Federal medical assistance percentage under section 1905(b) of such 
Act (42 U.S.C. 1396d(b)) for any year after 2006 for a State that the 
Secretary determines has a significant number of evacuees who were 
evacuated to, and live in, the State as a result of Hurricane Katrina 
as of October 1, 2005, shall disregard such evacuees (and income 
attributable to such evacuees) from such computation.

SEC. 6054. DSH ALLOTMENT FOR THE DISTRICT OF COLUMBIA.

    (a) In General.--For purposes of determining the DSH allotment for 
the District of Columbia under section 1923 of the Social Security Act 
(42 U.S.C. 1396r-4) for fiscal year 2006 and each subsequent fiscal 
year, the table in subsection (f)(2) of such section is amended under 
each of the columns for fiscal year 2000, fiscal year 2001, and fiscal 
year 2002, in the entry for the District of Columbia by striking ``32'' 
and inserting ``49''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
take effect as if enacted on October 1, 2005, and shall only apply to 
disproportionate share hospital adjustment expenditures applicable to 
fiscal year 2006 and subsequent fiscal years made on or after that 
date.

SEC. 6055. INCREASE IN MEDICAID PAYMENTS TO INSULAR AREAS.

    Section 1108(g) of the Social Security Act (42 U.S.C. 1308(g)) is 
amended--
            (1) in paragraph (2), by inserting ``and subject to 
        paragraph (3)'' after ``subsection (f)''; and
            (2) by adding at the end the following new paragraph:
            ``(3) Fiscal years 2006 and 2007 for certain insular 
        areas.--The amounts otherwise determined under this subsection 
        for Puerto Rico, the Virgin Islands, Guam, the Northern Mariana 
        Islands, and American Samoa for fiscal year 2006 and fiscal 
        year 2007 shall be increased by the following amounts:
                    ``(A) For Puerto Rico, $12,000,000 for fiscal year 
                2006 and $12,000,000 for fiscal year 2007.
                    ``(B) For the Virgin Islands, $2,500,000 for fiscal 
                year 2006 and $5,000,000 for fiscal year 2007.
                    ``(C) For Guam, $2,500,000 for fiscal year 2006 and 
                $5,000,000 for fiscal year 2007.
                    ``(D) For the Northern Mariana Islands, $1,000,000 
                for fiscal year 2006 and $2,000,000 for fiscal year 
                2007.
                    ``(E) For American Samoa, $2,000,000 for fiscal 
                year 2006 and $4,000,000 for fiscal year 2007.
        Such amounts shall not be taken into account in applying 
        paragraph (2) for fiscal year 2007 but shall be taken into 
        account in applying such paragraph for fiscal year 2008 and 
        subsequent fiscal years.''.

                      CHAPTER 6--OTHER PROVISIONS

                  Subchapter A--Family Opportunity Act

SEC. 6061. SHORT TITLE OF SUBCHAPTER.

    This subchapter may be cited as the ``Family Opportunity Act of 
2005'' or the ``Dylan Lee James Act''.

SEC. 6062. OPPORTUNITY FOR FAMILIES OF DISABLED CHILDREN TO PURCHASE 
              MEDICAID COVERAGE FOR SUCH CHILDREN.

    (a) State Option To Allow Families of Disabled Children To Purchase 
Medicaid Coverage for Such Children.--
            (1) In general.--Section 1902 of the Social Security Act 
        (42 U.S.C. 1396a) is amended--
                    (A) in subsection (a)(10)(A)(ii)--
                            (i) by striking ``or'' at the end of 
                        subclause (XVII);
                            (ii) by adding ``or'' at the end of 
                        subclause (XVIII); and
                            (iii) by adding at the end the following 
                        new subclause:
                                    ``(XIX) who are disabled children 
                                described in subsection (cc)(1);''; and
                    (B) by adding at the end the following new 
                subsection:
    ``(cc)(1) Individuals described in this paragraph are individuals--
            ``(A) who are children who have not attained 19 years of 
        age and are born--
                    ``(i) on or after January 1, 2001 (or, at the 
                option of a State, on or after an earlier date), in the 
                case of the second, third, and fourth quarters of 
                fiscal year 2007;
                    ``(ii) on or after October 1, 1995 (or, at the 
                option of a State, on or after an earlier date), in the 
                case of each quarter of fiscal year 2008; and
                    ``(iii) after October 1, 1989, in the case of each 
                quarter of fiscal year 2009 and each quarter of any 
                fiscal year thereafter;
            ``(B) who would be considered disabled under section 
        1614(a)(3)(C) (as determined under title XVI for children but 
        without regard to any income or asset eligibility requirements 
        that apply under such title with respect to children); and
            ``(C) whose family income does not exceed such income level 
        as the State establishes and does not exceed--
                    ``(i) 300 percent of the poverty line (as defined 
                in section 2110(c)(5)) applicable to a family of the 
                size involved; or
                    ``(ii) such higher percent of such poverty line as 
                a State may establish, except that--
                            ``(I) any medical assistance provided to an 
                        individual whose family income exceeds 300 
                        percent of such poverty line may only be 
                        provided with State funds; and
                            ``(II) no Federal financial participation 
                        shall be provided under section 1903(a) for any 
                        medical assistance provided to such an 
                        individual.''.
            (2) Interaction with employer-sponsored family coverage.--
        Section 1902(cc) of such Act (42 U.S.C. 1396a(cc)), as added by 
        paragraph (1)(B), is amended by adding at the end the following 
        new paragraph:
    ``(2)(A) If an employer of a parent of an individual described in 
paragraph (1) offers family coverage under a group health plan (as 
defined in section 2791(a) of the Public Health Service Act), the State 
shall--
            ``(i) notwithstanding section 1906, require such parent to 
        apply for, enroll in, and pay premiums for such coverage as a 
        condition of such parent's child being or remaining eligible 
        for medical assistance under subsection (a)(10)(A)(ii)(XIX) if 
        the parent is determined eligible for such coverage and the 
        employer contributes at least 50 percent of the total cost of 
        annual premiums for such coverage; and
            ``(ii) if such coverage is obtained--
                    ``(I) subject to paragraph (2) of section 1916(h), 
                reduce the premium imposed by the State under that 
                section in an amount that reasonably reflects the 
                premium contribution made by the parent for private 
                coverage on behalf of a child with a disability; and
                    ``(II) treat such coverage as a third party 
                liability under subsection (a)(25).
    ``(B) In the case of a parent to which subparagraph (A) applies, a 
State, notwithstanding section 1906 but subject to paragraph 
(1)(C)(ii), may provide for payment of any portion of the annual 
premium for such family coverage that the parent is required to pay. 
Any payments made by the State under this subparagraph shall be 
considered, for purposes of section 1903(a), to be payments for medical 
assistance.''.
    (b) State Option To Impose Income-Related Premiums.--Section 1916 
of such Act (42 U.S.C. 1396o) is amended--
            (1) in subsection (a), by striking ``subsection (g)'' and 
        inserting ``subsections (g) and (i)''; and
            (2) by adding at the end, as amended by section 6041(b)(2), 
        the following new subsection:
    ``(i)(1) With respect to disabled children provided medical 
assistance under section 1902(a)(10)(A)(ii)(XIX), subject to paragraph 
(2), a State may (in a uniform manner for such children) require the 
families of such children to pay monthly premiums set on a sliding 
scale based on family income.
    ``(2) A premium requirement imposed under paragraph (1) may only 
apply to the extent that--
            ``(A) in the case of a disabled child described in that 
        paragraph whose family income--
                    ``(i) does not exceed 200 percent of the poverty 
                line, the aggregate amount of such premium and any 
                premium that the parent is required to pay for family 
                coverage under section 1902(cc)(2)(A)(i) and other 
                cost-sharing charges do not exceed 5 percent of the 
                family's income; and
                    ``(ii) exceeds 200, but does not exceed 300, 
                percent of the poverty line, the aggregate amount of 
                such premium and any premium that the parent is 
                required to pay for family coverage under section 
                1902(cc)(2)(A)(i) and other cost-sharing charges do not 
                exceed 7.5 percent of the family's income; and
            ``(B) the requirement is imposed consistent with section 
        1902(cc)(2)(A)(ii)(I).
    ``(3) A State shall not require prepayment of a premium imposed 
pursuant to paragraph (1) and shall not terminate eligibility of a 
child under section 1902(a)(10)(A)(ii)(XIX) for medical assistance 
under this title on the basis of failure to pay any such premium until 
such failure continues for a period of at least 60 days from the date 
on which the premium became past due. The State may waive payment of 
any such premium in any case where the State determines that requiring 
such payment would create an undue hardship.''.
    (c) Conforming Amendments.--(1) Section 1903(f)(4) of such Act (42 
U.S.C. 1396b(f)(4)) is amended in the matter preceding subparagraph 
(A), by inserting ``1902(a)(10)(A)(ii)(XIX),'' after 
``1902(a)(10)(A)(ii)(XVIII),''.
    (2) Section 1905(u)(2)(B) of such Act (42 U.S.C. 1396d(u)(2)(B)) is 
amended by adding at the end the following sentence: ``Such term 
excludes any child eligible for medical assistance only by reason of 
section 1902(a)(10)(A)(ii)(XIX).''.
    (d) Effective Date.--The amendments made by this section shall 
apply to medical assistance for items and services furnished on or 
after January 1, 2007.

SEC. 6063. DEMONSTRATION PROJECTS REGARDING HOME AND COMMUNITY-BASED 
              ALTERNATIVES TO PSYCHIATRIC RESIDENTIAL TREATMENT 
              FACILITIES FOR CHILDREN.

    (a) In General.--The Secretary is authorized to conduct, during 
each of fiscal years 2007 through 2011, demonstration projects (each in 
the section referred to as a ``demonstration project'') in accordance 
with this section under which up to 10 States (as defined for purposes 
of title XIX of the Social Security Act) are awarded grants, on a 
competitive basis, to test the effectiveness in improving or 
maintaining a child's functional level and cost-effectiveness of 
providing coverage of home and community-based alternatives to 
psychiatric residential treatment for children enrolled in the Medicaid 
program under title XIX of such Act.
    (b) Application of Terms and Conditions.--
            (1) In general.--Subject to the provisions of this section, 
        for the purposes of the demonstration projects, and only with 
        respect to children enrolled under such demonstration projects, 
        a psychiatric residential treatment facility (as defined in 
        section 483.352 of title 42 of the Code of Federal Regulations) 
        shall be deemed to be a facility specified in section 1915(c) 
        of the Social Security Act (42 U.S.C. 1396n(c)), and to be 
        included in each reference in such section 1915(c) to 
        hospitals, nursing facilities, and intermediate care facilities 
        for the mentally retarded.
            (2) State option to assure continuity of medicaid 
        coverage.--Upon the termination of a demonstration project 
        under this section, the State that conducted the project may 
        elect, only with respect to a child who is enrolled in such 
        project on the termination date, to continue to provide medical 
        assistance for coverage of home and community-based 
        alternatives to psychiatric residential treatment for the child 
        in accordance with section 1915(c) of the Social Security Act 
        (42 U.S.C. 1396n(c)), as modified through the application of 
        paragraph (1). Expenditures incurred for providing such medical 
        assistance shall be treated as a home and community-based 
        waiver program under section 1915(c) of the Social Security Act 
        (42 U.S.C. 1396n(c)) for purposes of payment under section 1903 
        of such Act (42 U.S.C. 1396b).
    (c) Terms of Demonstration Projects.--
            (1) In general.--Except as otherwise provided in this 
        section, a demonstration project shall be subject to the same 
        terms and conditions as apply to a waiver under section 1915(c) 
        of the Social Security Act (42 U.S.C. 1396n(c)), including the 
        waiver of certain requirements under the first sentence of 
        paragraph (3) of such section but not applying the second 
        sentence of such paragraph.
            (2) Budget neutrality.--In conducting the demonstration 
        projects under this section, the Secretary shall ensure that 
        the aggregate payments made by the Secretary under title XIX of 
        the Social Security Act (42 U.S.C. 1396 et seq.) do not exceed 
        the amount which the Secretary estimates would have been paid 
        under that title if the demonstration projects under this 
        section had not been implemented.
            (3) Evaluation.--The application for a demonstration 
        project shall include an assurance to provide for such interim 
        and final evaluations of the demonstration project by 
        independent third parties, and for such interim and final 
        reports to the Secretary, as the Secretary may require.
    (d) Payments to States; Limitations to Scope and Funding.--
            (1) In general.--Subject to paragraph (2), a demonstration 
        project approved by the Secretary under this section shall be 
        treated as a home and community-based waiver program under 
        section 1915(c) of the Social Security Act (42 U.S.C. 1396n(c)) 
        for purposes of payment under section 1903 of such Act (42 
        U.S.C. 1396b).
            (2) Limitation.--In no case may the amount of payments made 
        by the Secretary under this section for State demonstration 
        projects for a fiscal year exceed the amount available under 
        subsection (f)(2)(A) for such fiscal year.
    (e) Secretary's Evaluation and Report.--The Secretary shall conduct 
an interim and final evaluation of State demonstration projects under 
this section and shall report to the President and Congress the 
conclusions of such evaluations within 12 months of completing such 
evaluations.
    (f) Funding.--
            (1) In general.--For the purpose of carrying out this 
        section, there are appropriated, from amounts in the Treasury 
        not otherwise appropriated, for fiscal years 2007 through 2011, 
        a total of $218,000,000, of which--
                    (A) the amount specified in paragraph (2) shall be 
                available for each of fiscal years 2007 through 2011; 
                and
                    (B) a total of $1,000,000 shall be available to the 
                Secretary for the evaluations and report under 
                subsection (e).
            (2) Fiscal year limit.--
                    (A) In general.--For purposes of paragraph (1), the 
                amount specified in this paragraph for a fiscal year is 
                the amount specified in subparagraph (B) for the fiscal 
                year plus the difference, if any, between the total 
                amount available under this paragraph for prior fiscal 
                years and the total amount previously expended under 
                paragraph (1)(A) for such prior fiscal years.
                    (B) Fiscal year amounts.--The amount specified in 
                this subparagraph for--
                            (i) fiscal year 2007 is $21,000,000;
                            (ii) fiscal year 2008 is $37,000,000;
                            (iii) fiscal year 2009 is $49,000,000;
                            (iv) fiscal year 2010 is $53,000,000; and
                            (v) fiscal year 2011 is $57,000,000.

SEC. 6064. DEVELOPMENT AND SUPPORT OF FAMILY-TO-FAMILY HEALTH 
              INFORMATION CENTERS.

    Section 501 of the Social Security Act (42 U.S.C. 701) is amended 
by adding at the end the following new subsection:
    ``(c)(1)(A) For the purpose of enabling the Secretary (through 
grants, contracts, or otherwise) to provide for special projects of 
regional and national significance for the development and support of 
family-to-family health information centers described in paragraph (2), 
there is appropriated to the Secretary, out of any money in the 
Treasury not otherwise appropriated--
            ``(i) $3,000,000 for fiscal year 2007;
            ``(ii) $4,000,000 for fiscal year 2008; and
            ``(iii) $5,000,000 for fiscal year 2009.
    ``(B) Funds appropriated or authorized to be appropriated under 
subparagraph (A) shall--
            ``(i) be in addition to amounts appropriated under 
        subsection (a) and retained under section 502(a)(1) for the 
        purpose of carrying out activities described in subsection 
        (a)(2); and
            ``(ii) remain available until expended.
    ``(2) The family-to-family health information centers described in 
this paragraph are centers that--
            ``(A) assist families of children with disabilities or 
        special health care needs to make informed choices about health 
        care in order to promote good treatment decisions, cost-
        effectiveness, and improved health outcomes for such children;
            ``(B) provide information regarding the health care needs 
        of, and resources available for, such children;
            ``(C) identify successful health delivery models for such 
        children;
            ``(D) develop with representatives of health care 
        providers, managed care organizations, health care purchasers, 
        and appropriate State agencies, a model for collaboration 
        between families of such children and health professionals;
            ``(E) provide training and guidance regarding caring for 
        such children;
            ``(F) conduct outreach activities to the families of such 
        children, health professionals, schools, and other appropriate 
        entities and individuals; and
            ``(G) are staffed--
                    ``(i) by such families who have expertise in 
                Federal and State public and private health care 
                systems; and
                    ``(ii) by health professionals.
    ``(3) The Secretary shall develop family-to-family health 
information centers described in paragraph (2) in accordance with the 
following:
            ``(A) With respect to fiscal year 2007, such centers shall 
        be developed in not less than 25 States.
            ``(B) With respect to fiscal year 2008, such centers shall 
        be developed in not less than 40 States.
            ``(C) With respect to fiscal year 2009 and each fiscal year 
        thereafter, such centers shall be developed in all States.
    ``(4) The provisions of this title that are applicable to the funds 
made available to the Secretary under section 502(a)(1) apply in the 
same manner to funds made available to the Secretary under paragraph 
(1)(A).
    ``(5) For purposes of this subsection, the term `State' means each 
of the 50 States and the District of Columbia.''.

SEC. 6065. RESTORATION OF MEDICAID ELIGIBILITY FOR CERTAIN SSI 
              BENEFICIARIES.

    (a) In General.--Section 1902(a)(10)(A)(i)(II) of the Social 
Security Act (42 U.S.C. 1396a(a)(10)(A)(i)(II)) is amended--
            (1) by inserting ``(aa)'' after ``(II)'';
            (2) by striking ``) and'' and inserting ``and'';
            (3) by striking ``section or who are'' and inserting 
        ``section), (bb) who are''; and
            (4) by inserting before the comma at the end the following: 
        ``, or (cc) who are under 21 years of age and with respect to 
        whom supplemental security income benefits would be paid under 
        title XVI if subparagraphs (A) and (B) of section 1611(c)(7) 
        were applied without regard to the phrase `the first day of the 
        month following'''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
apply to medical assistance for items and services furnished on or 
after the date that is 1 year after the date of enactment of this Act.

    Subchapter B--Money Follows the Person Rebalancing Demonstration

SEC. 6071. MONEY FOLLOWS THE PERSON REBALANCING DEMONSTRATION.

    (a) Program Purpose and Authority.--The Secretary is authorized to 
award, on a competitive basis, grants to States in accordance with this 
section for demonstration projects (each in this section referred to as 
an ``MFP demonstration project'') designed to achieve the following 
objectives with respect to institutional and home and community-based 
long-term care services under State Medicaid programs:
            (1) Rebalancing.--Increase the use of home and community-
        based, rather than institutional, long-term care services.
            (2) Money follows the person.--Eliminate barriers or 
        mechanisms, whether in the State law, the State Medicaid plan, 
        the State budget, or otherwise, that prevent or restrict the 
        flexible use of Medicaid funds to enable Medicaid-eligible 
        individuals to receive support for appropriate and necessary 
        long-term services in the settings of their choice.
            (3) Continuity of service.--Increase the ability of the 
        State Medicaid program to assure continued provision of home 
        and community-based long-term care services to eligible 
        individuals who choose to transition from an institutional to a 
        community setting.
            (4) Quality assurance and quality improvement.--Ensure that 
        procedures are in place (at least comparable to those required 
        under the qualified HCB program) to provide quality assurance 
        for eligible individuals receiving Medicaid home and community-
        based long-term care services and to provide for continuous 
        quality improvement in such services.
    (b) Definitions.--For purposes of this section:
            (1) Home and community-based long-term care services.--The 
        term ``home and community-based long-term care services'' 
        means, with respect to a State Medicaid program, home and 
        community-based services (including home health and personal 
        care services) that are provided under the State's qualified 
        HCB program or that could be provided under such a program but 
        are otherwise provided under the Medicaid program.
            (2) Eligible individual.--The term ``eligible individual'' 
        means, with respect to an MFP demonstration project of a State, 
        an individual in the State--
                    (A) who, immediately before beginning participation 
                in the MFP demonstration project--
                            (i) resides (and has resided, for a period 
                        of not less than 6 months or for such longer 
                        minimum period, not to exceed 2 years, as may 
                        be specified by the State) in an inpatient 
                        facility;
                            (ii) is receiving Medicaid benefits for 
                        inpatient services furnished by such inpatient 
                        facility; and
                            (iii) with respect to whom a determination 
                        has been made that, but for the provision of 
                        home and community-based long-term care 
                        services, the individual would continue to 
                        require the level of care provided in an 
                        inpatient facility and, in any case in which 
                        the State applies a more stringent level of 
                        care standard as a result of implementing the 
                        State plan option permitted under section 
                        1915(i) of the Social Security Act, the 
                        individual must continue to require at least 
                        the level of care which had resulted in 
                        admission to the institution; and
                    (B) who resides in a qualified residence beginning 
                on the initial date of participation in the 
                demonstration project.
            (3) Inpatient facility.--The term ``inpatient facility'' 
        means a hospital, nursing facility, or intermediate care 
        facility for the mentally retarded. Such term includes an 
        institution for mental diseases, but only, with respect to a 
        State, to the extent medical assistance is available under the 
        State Medicaid plan for services provided by such institution.
            (4) Medicaid.--The term ``Medicaid'' means, with respect to 
        a State, the State program under title XIX of the Social 
        Security Act (including any waiver or demonstration under such 
        title or under section 1115 of such Act relating to such 
        title).
            (5) Qualified hcb program.--The term ``qualified HCB 
        program'' means a program providing home and community-based 
        long-term care services operating under Medicaid, whether or 
        not operating under waiver authority.
            (6) Qualified residence.--The term ``qualified residence'' 
        means, with respect to an eligible individual--
                    (A) a home owned or leased by the individual or the 
                individual's family member;
                    (B) an apartment with an individual lease, with 
                lockable access and egress, and which includes living, 
                sleeping, bathing, and cooking areas over which the 
                individual or the individual's family has domain and 
                control; and
                    (C) a residence, in a community-based residential 
                setting, in which no more than 4 unrelated individuals 
                reside.
            (7) Qualified expenditures.--The term ``qualified 
        expenditures'' means expenditures by the State under its MFP 
        demonstration project for home and community-based long-term 
        care services for an eligible individual participating in the 
        MFP demonstration project, but only with respect to services 
        furnished during the 12-month period beginning on the date the 
        individual is discharged from an inpatient facility referred to 
        in paragraph (2)(A)(i).
            (8) Self-directed services.--The term ``self-directed'' 
        means, with respect to home and community-based long-term care 
        services for an eligible individual, such services for the 
        individual which are planned and purchased under the direction 
        and control of such individual or the individual's authorized 
        representative (as defined by the Secretary), including the 
        amount, duration, scope, provider, and location of such 
        services, under the State Medicaid program consistent with the 
        following requirements:
                    (A) Assessment.--There is an assessment of the 
                needs, capabilities, and preferences of the individual 
                with respect to such services.
                    (B) Service plan.--Based on such assessment, there 
                is developed jointly with such individual or the 
                individual's authorized representative a plan for such 
                services for such individual that is approved by the 
                State and that--
                            (i) specifies those services, if any, which 
                        the individual or the individual's authorized 
                        representative would be responsible for 
                        directing;
                            (ii) identifies the methods by which the 
                        individual or the individual's authorized 
                        representative or an agency designated by an 
                        individual or representative will select, 
                        manage, and dismiss providers of such services;
                            (iii) specifies the role of family members 
                        and others whose participation is sought by the 
                        individual or the individual's authorized 
                        representative with respect to such services;
                            (iv) is developed through a person-centered 
                        process that--
                                    (I) is directed by the individual 
                                or the individual's authorized 
                                representative;
                                    (II) builds upon the individual's 
                                capacity to engage in activities that 
                                promote community life and that 
                                respects the individual's preferences, 
                                choices, and abilities; and
                                    (III) involves families, friends, 
                                and professionals as desired or 
                                required by the individual or the 
                                individual's authorized representative;
                            (v) includes appropriate risk management 
                        techniques that recognize the roles and sharing 
                        of responsibilities in obtaining services in a 
                        self-directed manner and assure the 
                        appropriateness of such plan based upon the 
                        resources and capabilities of the individual or 
                        the individual's authorized representative; and
                            (vi) may include an individualized budget 
                        which identifies the dollar value of the 
                        services and supports under the control and 
                        direction of the individual or the individual's 
                        authorized representative.
                    (C) Budget process.--With respect to individualized 
                budgets described in subparagraph (B)(vi), the State 
                application under subsection (c)--
                            (i) describes the method for calculating 
                        the dollar values in such budgets based on 
                        reliable costs and service utilization;
                            (ii) defines a process for making 
                        adjustments in such dollar values to reflect 
                        changes in individual assessments and service 
                        plans; and
                            (iii) provides a procedure to evaluate 
                        expenditures under such budgets.
            (9) State.--The term ``State'' has the meaning given such 
        term for purposes of title XIX of the Social Security Act.
    (c) State Application.--A State seeking approval of an MFP 
demonstration project shall submit to the Secretary, at such time and 
in such format as the Secretary requires, an application meeting the 
following requirements and containing such additional information, 
provisions, and assurances, as the Secretary may require:
            (1) Assurance of a public development process.--The 
        application contains an assurance that the State has engaged, 
        and will continue to engage, in a public process for the 
        design, development, and evaluation of the MFP demonstration 
        project that allows for input from eligible individuals, the 
        families of such individuals, authorized representatives of 
        such individuals, providers, and other interested parties.
            (2) Operation in connection with qualified hcb program to 
        assure continuity of services.--The State will conduct the MFP 
        demonstration project for eligible individuals in conjunction 
        with the operation of a qualified HCB program that is in 
        operation (or approved) in the State for such individuals in a 
        manner that assures continuity of Medicaid coverage for such 
        individuals so long as such individuals continue to be eligible 
        for medical assistance.
            (3) Demonstration project period.--The application shall 
        specify the period of the MFP demonstration project, which 
        shall include at least 2 consecutive fiscal years in the 5-
        fiscal-year period beginning with fiscal year 2007.
            (4) Service area.--The application shall specify the 
        service area or areas of the MFP demonstration project, which 
        may be a statewide area or 1 or more geographic areas of the 
        State.
            (5) Targeted groups and numbers of individuals served.--The 
        application shall specify--
                    (A) the target groups of eligible individuals to be 
                assisted to transition from an inpatient facility to a 
                qualified residence during each fiscal year of the MFP 
                demonstration project;
                    (B) the projected numbers of eligible individuals 
                in each targeted group of eligible individuals to be so 
                assisted during each such year; and
                    (C) the estimated total annual qualified 
                expenditures for each fiscal year of the MFP 
                demonstration project.
            (6) Individual choice, continuity of care.--The application 
        shall contain assurances that--
                    (A) each eligible individual or the individual's 
                authorized representative will be provided the 
                opportunity to make an informed choice regarding 
                whether to participate in the MFP demonstration 
                project;
                    (B) each eligible individual or the individual's 
                authorized representative will choose the qualified 
                residence in which the individual will reside and the 
                setting in which the individual will receive home and 
                community-based long-term care services;
                    (C) the State will continue to make available, so 
                long as the State operates its qualified HCB program 
                consistent with applicable requirements, home and 
                community-based long-term care services to each 
                individual who completes participation in the MFP 
                demonstration project for as long as the individual 
                remains eligible for medical assistance for such 
                services under such qualified HCB program (including 
                meeting a requirement relating to requiring a level of 
                care provided in an inpatient facility and continuing 
                to require such services, and, if the State applies a 
                more stringent level of care standard as a result of 
                implementing the State plan option permitted under 
                section 1915(i) of the Social Security Act, meeting the 
                requirement for at least the level of care which had 
                resulted in the individual's admission to the 
                institution).
            (7) Rebalancing.--The application shall--
                    (A) provide such information as the Secretary may 
                require concerning the dollar amounts of State Medicaid 
                expenditures for the fiscal year, immediately preceding 
                the first fiscal year of the State's MFP demonstration 
                project, for long-term care services and the percentage 
                of such expenditures that were for institutional long-
                term care services or were for home and community-based 
                long-term care services;
                    (B)(i) specify the methods to be used by the State 
                to increase, for each fiscal year during the MFP 
                demonstration project, the dollar amount of such total 
                expenditures for home and community-based long-term 
                care services and the percentage of such total 
                expenditures for long-term care services that are for 
                home and community-based long-term care services; and
                    (ii) describe the extent to which the MFP 
                demonstration project will contribute to accomplishment 
                of objectives described in subsection (a).
            (8) Money follows the person.--The application shall 
        describe the methods to be used by the State to eliminate any 
        legal, budgetary, or other barriers to flexibility in the 
        availability of Medicaid funds to pay for long-term care 
        services for eligible individuals participating in the project 
        in the appropriate settings of their choice, including costs to 
        transition from an institutional setting to a qualified 
        residence.
            (9) Maintenance of effort and cost-effectiveness.--The 
        application shall contain or be accompanied by such information 
        and assurances as may be required to satisfy the Secretary 
        that--
                    (A) total expenditures under the State Medicaid 
                program for home and community-based long-term care 
                services will not be less for any fiscal year during 
                the MFP demonstration project than for the greater of 
                such expenditures for--
                            (i) fiscal year 2005; or
                            (ii) any succeeding fiscal year before the 
                        first year of the MFP demonstration project; 
                        and
                    (B) in the case of a qualified HCB program 
                operating under a waiver under subsection (c) or (d) of 
                section 1915 of the Social Security Act (42 U.S.C. 
                1396n), but for the amount awarded under a grant under 
                this section, the State program would continue to meet 
                the cost-effectiveness requirements of subsection 
                (c)(2)(D) of such section or comparable requirements 
                under subsection (d)(5) of such section, respectively.
            (10) Waiver requests.--The application shall contain or be 
        accompanied by requests for any modification or adjustment of 
        waivers of Medicaid requirements described in subsection 
        (d)(3), including adjustments to the maximum numbers of 
        individuals included and package of benefits, including one-
        time transitional services, provided.
            (11) Quality assurance and quality improvement.--The 
        application shall include--
                    (A) a plan satisfactory to the Secretary for 
                quality assurance and quality improvement for home and 
                community-based long-term care services under the State 
                Medicaid program, including a plan to assure the health 
                and welfare of individuals participating in the MFP 
                demonstration project; and
                    (B) an assurance that the State will cooperate in 
                carrying out activities under subsection (f) to develop 
                and implement continuous quality assurance and quality 
                improvement systems for home and community-based long-
                term care services.
            (12) Optional program for self-directed services.--If the 
        State elects to provide for any home and community-based long-
        term care services as self-directed services (as defined in 
        subsection (b)(8)) under the MFP demonstration project, the 
        application shall provide the following:
                    (A) Meeting requirements.--A description of how the 
                project will meet the applicable requirements of such 
                subsection for the provision of self-directed services.
                    (B) Voluntary election.--A description of how 
                eligible individuals will be provided with the 
                opportunity to make an informed election to receive 
                self-directed services under the project and after the 
                end of the project.
                    (C) State support in service plan development.--
                Satisfactory assurances that the State will provide 
                support to eligible individuals who self-direct in 
                developing and implementing their service plans.
                    (D) Oversight of receipt of services.--Satisfactory 
                assurances that the State will provide oversight of 
                eligible individual's receipt of such self-directed 
                services, including steps to assure the quality of 
                services provided and that the provision of such 
                services are consistent with the service plan under 
                such subsection.
        Nothing in this section shall be construed as requiring a State 
        to make an election under the project to provide for home and 
        community-based long-term care services as self-directed 
        services, or as requiring an individual to elect to receive 
        self-directed services under the project.
            (13) Reports and evaluation.--The application shall provide 
        that--
                    (A) the State will furnish to the Secretary such 
                reports concerning the MFP demonstration project, on 
                such timetable, in such uniform format, and containing 
                such information as the Secretary may require, as will 
                allow for reliable comparisons of MFP demonstration 
                projects across States; and
                    (B) the State will participate in and cooperate 
                with the evaluation of the MFP demonstration project.
    (d) Secretary's Award of Competitive Grants.--
            (1) In general.--The Secretary shall award grants under 
        this section on a competitive basis to States selected from 
        among those with applications meeting the requirements of 
        subsection (c), in accordance with the provisions of this 
        subsection.
            (2) Selection and modification of state applications.--In 
        selecting State applications for the awarding of such a grant, 
        the Secretary--
                    (A) shall take into consideration the manner in 
                which, and extent to which, the State proposes to 
                achieve the objectives specified in subsection (a);
                    (B) shall seek to achieve an appropriate national 
                balance in the numbers of eligible individuals, within 
                different target groups of eligible individuals, who 
                are assisted to transition to qualified residences 
                under MFP demonstration projects, and in the geographic 
                distribution of States operating MFP demonstration 
                projects;
                    (C) shall give preference to State applications 
                proposing--
                            (i) to provide transition assistance to 
                        eligible individuals within multiple target 
                        groups; and
                            (ii) to provide eligible individuals with 
                        the opportunity to receive home and community-
                        based long-term care services as self-directed 
                        services, as defined in subsection (b)(8); and
                    (D) shall take such objectives into consideration 
                in setting the annual amounts of State grant awards 
                under this section.
            (3) Waiver authority.--The Secretary is authorized to waive 
        the following provisions of title XIX of the Social Security 
        Act, to the extent necessary to enable a State initiative to 
        meet the requirements and accomplish the purposes of this 
        section:
                    (A) Statewideness.--Section 1902(a)(1), in order to 
                permit implementation of a State initiative in a 
                selected area or areas of the State.
                    (B) Comparability.--Section 1902(a)(10)(B), in 
                order to permit a State initiative to assist a selected 
                category or categories of individuals described in 
                subsection (b)(2)(A).
                    (C) Income and resources eligibility.--Section 
                1902(a)(10)(C)(i)(III), in order to permit a State to 
                apply institutional eligibility rules to individuals 
                transitioning to community-based care.
                    (D) Provider agreements.--Section 1902(a)(27), in 
                order to permit a State to implement self-directed 
                services in a cost-effective manner.
            (4) Conditional approval of outyear grant.--In awarding 
        grants under this section, the Secretary shall condition the 
        grant for the second and any subsequent fiscal years of the 
        grant period on the following:
                    (A) Numerical benchmarks.--The State must 
                demonstrate to the satisfaction of the Secretary that 
                it is meeting numerical benchmarks specified in the 
                grant agreement for--
                            (i) increasing State Medicaid support for 
                        home and community-based long-term care 
                        services under subsection (c)(5); and
                            (ii) numbers of eligible individuals 
                        assisted to transition to qualified residences.
                    (B) Quality of care.--The State must demonstrate to 
                the satisfaction of the Secretary that it is meeting 
                the requirements under subsection (c)(11) to assure the 
                health and welfare of MFP demonstration project 
                participants.
    (e) Payments to States; Carryover of Unused Grant Amounts.--
            (1) Payments.--For each calendar quarter in a fiscal year 
        during the period a State is awarded a grant under subsection 
        (d), the Secretary shall pay to the State from its grant award 
        for such fiscal year an amount equal to the lesser of--
                    (A) the MFP-enhanced FMAP (as defined in paragraph 
                (5)) of the amount of qualified expenditures made 
                during such quarter; or
                    (B) the total amount remaining in such grant award 
                for such fiscal year (taking into account the 
                application of paragraph (2)).
            (2) Carryover of unused amounts.--Any portion of a State 
        grant award for a fiscal year under this section remaining at 
        the end of such fiscal year shall remain available to the State 
        for the next 4 fiscal years, subject to paragraph (3).
            (3) Reawarding of certain unused amounts.--In the case of a 
        State that the Secretary determines pursuant to subsection 
        (d)(4) has failed to meet the conditions for continuation of a 
        MFP demonstration project under this section in a succeeding 
        year or years, the Secretary shall rescind the grant awards for 
        such succeeding year or years, together with any unspent 
        portion of an award for prior years, and shall add such amounts 
        to the appropriation for the immediately succeeding fiscal year 
        for grants under this section.
            (4) Preventing duplication of payment.--The payment under a 
        MFP demonstration project with respect to qualified 
        expenditures shall be in lieu of any payment with respect to 
        such expenditures that could otherwise be paid under Medicaid, 
        including under section 1903(a) of the Social Security Act. 
        Nothing in the previous sentence shall be construed as 
        preventing the payment under Medicaid for such expenditures in 
        a grant year after amounts available to pay for such 
        expenditures under the MFP demonstration project have been 
        exhausted.
            (5) MFP-enhanced fmap.--For purposes of paragraph (1)(A), 
        the ``MFP-enhanced FMAP'', for a State for a fiscal year, is 
        equal to the Federal medical assistance percentage (as defined 
        in the first sentence of section 1905(b)) for the State 
        increased by a number of percentage points equal to 50 percent 
        of the number of percentage points by which (A) such Federal 
        medical assistance percentage for the State, is less than (B) 
        100 percent; but in no case shall the MFP-enhanced FMAP for a 
        State exceed 90 percent.
    (f) Quality Assurance and Improvement; Technical Assistance; 
Oversight.--
            (1) In general.--The Secretary, either directly or by grant 
        or contract, shall provide for technical assistance to, and 
        oversight of, States for purposes of upgrading quality 
        assurance and quality improvement systems under Medicaid home 
        and community-based waivers, including--
                    (A) dissemination of information on promising 
                practices;
                    (B) guidance on system design elements addressing 
                the unique needs of participating beneficiaries;
                    (C) ongoing consultation on quality, including 
                assistance in developing necessary tools, resources, 
                and monitoring systems; and
                    (D) guidance on remedying programmatic and systemic 
                problems.
            (2) Funding.--From the amounts appropriated under 
        subsection (h)(1) for the portion of fiscal year 2007 that 
        begins on January 1, 2007, and ends on September 30, 2007, and 
        for fiscal year 2008, not more than $2,400,000 shall be 
        available to the Secretary to carry out this subsection during 
        the period that begins on January 1, 2007, and ends on 
        September 30, 2011.
    (g) Research and Evaluation.--
            (1) In general.--The Secretary, directly or through grant 
        or contract, shall provide for research on, and a national 
        evaluation of, the program under this section, including 
        assistance to the Secretary in preparing the final report 
        required under paragraph (2). The evaluation shall include an 
        analysis of projected and actual savings related to the 
        transition of individuals to qualified residences in each State 
        conducting an MFP demonstration project.
            (2) Final report.--The Secretary shall make a final report 
        to the President and Congress, not later than September 30, 
        2011, reflecting the evaluation described in paragraph (1) and 
        providing findings and conclusions on the conduct and 
        effectiveness of MFP demonstration projects.
            (3) Funding.--From the amounts appropriated under 
        subsection (h)(1) for each of fiscal years 2008 through 2011, 
        not more than $1,100,000 per year shall be available to the 
        Secretary to carry out this subsection.
    (h) Appropriations.--
            (1) In general.--There are appropriated, from any funds in 
        the Treasury not otherwise appropriated, for grants to carry 
        out this section--
                    (A) $250,000,000 for the portion of fiscal year 
                2007 beginning on January 1, 2007, and ending on 
                September 30, 2007;
                    (B) $300,000,000 for fiscal year 2008;
                    (C) $350,000,000 for fiscal year 2009;
                    (D) $400,000,000 for fiscal year 2010; and
                    (E) $450,000,000 for fiscal year 2011.
            (2) Availability.--Amounts made available under paragraph 
        (1) for a fiscal year shall remain available for the awarding 
        of grants to States by not later than September 30, 2011.

                      Subchapter C--Miscellaneous

SEC. 6081. MEDICAID TRANSFORMATION GRANTS.

    (a) In General.--Section 1903 of the Social Security Act (42 U.S.C. 
1396b), as amended by sections 6037(a)(2) and 6043(b), is amended by 
adding at the end the following new subsection:
    ``(z) Medicaid Transformation Payments.--
            ``(1) In general.--In addition to the payments provided 
        under subsection (a), subject to paragraph (4), the Secretary 
        shall provide for payments to States for the adoption of 
        innovative methods to improve the effectiveness and efficiency 
        in providing medical assistance under this title.
            ``(2) Permissible uses of funds.--The following are 
        examples of innovative methods for which funds provided under 
        this subsection may be used:
                    ``(A) Methods for reducing patient error rates 
                through the implementation and use of electronic health 
                records, electronic clinical decision support tools, or 
                e-prescribing programs.
                    ``(B) Methods for improving rates of collection 
                from estates of amounts owed under this title.
                    ``(C) Methods for reducing waste, fraud, and abuse 
                under the program under this title, such as reducing 
                improper payment rates as measured by annual payment 
                error rate measurement (PERM) project rates.
                    ``(D) Implementation of a medication risk 
                management program as part of a drug use review program 
                under section 1927(g).
                    ``(E) Methods in reducing, in clinically 
                appropriate ways, expenditures under this title for 
                covered outpatient drugs, particularly in the 
                categories of greatest drug utilization, by increasing 
                the utilization of generic drugs through the use of 
                education programs and other incentives to promote 
                greater use of generic drugs.
                    ``(F) Methods for improving access to primary and 
                specialty physician care for the uninsured using 
                integrated university-based hospital and clinic 
                systems.
            ``(3) Application; terms and conditions.--
                    ``(A) In general.--No payments shall be made to a 
                State under this subsection unless the State applies to 
                the Secretary for such payments in a form, manner, and 
                time specified by the Secretary.
                    ``(B) Terms and conditions.--Such payments are made 
                under such terms and conditions consistent with this 
                subsection as the Secretary prescribes.
                    ``(C) Annual report.--Payment to a State under this 
                subsection is conditioned on the State submitting to 
                the Secretary an annual report on the programs 
                supported by such payment. Such report shall include 
                information on--
                            ``(i) the specific uses of such payment;
                            ``(ii) an assessment of quality 
                        improvements and clinical outcomes under such 
                        programs; and
                            ``(iii) estimates of cost savings resulting 
                        from such programs.
            ``(4) Funding.--
                    ``(A) Limitation on funds.--The total amount of 
                payments under this subsection shall be equal to, and 
                shall not exceed--
                            ``(i) $75,000,000 for fiscal year 2007; and
                            ``(ii) $75,000,000 for fiscal year 2008.
                This subsection constitutes budget authority in advance 
                of appropriations Acts and represents the obligation of 
                the Secretary to provide for the payment of amounts 
                provided under this subsection.
                    ``(B) Allocation of funds.--The Secretary shall 
                specify a method for allocating the funds made 
                available under this subsection among States. Such 
                method shall provide preference for States that design 
                programs that target health providers that treat 
                significant numbers of Medicaid beneficiaries. Such 
                method shall provide that not less than 25 percent of 
                such funds shall be allocated among States the 
                population of which (as determined according to data 
                collected by the United States Census Bureau) as of 
                July 1, 2004, was more than 105 percent of the 
                population of the respective State (as so determined) 
                as of April 1, 2000.
                    ``(C) Form and manner of payment.--Payment to a 
                State under this subsection shall be made in the same 
                manner as other payments under section 1903(a). There 
                is no requirement for State matching funds to receive 
                payments under this subsection.
            ``(5) Medication risk management program.--
                    ``(A) In general.--For purposes of this subsection, 
                the term `medication risk management program' means a 
                program for targeted beneficiaries that ensures that 
                covered outpatient drugs are appropriately used to 
                optimize therapeutic outcomes through improved 
                medication use and to reduce the risk of adverse 
                events.
                    ``(B) Elements.--Such program may include the 
                following elements:
                            ``(i) The use of established principles and 
                        standards for drug utilization review and best 
                        practices to analyze prescription drug claims 
                        of targeted beneficiaries and identify outlier 
                        physicians.
                            ``(ii) On an ongoing basis provide outlier 
                        physicians--
                                    ``(I) a comprehensive pharmacy 
                                claims history for each targeted 
                                beneficiary under their care;
                                    ``(II) information regarding the 
                                frequency and cost of relapses and 
                                hospitalizations of targeted 
                                beneficiaries under the physician's 
                                care; and
                                    ``(III) applicable best practice 
                                guidelines and empirical references.
                            ``(iii) Monitor outlier physician's 
                        prescribing, such as failure to refill, dosage 
                        strengths, and provide incentives and 
                        information to encourage the adoption of best 
                        clinical practices.
                    ``(C) Targeted beneficiaries.--For purposes of this 
                paragraph, the term `targeted beneficiaries' means 
                Medicaid eligible beneficiaries who are identified as 
                having high prescription drug costs and medical costs, 
                such as individuals with behavioral disorders or 
                multiple chronic diseases who are taking multiple 
                medications.''.

SEC. 6082. HEALTH OPPORTUNITY ACCOUNTS.

    Title XIX of the Social Security Act, as amended by sections 6035 
and 6044, is amended--
            (1) by redesignating section 1938 as section 1939; and
            (2) by inserting after section 1937 the following new 
        section:

                     ``health opportunity accounts

    ``Sec. 1938. (a) Authority.--
            ``(1) In general.--Notwithstanding any other provision of 
        this title, the Secretary shall establish a demonstration 
        program under which States may provide under their State plans 
        under this title (including such a plan operating under a 
        statewide waiver under section 1115) in accordance with this 
        section for the provision of alternative benefits consistent 
        with subsection (c) for eligible population groups in one or 
        more geographic areas of the State specified by the State. An 
        amendment under the previous sentence is referred to in this 
        section as a `State demonstration program'.
            ``(2) Initial demonstration.--
                    ``(A) In general.--The demonstration program under 
                this section shall begin on January 1, 2007. During the 
                first 5 years of such program, the Secretary shall not 
                approve more than 10 States to conduct demonstration 
                programs under this section, with each State 
                demonstration program covering 1 or more geographic 
                areas specified by the State. After such 5-year 
                period--
                            ``(i) unless the Secretary finds, taking 
                        into account cost-effectiveness, quality of 
                        care, and other criteria that the Secretary 
                        specifies, that a State demonstration program 
                        previously implemented has been unsuccessful, 
                        such a demonstration program may be extended or 
                        made permanent in the State; and
                            ``(ii) unless the Secretary finds, taking 
                        into account cost-effectiveness, quality of 
                        care, and other criteria that the Secretary 
                        specifies, that all State demonstration 
                        programs previously implemented were 
                        unsuccessful, other States may implement State 
                        demonstration programs.
                    ``(B) GAO report.--
                            ``(i) In general.--Not later than 3 months 
                        after the end of the 5-year period described in 
                        subparagraph (A), the Comptroller General of 
                        the United States shall submit a report to 
                        Congress evaluating the demonstration programs 
                        conducted under this section during such 
                        period.
                            ``(ii) Appropriation.--Out of any funds in 
                        the Treasury not otherwise appropriated, there 
                        is appropriated to the Comptroller General of 
                        the United States, $550,000 for the period of 
                        fiscal years 2007 through 2010 to carry out 
                        clause (i).
            ``(3) Approval.--The Secretary shall not approve a State 
        demonstration program under paragraph (1) unless the program 
        includes the following:
                    ``(A) Creating patient awareness of the high cost 
                of medical care.
                    ``(B) Providing incentives to patients to seek 
                preventive care services.
                    ``(C) Reducing inappropriate use of health care 
                services.
                    ``(D) Enabling patients to take responsibility for 
                health outcomes.
                    ``(E) Providing enrollment counselors and ongoing 
                education activities.
                    ``(F) Providing transactions involving health 
                opportunity accounts to be conducted electronically and 
                without cash.
                    ``(G) Providing access to negotiated provider 
                payment rates consistent with this section.
        Nothing in this section shall be construed as preventing a 
        State demonstration program from providing incentives for 
        patients obtaining appropriate preventive care (as defined for 
        purposes of section 223(c)(2)(C) of the Internal Revenue Code 
        of 1986), such as additional account contributions for an 
        individual demonstrating healthy prevention practices.
            ``(4) No requirement for statewideness.--Nothing in this 
        section or any other provision of law shall be construed to 
        require that a State must provide for the implementation of a 
        State demonstration program on a Statewide basis.
    ``(b) Eligible Population Groups.--
            ``(1) In general.--A State demonstration program under this 
        section shall specify the eligible population groups consistent 
        with paragraphs (2) and (3).
            ``(2) Eligibility limitations during initial demonstration 
        period.--During the initial 5 years of the demonstration 
        program under this section, a State demonstration program shall 
        not apply to any of the following individuals:
                    ``(A) Individuals who are 65 years of age or older.
                    ``(B) Individuals who are disabled, regardless of 
                whether or not their eligibility for medical assistance 
                under this title is based on such disability.
                    ``(C) Individuals who are eligible for medical 
                assistance under this title only because they are (or 
                were within the previous 60 days) pregnant.
                    ``(D) Individuals who have been eligible for 
                medical assistance for a continuous period of less than 
                3 months.
            ``(3) Additional limitations.--A State demonstration 
        program shall not apply to any individual within a category of 
        individuals described in section 1937(a)(2)(B).
            ``(4) Limitations.--
                    ``(A) State option.--This subsection shall not be 
                construed as preventing a State from further limiting 
                eligibility.
                    ``(B) On enrollees in medicaid managed care 
                organizations.--Insofar as the State provides for 
                eligibility of individuals who are enrolled in Medicaid 
                managed care organizations, such individuals may 
                participate in the State demonstration program only if 
                the State provides assurances satisfactory to the 
                Secretary that the following conditions are met with 
                respect to any such organization:
                            ``(i) In no case may the number of such 
                        individuals enrolled in the organization who 
                        participate in the program exceed 5 percent of 
                        the total number of individuals enrolled in 
                        such organization.
                            ``(ii) The proportion of enrollees in the 
                        organization who so participate is not 
                        significantly disproportionate to the 
                        proportion of such enrollees in other such 
                        organizations who participate.
                            ``(iii) The State has provided for an 
                        appropriate adjustment in the per capita 
                        payments to the organization to account for 
                        such participation, taking into account 
                        differences in the likely use of health 
                        services between enrollees who so participate 
                        and enrollees who do not so participate.
            ``(5) Voluntary participation.--An eligible individual 
        shall be enrolled in a State demonstration program only if the 
        individual voluntarily enrolls. Except in such hardship cases 
        as the Secretary shall specify, such an enrollment shall be 
        effective for a period of 12 months, but may be extended for 
        additional periods of 12 months each with the consent of the 
        individual.
            ``(6) 1-year moratorium for reenrollment.--An eligible 
        individual who, for any reason, is disenrolled from a State 
        demonstration program conducted under this section shall not be 
        permitted to reenroll in such program before the end of the 1-
        year period that begins on the effective date of such 
        disenrollment.
    ``(c) Alternative Benefits.--
            ``(1) In general.--The alternative benefits provided under 
        this section shall consist, consistent with this subsection, of 
        at least--
                    ``(A) coverage for medical expenses in a year for 
                items and services for which benefits are otherwise 
                provided under this title after an annual deductible 
                described in paragraph (2) has been met; and
                    ``(B) contribution into a health opportunity 
                account.
        Nothing in subparagraph (A) shall be construed as preventing a 
        State from providing for coverage of preventive care (referred 
        to in subsection (a)(3)) within the alternative benefits 
        without regard to the annual deductible.
            ``(2) Annual deductible.--The amount of the annual 
        deductible described in paragraph (1)(A) shall be at least 100 
        percent, but no more than 110 percent, of the annualized amount 
        of contributions to the health opportunity account under 
        subsection (d)(2)(A)(i), determined without regard to any 
        limitation described in subsection (d)(2)(C)(i)(II).
            ``(3) Access to negotiated provider payment rates.--
                    ``(A) Fee-for-service enrollees.--In the case of an 
                individual who is participating in a State 
                demonstration program and who is not enrolled with a 
                Medicaid managed care organization, the State shall 
                provide that the individual may obtain demonstration 
                program Medicaid services from--
                            ``(i) any participating provider under this 
                        title at the same payment rates that would be 
                        applicable to such services if the deductible 
                        described in paragraph (1)(A) was not 
                        applicable; or
                            ``(ii) any other provider at payment rates 
                        that do not exceed 125 percent of the payment 
                        rate that would be applicable to such services 
                        furnished by a participating provider under 
                        this title if the deductible described in 
                        paragraph (1)(A) was not applicable.
                    ``(B) Treatment under medicaid managed care 
                plans.--In the case of an individual who is 
                participating in a State demonstration program and is 
                enrolled with a Medicaid managed care organization, the 
                State shall enter into an arrangement with the 
                organization under which the individual may obtain 
                demonstration program Medicaid services from any 
                provider described in clause (ii) of subparagraph (A) 
                at payment rates that do not exceed the payment rates 
                that may be imposed under that clause.
                    ``(C) Computation.--The payment rates described in 
                subparagraphs (A) and (B) shall be computed without 
                regard to any cost sharing that would be otherwise 
                applicable under sections 1916 and 1916A.
                    ``(D) Definitions.--For purposes of this paragraph:
                            ``(i) The term `demonstration program 
                        Medicaid services' means, with respect to an 
                        individual participating in a State 
                        demonstration program, services for which the 
                        individual would be provided medical assistance 
                        under this title but for the application of the 
                        deductible described in paragraph (1)(A).
                            ``(ii) The term `participating provider' 
                        means--
                                    ``(I) with respect to an individual 
                                described in subparagraph (A), a health 
                                care provider that has entered into a 
                                participation agreement with the State 
                                for the provision of services to 
                                individuals entitled to benefits under 
                                the State plan; or
                                    ``(II) with respect to an 
                                individual described in subparagraph 
                                (B) who is enrolled in a Medicaid 
                                managed care organization, a health 
                                care provider that has entered into an 
                                arrangement for the provision of 
                                services to enrollees of the 
                                organization under this title.
            ``(4) No effect on subsequent benefits.--Except as provided 
        under paragraphs (1) and (2), alternative benefits for an 
        eligible individual shall consist of the benefits otherwise 
        provided to the individual, including cost sharing relating to 
        such benefits.
            ``(5) Overriding cost sharing and comparability 
        requirements for alternative benefits.--The provisions of this 
        title relating to cost sharing for benefits (including sections 
        1916 and 1916A) shall not apply with respect to benefits to 
        which the annual deductible under paragraph (1)(A) applies. The 
        provisions of section 1902(a)(10)(B) (relating to 
        comparability) shall not apply with respect to the provision of 
        alternative benefits (as described in this subsection).
            ``(6) Treatment as medical assistance.--Subject to 
        subparagraphs (D) and (E) of subsection (d)(2), payments for 
        alternative benefits under this section (including 
        contributions into a health opportunity account) shall be 
        treated as medical assistance for purposes of section 1903(a).
            ``(7) Use of tiered deductible and cost sharing.--
                    ``(A) In general.--A State--
                            ``(i) may vary the amount of the annual 
                        deductible applied under paragraph (1)(A) based 
                        on the income of the family involved so long as 
                        it does not favor families with higher income 
                        over those with lower income; and
                            ``(ii) may vary the amount of the maximum 
                        out-of-pocket cost sharing (as defined in 
                        subparagraph (B)) based on the income of the 
                        family involved so long as it does not favor 
                        families with higher income over those with 
                        lower income.
                    ``(B) Maximum out-of-pocket cost sharing.--For 
                purposes of subparagraph (A)(ii), the term `maximum 
                out-of-pocket cost sharing' means, for an individual or 
                family, the amount by which the annual deductible level 
                applied under paragraph (1)(A) to the individual or 
                family exceeds the balance in the health opportunity 
                account for the individual or family.
            ``(8) Contributions by employers.--Nothing in this section 
        shall be construed as preventing an employer from providing 
        health benefits coverage consisting of the coverage described 
        in paragraph (1)(A) to individuals who are provided alternative 
        benefits under this section.
    ``(d) Health Opportunity Account.--
            ``(1) In general.--For purposes of this section, the term 
        `health opportunity account' means an account that meets the 
        requirements of this subsection.
            ``(2) Contributions.--
                    ``(A) In general.--No contribution may be made into 
                a health opportunity account except--
                            ``(i) contributions by the State under this 
                        title; and
                            ``(ii) contributions by other persons and 
                        entities, such as charitable organizations, as 
                        permitted under section 1903(w).
                    ``(B) State contribution.--A State shall specify 
                the contribution amount that shall be deposited under 
                subparagraph (A)(i) into a health opportunity account.
                    ``(C) Limitation on annual state contribution 
                provided and permitting imposition of maximum account 
                balance.--
                            ``(i) In general.--A State--
                                    ``(I) may impose limitations on the 
                                maximum contributions that may be 
                                deposited under subparagraph (A)(i) 
                                into a health opportunity account in a 
                                year;
                                    ``(II) may limit contributions into 
                                such an account once the balance in the 
                                account reaches a level specified by 
                                the State; and
                                    ``(III) subject to clauses (ii) and 
                                (iii) and subparagraph (D)(i), may not 
                                provide contributions described in 
                                subparagraph (A)(i) to a health 
                                opportunity account on behalf of an 
                                individual or family to the extent the 
                                amount of such contributions (including 
                                both State and Federal shares) exceeds, 
                                on an annual basis, $2,500 for each 
                                individual (or family member) who is an 
                                adult and $1,000 for each individual 
                                (or family member) who is a child.
                            ``(ii) Indexing of dollar limitations.--For 
                        each year after 2006, the dollar amounts 
                        specified in clause (i)(III) shall be annually 
                        increased by the Secretary by a percentage that 
                        reflects the annual percentage increase in the 
                        medical care component of the consumer price 
                        index for all urban consumers.
                            ``(iii) Budget neutral adjustment.--A State 
                        may provide for dollar limitations in excess of 
                        those specified in clause (i)(III) (as 
                        increased under clause (ii)) for specified 
                        individuals if the State provides assurances 
                        satisfactory to the Secretary that 
                        contributions otherwise made to other 
                        individuals will be reduced in a manner so as 
                        to provide for aggregate contributions that do 
                        not exceed the aggregate contributions that 
                        would otherwise be permitted under this 
                        subparagraph.
                    ``(D) Limitations on federal matching.--
                            ``(i) State contribution.--A State may 
                        contribute under subparagraph (A)(i) amounts to 
                        a health opportunity account in excess of the 
                        limitations provided under subparagraph 
                        (C)(i)(III), but no Federal financial 
                        participation shall be provided under section 
                        1903(a) with respect to contributions in excess 
                        of such limitations.
                            ``(ii) No ffp for private contributions.--
                        No Federal financial participation shall be 
                        provided under section 1903(a) with respect to 
                        any contributions described in subparagraph 
                        (A)(ii) to a health opportunity account.
                    ``(E) Application of different matching rates.--The 
                Secretary shall provide a method under which, for 
                expenditures made from a health opportunity account for 
                medical care for which the Federal matching rate under 
                section 1903(a) exceeds the Federal medical assistance 
                percentage, a State may obtain payment under such 
                section at such higher matching rate for such 
                expenditures.
            ``(3) Use.--
                    ``(A) General uses.--
                            ``(i) In general.--Subject to the 
                        succeeding provisions of this paragraph, 
                        amounts in a health opportunity account may be 
                        used for payment of such health care 
                        expenditures as the State specifies.
                            ``(ii) General limitation.--Subject to 
                        subparagraph (B)(ii), in no case shall such 
                        account be used for payment for health care 
                        expenditures that are not payment of medical 
                        care (as defined by section 213(d) of the 
                        Internal Revenue Code of 1986).
                            ``(iii) State restrictions.--In applying 
                        clause (i), a State may restrict payment for--
                                    ``(I) providers of items and 
                                services to providers that are licensed 
                                or otherwise authorized under State law 
                                to provide the item or service and may 
                                deny payment for such a provider on the 
                                basis that the provider has been found, 
                                whether with respect to this title or 
                                any other health benefit program, to 
                                have failed to meet quality standards 
                                or to have committed 1 or more acts of 
                                fraud or abuse; and
                                    ``(II) items and services insofar 
                                as the State finds they are not 
                                medically appropriate or necessary.
                            ``(iv) Electronic withdrawals.--The State 
                        demonstration program shall provide for a 
                        method whereby withdrawals may be made from the 
                        account for such purposes using an electronic 
                        system and shall not permit withdrawals from 
                        the account in cash.
                    ``(B) Maintenance of health opportunity account 
                after becoming ineligible for public benefit.--
                            ``(i) In general.--Notwithstanding any 
                        other provision of law, if an account holder of 
                        a health opportunity account becomes ineligible 
                        for benefits under this title because of an 
                        increase in income or assets--
                                    ``(I) no additional contribution 
                                shall be made into the account under 
                                paragraph (2)(A)(i);
                                    ``(II) subject to clause (iii), the 
                                balance in the account shall be reduced 
                                by 25 percent; and
                                    ``(III) subject to the succeeding 
                                provisions of this subparagraph, the 
                                account shall remain available to the 
                                account holder for 3 years after the 
                                date on which the individual becomes 
                                ineligible for such benefits for 
                                withdrawals under the same terms and 
                                conditions as if the account holder 
                                remained eligible for such benefits, 
                                and such withdrawals shall be treated 
                                as medical assistance in accordance 
                                with subsection (c)(6).
                            ``(ii) Special rules.--Withdrawals under 
                        this subparagraph from an account--
                                    ``(I) shall be available for the 
                                purchase of health insurance coverage; 
                                and
                                    ``(II) may, subject to clause (iv), 
                                be made available (at the option of the 
                                State) for such additional expenditures 
                                (such as job training and tuition 
                                expenses) specified by the State (and 
                                approved by the Secretary) as the State 
                                may specify.
                            ``(iii) Exception from 25 percent savings 
                        to government for private contributions.--
                        Clause (i)(II) shall not apply to the portion 
                        of the account that is attributable to 
                        contributions described in paragraph 
                        (2)(A)(ii). For purposes of accounting for such 
                        contributions, withdrawals from a health 
                        opportunity account shall first be attributed 
                        to contributions described in paragraph 
                        (2)(A)(i).
                            ``(iv) Condition for non-health 
                        withdrawals.--No withdrawal may be made from an 
                        account under clause (ii)(II) unless the 
                        account holder has participated in the program 
                        under this section for at least 1 year.
                            ``(v) No requirement for continuation of 
                        coverage.--An account holder of a health 
                        opportunity account, after becoming ineligible 
                        for medical assistance under this title, is not 
                        required to purchase high-deductible or other 
                        insurance as a condition of maintaining or 
                        using the account.
            ``(4) Administration.--A State may coordinate 
        administration of health opportunity accounts through the use 
        of a third party administrator and reasonable expenditures for 
        the use of such administrator shall be reimbursable to the 
        State in the same manner as other administrative expenditures 
        under section 1903(a)(7).
            ``(5) Treatment.--Amounts in, or contributed to, a health 
        opportunity account shall not be counted as income or assets 
        for purposes of determining eligibility for benefits under this 
        title.
            ``(6) Unauthorized withdrawals.--A State may establish 
        procedures--
                    ``(A) to penalize or remove an individual from the 
                health opportunity account based on nonqualified 
                withdrawals by the individual from such an account; and
                    ``(B) to recoup costs that derive from such 
                nonqualified withdrawals.''.

SEC. 6083. STATE OPTION TO ESTABLISH NON-EMERGENCY MEDICAL 
              TRANSPORTATION PROGRAM.

    (a) In General.--Section 1902(a) of the Social Security Act (42 
U.S.C. 1396a(a)), as amended by sections 6033(a) and 6035(b), is 
amended--
            (1) in paragraph (68), by striking ``and'' at the end;
            (2) in paragraph (69) by striking the period at the end and 
        inserting ``; and''; and
            (3) by inserting after paragraph (69) the following:
            ``(70) at the option of the State and notwithstanding 
        paragraphs (1), (10)(B), and (23), provide for the 
        establishment of a non-emergency medical transportation 
        brokerage program in order to more cost-effectively provide 
        transportation for individuals eligible for medical assistance 
        under the State plan who need access to medical care or 
        services and have no other means of transportation which--
                    ``(A) may include a wheelchair van, taxi, stretcher 
                car, bus passes and tickets, secured transportation, 
                and such other transportation as the Secretary 
                determines appropriate; and
                    ``(B) may be conducted under contract with a broker 
                who--
                            ``(i) is selected through a competitive 
                        bidding process based on the State's evaluation 
                        of the broker's experience, performance, 
                        references, resources, qualifications, and 
                        costs;
                            ``(ii) has oversight procedures to monitor 
                        beneficiary access and complaints and ensure 
                        that transport personnel are licensed, 
                        qualified, competent, and courteous;
                            ``(iii) is subject to regular auditing and 
                        oversight by the State in order to ensure the 
                        quality of the transportation services provided 
                        and the adequacy of beneficiary access to 
                        medical care and services; and
                            ``(iv) complies with such requirements 
                        related to prohibitions on referrals and 
                        conflict of interest as the Secretary shall 
                        establish (based on the prohibitions on 
                        physician referrals under section 1877 and such 
                        other prohibitions and requirements as the 
                        Secretary determines to be appropriate).''.
    (b) Effective Date.--The amendments made by subsection (a) take 
effect on the date of the enactment of this Act.

SEC. 6084. EXTENSION OF TRANSITIONAL MEDICAL ASSISTANCE (TMA) AND 
              ABSTINENCE EDUCATION PROGRAM.

    Effective as if enacted on December 31, 2005, activities authorized 
by sections 510 and 1925 of the Social Security Act shall continue 
through December 31, 2006, in the manner authorized for fiscal year 
2005, notwithstanding section 1902(e)(1)(A) of such Act, and out of any 
money in the Treasury of the United States not otherwise appropriated, 
there are hereby appropriated such sums as may be necessary for such 
purpose. Grants and payments may be made pursuant to this authority 
through the first quarter of fiscal year 2007 at the level provided for 
such activities through the first quarter of fiscal year 2006.

SEC. 6085. EMERGENCY SERVICES FURNISHED BY NON-CONTRACT PROVIDERS FOR 
              MEDICAID MANAGED CARE ENROLLEES.

    (a) In General.--Section 1932(b)(2) of the Social Security Act (42 
U.S.C. 1396u-2(b)(2)) is amended by adding at the end the following new 
subparagraph:
                    ``(D) Emergency services furnished by non-contract 
                providers.--Any provider of emergency services that 
                does not have in effect a contract with a Medicaid 
                managed care entity that establishes payment amounts 
                for services furnished to a beneficiary enrolled in the 
                entity's Medicaid managed care plan must accept as 
                payment in full no more than the amounts (less any 
                payments for indirect costs of medical education and 
                direct costs of graduate medical education) that it 
                could collect if the beneficiary received medical 
                assistance under this title other than through 
                enrollment in such an entity. In a State where rates 
                paid to hospitals under the State plan are negotiated 
                by contract and not publicly released, the payment 
                amount applicable under this subparagraph shall be the 
                average contract rate that would apply under the State 
                plan for general acute care hospitals or the average 
                contract rate that would apply under such plan for 
                tertiary hospitals.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
take effect on January 1, 2007.

SEC. 6086. EXPANDED ACCESS TO HOME AND COMMUNITY-BASED SERVICES FOR THE 
              ELDERLY AND DISABLED.

    (a) Home and Community-Based Services as an Optional Benefit for 
Elderly and Disabled Individuals.--Section 1915 of the Social Security 
Act (42 U.S.C. 1396n) is amended by adding at the end the following new 
subsection:
    ``(i) State Plan Amendment Option To Provide Home and Community-
Based Services for Elderly and Disabled Individuals.--
            ``(1) In general.--Subject to the succeeding provisions of 
        this subsection, a State may provide through a State plan 
        amendment for the provision of medical assistance for home and 
        community-based services (within the scope of services 
        described in paragraph (4)(B) of subsection (c) for which the 
        Secretary has the authority to approve a waiver and not 
        including room and board or such other services requested by 
        the State as the Secretary may approve) for individuals 
        eligible for medical assistance under the State plan whose 
        income does not exceed 150 percent of the poverty line (as 
        defined in section 2110(c)(5)), without determining that but 
        for the provision of such services the individuals would 
        require the level of care provided in a hospital or a nursing 
        facility or intermediate care facility for the mentally 
        retarded, but only if the State meets the following 
        requirements:
                    ``(A) Needs-based criteria for eligibility for, and 
                receipt of, home and community-based services.--The 
                State establishes needs-based criteria for determining 
                an individual's eligibility under the State plan for 
                medical assistance for such home and community-based 
                services, and if the individual is eligible for such 
                services, the specific home and community-based 
                services that the individual will receive.
                    ``(B) Establishment of more stringent needs-based 
                eligibility criteria for institutionalized care.--The 
                State establishes needs-based criteria for determining 
                whether an individual requires the level of care 
                provided in a hospital, a nursing facility, or an 
                intermediate care facility for the mentally retarded 
                under the State plan or under any waiver of such plan 
                that are more stringent than the needs-based criteria 
                established under subparagraph (A) for determining 
                eligibility for home and community-based services.
                    ``(C) Projection of number of individuals to be 
                provided home and community-based services.--
                            ``(i) In general.--The State submits to the 
                        Secretary, in such form and manner, and upon 
                        such frequency as the Secretary shall specify, 
                        the projected number of individuals to be 
                        provided home and community-based services.
                            ``(ii) Authority to limit number of 
                        eligible individuals.--A State may limit the 
                        number of individuals who are eligible for such 
                        services and may establish waiting lists for 
                        the receipt of such services.
                    ``(D) Criteria based on individual assessment.--
                            ``(i) In general.--The criteria established 
                        by the State for purposes of subparagraphs (A) 
                        and (B) requires an assessment of an 
                        individual's support needs and capabilities, 
                        and may take into account the inability of the 
                        individual to perform 2 or more activities of 
                        daily living (as defined in section 
                        7702B(c)(2)(B) of the Internal Revenue Code of 
                        1986) or the need for significant assistance to 
                        perform such activities, and such other risk 
                        factors as the State determines to be 
                        appropriate.
                            ``(ii) Adjustment authority.--The State 
                        plan amendment provides the State with the 
                        option to modify the criteria established under 
                        subparagraph (A) (without having to obtain 
                        prior approval from the Secretary) in the event 
                        that the enrollment of individuals eligible for 
                        home and community-based services exceeds the 
                        projected enrollment submitted for purposes of 
                        subparagraph (C), but only if--
                                    ``(I) the State provides at least 
                                60 days notice to the Secretary and the 
                                public of the proposed modification;
                                    ``(II) the State deems an 
                                individual receiving home and 
                                community-based services on the basis 
                                of the most recent version of the 
                                criteria in effect prior to the 
                                effective date of the modification to 
                                be eligible for such services for a 
                                period of at least 12 months beginning 
                                on the date the individual first 
                                received medical assistance for such 
                                services; and
                                    ``(III) after the effective date of 
                                such modification, the State, at a 
                                minimum, applies the criteria for 
                                determining whether an individual 
                                requires the level of care provided in 
                                a hospital, a nursing facility, or an 
                                intermediate care facility for the 
                                mentally retarded under the State plan 
                                or under any waiver of such plan which 
                                applied prior to the application of the 
                                more stringent criteria developed under 
                                subparagraph (B).
                    ``(E) Independent evaluation and assessment.--
                            ``(i) Eligibility determination.--The State 
                        uses an independent evaluation for making the 
                        determinations described in subparagraphs (A) 
                        and (B).
                            ``(ii) Assessment.--In the case of an 
                        individual who is determined to be eligible for 
                        home and community-based services, the State 
                        uses an independent assessment, based on the 
                        needs of the individual to--
                                    ``(I) determine a necessary level 
                                of services and supports to be 
                                provided, consistent with an 
                                individual's physical and mental 
                                capacity;
                                    ``(II) prevent the provision of 
                                unnecessary or inappropriate care; and
                                    ``(III) establish an individualized 
                                care plan for the individual in 
                                accordance with subparagraph (G).
                    ``(F) Assessment.--The independent assessment 
                required under subparagraph (E)(ii) shall include the 
                following:
                            ``(i) An objective evaluation of an 
                        individual's inability to perform 2 or more 
                        activities of daily living (as defined in 
                        section 7702B(c)(2)(B) of the Internal Revenue 
                        Code of 1986) or the need for significant 
                        assistance to perform such activities.
                            ``(ii) A face-to-face evaluation of the 
                        individual by an individual trained in the 
                        assessment and evaluation of individuals whose 
                        physical or mental conditions trigger a 
                        potential need for home and community-based 
                        services.
                            ``(iii) Where appropriate, consultation 
                        with the individual's family, spouse, guardian, 
                        or other responsible individual.
                            ``(iv) Consultation with appropriate 
                        treating and consulting health and support 
                        professionals caring for the individual.
                            ``(v) An examination of the individual's 
                        relevant history, medical records, and care and 
                        support needs, guided by best practices and 
                        research on effective strategies that result in 
                        improved health and quality of life outcomes.
                            ``(vi) If the State offers individuals the 
                        option to self-direct the purchase of, or 
                        control the receipt of, home and community-
                        based service, an evaluation of the ability of 
                        the individual or the individual's 
                        representative to self-direct the purchase of, 
                        or control the receipt of, such services if the 
                        individual so elects.
                    ``(G) Individualized care plan.--
                            ``(i) In general.--In the case of an 
                        individual who is determined to be eligible for 
                        home and community-based services, the State 
                        uses the independent assessment required under 
                        subparagraph (E)(ii) to establish a written 
                        individualized care plan for the individual.
                            ``(ii) Plan requirements.--The State 
                        ensures that the individualized care plan for 
                        an individual--
                                    ``(I) is developed--
                                            ``(aa) in consultation with 
                                        the individual, the 
                                        individual's treating 
                                        physician, health care or 
                                        support professional, or other 
                                        appropriate individuals, as 
                                        defined by the State, and, 
                                        where appropriate the 
                                        individual's family, caregiver, 
                                        or representative; and
                                            ``(bb) taking into account 
                                        the extent of, and need for, 
                                        any family or other supports 
                                        for the individual;
                                    ``(II) identifies the necessary 
                                home and community-based services to be 
                                furnished to the individual (or, if the 
                                individual elects to self-direct the 
                                purchase of, or control the receipt of, 
                                such services, funded for the 
                                individual); and
                                    ``(III) is reviewed at least 
                                annually and as needed when there is a 
                                significant change in the individual's 
                                circumstances.
                            ``(iii) State option to offer election for 
                        self-directed services.--
                                    ``(I) Individual choice.--At the 
                                option of the State, the State may 
                                allow an individual or the individual's 
                                representative to elect to receive 
                                self-directed home and community-based 
                                services in a manner which gives them 
                                the most control over such services 
                                consistent with the individual's 
                                abilities and the requirements of 
                                subclauses (II) and (III).
                                    ``(II) Self-directed services.--The 
                                term `self-directed' means, with 
                                respect to the home and community-based 
                                services offered under the State plan 
                                amendment, such services for the 
                                individual which are planned and 
                                purchased under the direction and 
                                control of such individual or the 
                                individual's authorized representative, 
                                including the amount, duration, scope, 
                                provider, and location of such 
                                services, under the State plan 
                                consistent with the following 
                                requirements:
                                            ``(aa) Assessment.--There 
                                        is an assessment of the needs, 
                                        capabilities, and preferences 
                                        of the individual with respect 
                                        to such services.
                                            ``(bb) Service plan.--Based 
                                        on such assessment, there is 
                                        developed jointly with such 
                                        individual or the individual's 
                                        authorized representative a 
                                        plan for such services for such 
                                        individual that is approved by 
                                        the State and that satisfies 
                                        the requirements of subclause 
                                        (III).
                                    ``(III) Plan requirements.--For 
                                purposes of subclause (II)(bb), the 
                                requirements of this subclause are that 
                                the plan--
                                            ``(aa) specifies those 
                                        services which the individual 
                                        or the individual's authorized 
                                        representative would be 
                                        responsible for directing;
                                            ``(bb) identifies the 
                                        methods by which the individual 
                                        or the individual's authorized 
                                        representative will select, 
                                        manage, and dismiss providers 
                                        of such services;
                                            ``(cc) specifies the role 
                                        of family members and others 
                                        whose participation is sought 
                                        by the individual or the 
                                        individual's authorized 
                                        representative with respect to 
                                        such services;
                                            ``(dd) is developed through 
                                        a person-centered process that 
                                        is directed by the individual 
                                        or the individual's authorized 
                                        representative, builds upon the 
                                        individual's capacity to engage 
                                        in activities that promote 
                                        community life and that 
                                        respects the individual's 
                                        preferences, choices, and 
                                        abilities, and involves 
                                        families, friends, and 
                                        professionals as desired or 
                                        required by the individual or 
                                        the individual's authorized 
                                        representative;
                                            ``(ee) includes appropriate 
                                        risk management techniques that 
                                        recognize the roles and sharing 
                                        of responsibilities in 
                                        obtaining services in a self-
                                        directed manner and assure the 
                                        appropriateness of such plan 
                                        based upon the resources and 
                                        capabilities of the individual 
                                        or the individual's authorized 
                                        representative; and
                                            ``(ff) may include an 
                                        individualized budget which 
                                        identifies the dollar value of 
                                        the services and supports under 
                                        the control and direction of 
                                        the individual or the 
                                        individual's authorized 
                                        representative.
                                    ``(IV) Budget process.--With 
                                respect to individualized budgets 
                                described in subclause (III)(ff), the 
                                State plan amendment--
                                            ``(aa) describes the method 
                                        for calculating the dollar 
                                        values in such budgets based on 
                                        reliable costs and service 
                                        utilization;
                                            ``(bb) defines a process 
                                        for making adjustments in such 
                                        dollar values to reflect 
                                        changes in individual 
                                        assessments and service plans; 
                                        and
                                            ``(cc) provides a procedure 
                                        to evaluate expenditures under 
                                        such budgets.
                    ``(H) Quality assurance; conflict of interest 
                standards.--
                            ``(i) Quality assurance.--The State ensures 
                        that the provision of home and community-based 
                        services meets Federal and State guidelines for 
                        quality assurance.
                            ``(ii) Conflict of interest standards.--The 
                        State establishes standards for the conduct of 
                        the independent evaluation and the independent 
                        assessment to safeguard against conflicts of 
                        interest.
                    ``(I) Redeterminations and appeals.--The State 
                allows for at least annual redeterminations of 
                eligibility, and appeals in accordance with the 
                frequency of, and manner in which, redeterminations and 
                appeals of eligibility are made under the State plan.
                    ``(J) Presumptive eligibility for assessment.--The 
                State, at its option, elects to provide for a period of 
                presumptive eligibility (not to exceed a period of 60 
                days) only for those individuals that the State has 
                reason to believe may be eligible for home and 
                community-based services. Such presumptive eligibility 
                shall be limited to medical assistance for carrying out 
                the independent evaluation and assessment under 
                subparagraph (E) to determine an individual's 
                eligibility for such services and if the individual is 
                so eligible, the specific home and community-based 
                services that the individual will receive.
            ``(2) Definition of individual's representative.--In this 
        section, the term `individual's representative' means, with 
        respect to an individual, a parent, a family member, or a 
        guardian of the individual, an advocate for the individual, or 
        any other individual who is authorized to represent the 
        individual.
            ``(3) Nonapplication.--A State may elect in the State plan 
        amendment approved under this section to not comply with the 
        requirements of section 1902(a)(1) (relating to statewideness) 
        and section 1902(a)(10)(C)(i)(III) (relating to income and 
        resource rules applicable in the community), but only for 
        purposes of provided home and community-based services in 
        accordance with such amendment. Any such election shall not be 
        construed to apply to the provision of services to an 
        individual receiving medical assistance in an institutionalized 
        setting as a result of a determination that the individual 
        requires the level of care provided in a hospital or a nursing 
        facility or intermediate care facility for the mentally 
        retarded.
            ``(4) No effect on other waiver authority.--Nothing in this 
        subsection shall be construed as affecting the option of a 
        State to offer home and community-based services under a waiver 
        under subsections (c) or (d) of this section or under section 
        1115.
            ``(5) Continuation of federal financial participation for 
        medical assistance provided to individuals as of effective date 
        of state plan amendment.--Notwithstanding paragraph (1)(B), 
        Federal financial participation shall continue to be available 
        for an individual who is receiving medical assistance in an 
        institutionalized setting, or home and community-based services 
        provided under a waiver under this section or section 1115 that 
        is in effect as of the effective date of the State plan 
        amendment submitted under this subsection, as a result of a 
        determination that the individual requires the level of care 
        provided in a hospital or a nursing facility or intermediate 
        care facility for the mentally retarded, without regard to 
        whether such individuals satisfy the more stringent eligibility 
        criteria established under that paragraph, until such time as 
        the individual is discharged from the institution or waiver 
        program or no longer requires such level of care.''.
    (b) Quality of Care Measures.--
            (1) In general.--The Secretary, acting through the Director 
        of the Agency for Healthcare Research and Quality, shall 
        consult with consumers, health and social service providers and 
        other professionals knowledgeable about long-term care services 
        and supports to develop program performance indicators, client 
        function indicators, and measures of client satisfaction with 
        respect to home and community-based services offered under 
        State Medicaid programs.
            (2) Best practices.--The Secretary shall--
                    (A) use the indicators and measures developed under 
                paragraph (1) to assess such home and community-based 
                services, the outcomes associated with the receipt of 
                such services (particularly with respect to the health 
                and welfare of the recipient of the services), and the 
                overall system for providing home and community-based 
                services under the Medicaid program under title XIX of 
                the Social Security Act; and
                    (B) make publicly available the best practices 
                identified through such assessment and a comparative 
                analyses of the system features of each State.
            (3) Appropriation.--Out of any funds in the Treasury not 
        otherwise appropriated, there is appropriated to the Secretary 
        of Health and Human Services, $1,000,000 for the period of 
        fiscal years 2006 through 2010 to carry out this subsection.
    (c) Effective Date.--The amendments made by subsections (a) and (b) 
take effect on January 1, 2007, and apply to expenditures for medical 
assistance for home and community-based services provided in accordance 
with section 1915(i) of the Social Security Act (as added by 
subsections (a) and (b)) on or after that date.

SEC. 6087. OPTIONAL CHOICE OF SELF-DIRECTED PERSONAL ASSISTANCE 
              SERVICES (CASH AND COUNSELING).

    (a) Exemption From Certain Requirements.--Section 1915 of the 
Social Security Act (42 U.S.C. 1396n), as amended by section 6086(a), 
is amended by adding at the end the following new subsection:
    ``(j)(1) A State may provide, as `medical assistance', payment for 
part or all of the cost of self-directed personal assistance services 
(other than room and board) under the plan which are provided pursuant 
to a written plan of care to individuals with respect to whom there has 
been a determination that, but for the provision of such services, the 
individuals would require and receive personal care services under the 
plan, or home and community-based services provided pursuant to a 
waiver under subsection (c). Self-directed personal assistance services 
may not be provided under this subsection to individuals who reside in 
a home or property that is owned, operated, or controlled by a provider 
of services, not related by blood or marriage.
    ``(2) The Secretary shall not grant approval for a State self-
directed personal assistance services program under this section unless 
the State provides assurances satisfactory to the Secretary of the 
following:
            ``(A) Necessary safeguards have been taken to protect the 
        health and welfare of individuals provided services under the 
        program, and to assure financial accountability for funds 
        expended with respect to such services.
            ``(B) The State will provide, with respect to individuals 
        who--
                    ``(i) are entitled to medical assistance for 
                personal care services under the plan, or receive home 
                and community-based services under a waiver granted 
                under subsection (c);
                    ``(ii) may require self-directed personal 
                assistance services; and
                    ``(iii) may be eligible for self-directed personal 
                assistance services,
        an evaluation of the need for personal care under the plan, or 
        personal services under a waiver granted under subsection (c).
            ``(C) Such individuals who are determined to be likely to 
        require personal care under the plan, or home and community-
        based services under a waiver granted under subsection (c) are 
        informed of the feasible alternatives, if available under the 
        State's self-directed personal assistance services program, at 
        the choice of such individuals, to the provision of personal 
        care services under the plan, or personal assistance services 
        under a waiver granted under subsection (c).
            ``(D) The State will provide for a support system that 
        ensures participants in the self-directed personal assistance 
        services program are appropriately assessed and counseled prior 
        to enrollment and are able to manage their budgets. Additional 
        counseling and management support may be provided at the 
        request of the participant.
            ``(E) The State will provide to the Secretary an annual 
        report on the number of individuals served and total 
        expenditures on their behalf in the aggregate. The State shall 
        also provide an evaluation of overall impact on the health and 
        welfare of participating individuals compared to non-
        participants every three years.
    ``(3) A State may provide self-directed personal assistance 
services under the State plan without regard to the requirements of 
section 1902(a)(1) and may limit the population eligible to receive 
these services and limit the number of persons served without regard to 
section 1902(a)(10)(B).
    ``(4)(A) For purposes of this subsection, the term `self-directed 
personal assistance services' means personal care and related services, 
or home and community-based services otherwise available under the plan 
under this title or subsection (c), that are provided to an eligible 
participant under a self-directed personal assistance services program 
under this section, under which individuals, within an approved self-
directed services plan and budget, purchase personal assistance and 
related services, and permits participants to hire, fire, supervise, 
and manage the individuals providing such services.
    ``(B) At the election of the State--
            ``(i) a participant may choose to use any individual 
        capable of providing the assigned tasks including legally 
        liable relatives as paid providers of the services; and
            ``(ii) the individual may use the individual's budget to 
        acquire items that increase independence or substitute (such as 
        a microwave oven or an accessibility ramp) for human 
        assistance, to the extent that expenditures would otherwise be 
        made for the human assistance.
    ``(5) For purpose of this section, the term `approved self-directed 
services plan and budget' means, with respect to a participant, the 
establishment of a plan and budget for the provision of self-directed 
personal assistance services, consistent with the following 
requirements:
            ``(A) Self-direction.--The participant (or in the case of a 
        participant who is a minor child, the participant's parent or 
        guardian, or in the case of an incapacitated adult, another 
        individual recognized by State law to act on behalf of the 
        participant) exercises choice and control over the budget, 
        planning, and purchase of self-directed personal assistance 
        services, including the amount, duration, scope, provider, and 
        location of service provision.
            ``(B) Assessment of needs.--There is an assessment of the 
        needs, strengths, and preferences of the participants for such 
        services.
            ``(C) Service plan.--A plan for such services (and supports 
        for such services) for the participant has been developed and 
        approved by the State based on such assessment through a 
        person-centered process that--
                    ``(i) builds upon the participant's capacity to 
                engage in activities that promote community life and 
                that respects the participant's preferences, choices, 
                and abilities; and
                    ``(ii) involves families, friends, and 
                professionals in the planning or delivery of services 
                or supports as desired or required by the participant.
            ``(D) Service budget.--A budget for such services and 
        supports for the participant has been developed and approved by 
        the State based on such assessment and plan and on a 
        methodology that uses valid, reliable cost data, is open to 
        public inspection, and includes a calculation of the expected 
        cost of such services if those services were not self-directed. 
        The budget may not restrict access to other medically necessary 
        care and services furnished under the plan and approved by the 
        State but not included in the budget.
            ``(E) Application of quality assurance and risk 
        management.--There are appropriate quality assurance and risk 
        management techniques used in establishing and implementing 
        such plan and budget that recognize the roles and 
        responsibilities in obtaining services in a self-directed 
        manner and assure the appropriateness of such plan and budget 
        based upon the participant's resources and capabilities.
    ``(6) A State may employ a financial management entity to make 
payments to providers, track costs, and make reports under the program. 
Payment for the activities of the financial management entity shall be 
at the administrative rate established in section 1903(a).''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to services furnished on or after January 1, 2007.

                           Subtitle B--SCHIP

SEC. 6101. ADDITIONAL ALLOTMENTS TO ELIMINATE FISCAL YEAR 2006 FUNDING 
              SHORTFALLS.

    (a) In General.--Section 2104 of the Social Security Act (42 U.S.C. 
1397dd) is amended by inserting after subsection (c) the following:
    ``(d) Additional Allotments To Eliminate Funding Shortfalls.--
            ``(1) Appropriation; allotment authority.--For the purpose 
        of providing additional allotments to shortfall States 
        described in paragraph (2), there is appropriated, out of any 
        money in the Treasury not otherwise appropriated, $283,000,000 
        for fiscal year 2006.
            ``(2) Shortfall states described.--For purposes of 
        paragraph (1), a shortfall State described in this paragraph is 
        a State with a State child health plan approved under this 
        title for which the Secretary estimates, on the basis of the 
        most recent data available to the Secretary as of December 16, 
        2005, that the projected expenditures under such plan for such 
        State for fiscal year 2006 will exceed the sum of--
                    ``(A) the amount of the State's allotments for each 
                of fiscal years 2004 and 2005 that will not be expended 
                by the end of fiscal year 2005;
                    ``(B) the amount, if any, that is to be 
                redistributed to the State during fiscal year 2006 in 
                accordance with subsection (f); and
                    ``(C) the amount of the State's allotment for 
                fiscal year 2006.
            ``(3) Allotments.--In addition to the allotments provided 
        under subsections (b) and (c), subject to paragraph (4), of the 
        amount available for the additional allotments under paragraph 
        (1) for fiscal year 2006, the Secretary shall allot--
                    ``(A) to each shortfall State described in 
                paragraph (2) such amount as the Secretary determines 
                will eliminate the estimated shortfall described in 
                such paragraph for the State; and
                    ``(B) to each commonwealth or territory described 
                in subsection (c)(3), the same proportion as the 
                proportion of the commonwealth's or territory's 
                allotment under subsection (c) (determined without 
                regard to subsection (f)) to 1.05 percent of the amount 
                appropriated under paragraph (1).
            ``(4) Use of additional allotment.--Additional allotments 
        provided under this subsection are only available for amounts 
        expended under a State plan approved under this title for child 
        health assistance for targeted low-income children.
            ``(5) 1-year availability; no redistribution of unexpended 
        additional allotments.--Notwithstanding subsections (e) and 
        (f), amounts allotted to a State pursuant to this subsection 
        for fiscal year 2006 shall only remain available for 
        expenditure by the State through September 30, 2006. Any 
        amounts of such allotments that remain unexpended as of such 
        date shall not be subject to redistribution under subsection 
        (f) and shall revert to the Treasury on October 1, 2006.''.
    (b) Conforming amendments.--Section 2104 of the Social Security Act 
(42 U.S.C. 1397dd) is amended--
            (1) in subsection (a), by inserting ``subject to subsection 
        (d),'' after ``under this section,'';
            (2) in subsection (b)(1), by inserting ``and subsection 
        (d)'' after ``Subject to paragraph (4)''; and
            (3) in subsection (c)(1), by inserting ``subject to 
        subsection (d),'' after ``for a fiscal year,''.
    (c) Effective Date.--The amendments made by this section apply to 
items and services furnished on or after October 1, 2005, without 
regard to whether or not regulations implementing such amendments have 
been issued.

SEC. 6102. PROHIBITION AGAINST COVERING NONPREGNANT CHILDLESS ADULTS 
              WITH SCHIP FUNDS.

    (a) Prohibition on Use of SCHIP Funds.--Section 2107 of the Social 
Security Act (42 U.S.C. 1397gg) is amended by adding at the end the 
following:
    ``(f) Limitation of Waiver Authority.--Notwithstanding subsection 
(e)(2)(A) and section 1115(a), the Secretary may not approve a waiver, 
experimental, pilot, or demonstration project that would allow funds 
made available under this title to be used to provide child health 
assistance or other health benefits coverage to a nonpregnant childless 
adult. For purposes of the preceding sentence, a caretaker relative (as 
such term is defined for purposes of carrying out section 1931) shall 
not be considered a childless adult.''.
    (b) Conforming Amendments.--Section 2105(c)(1) of such Act (42 
U.S.C. 1397ee(c)(1)) is amended--
            (1) by inserting ``and may not include coverage of a 
        nonpregnant childless adult'' after ``section 2101)''; and
            (2) by adding at the end the following: ``For purposes of 
        the preceding sentence, a caretaker relative (as such term is 
        defined for purposes of carrying out section 1931) shall not be 
        considered a childless adult.''.
    (c) Rule of Construction.--Nothing in this section or the 
amendments made by this section shall be construed to--
            (1) authorize the waiver of any provision of title XIX or 
        XXI of the Social Security Act (42 U.S.C. 1396 et seq., 1397aa 
        et seq.) that is not otherwise authorized to be waived under 
        such titles or under title XI of such Act (42 U.S.C. 1301 et 
        seq.) as of the date of enactment of this Act;
            (2) imply congressional approval of any waiver, 
        experimental, pilot, or demonstration project affecting funds 
        made available under the State children's health insurance 
        program under title XXI of the Social Security Act (42 U.S.C. 
        1397aa et. seq.) or any amendment to such a waiver or project 
        that has been approved as of such date of enactment; or
            (3) apply to any waiver, experimental, pilot, or 
        demonstration project that would allow funds made available 
        under title XXI of the Social Security Act (42 U.S.C. 1397aa et 
        seq.) to be used to provide child health assistance or other 
        health benefits coverage to a nonpregnant childless adult that 
        is approved before the date of enactment of this Act or to any 
        extension, renewal, or amendment of such a waiver or project 
        that is approved on or after such date of enactment.
    (d) Effective Date.--This section and the amendments made by this 
section shall take effect as if enacted on October 1, 2005, and shall 
apply to any waiver, experimental, pilot, or demonstration project that 
is approved on or after that date.

SEC. 6103. CONTINUED AUTHORITY FOR QUALIFYING STATES TO USE CERTAIN 
              FUNDS FOR MEDICAID EXPENDITURES.

    (a) In General.--Section 2105(g)(1)(A) of the Social Security Act 
(42 U.S.C. 1397ee(g)(1)(A)) is amended by striking ``or 2001'' and 
inserting ``2001, 2004, or 2005''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to expenditures made under title XIX of the Social Security Act 
(42 U.S.C. 1396 et seq.) on or after October 1, 2005.

                       Subtitle C--Katrina Relief

SEC. 6201. ADDITIONAL FEDERAL PAYMENTS UNDER HURRICANE-RELATED MULTI-
              STATE SECTION 1115 DEMONSTRATIONS.

    (a) In General.--The Secretary of Health and Human Services shall 
pay to each eligible State, from amounts appropriated pursuant to 
subsection (e), amounts for the following purposes:
            (1) Under the authority of an approved Multi-State Section 
        1115 Demonstration Project (in this section referred to as an 
        ``section 1115 project'')--
                    (A) with respect to evacuees receiving health care 
                under such project, for the non-Federal share of 
                expenditures:
                            (i) for medical assistance furnished under 
                        title XIX of the Social Security Act, and
                            (ii) for child health assistance furnished 
                        under title XXI of such Act;
                    (B) with respect to evacuees who do not have other 
                coverage for such assistance through insurance, 
                including (but not limited to) private insurance, under 
                title XIX or title XXI of the Social Security Act, or 
                under State-funded health insurance programs, for the 
                total uncompensated care costs incurred for medically 
                necessary services and supplies or premium assistance 
                for such persons, and for those evacuees receiving 
                medical assistance under the project for the total 
                uncompensated care costs incurred for medically 
                necessary services and supplies beyond those included 
                as medical assistance or child health assistance under 
                the State's approved plan under title XIX or title XXI 
                of the Social Security Act;
                    (C) with respect to affected individuals receiving 
                health care under such project for the non-Federal 
                share of the following expenditures:
                            (i) for medical assistance furnished under 
                        title XIX of the Social Security Act, and
                            (ii) for child health assistance furnished 
                        under title XXI of such Act; and
                    (D) with respect to affected individuals who do not 
                have other coverage for such assistance through 
                insurance, including (but not limited to) private 
                insurance, under title XIX or title XXI of the Social 
                Security Act, or under State-funded health insurance 
                programs, for the total uncompensated care costs 
                incurred for medically necessary services and supplies 
                or premium assistance for such persons, and for those 
                affected individuals receiving medical assistance under 
                the project for the total uncompensated care costs 
                incurred for medically necessary services and supplies 
                beyond those included as medical assistance or child 
                health assistance under the State's approved plan under 
                title XIX or title XXI of the Social Security Act.
            (2) For reimbursement of the reasonable administrative 
        costs related to subparagraphs (A) through (D) of paragraph (1) 
        as determined by the Secretary.
            (3) Only with respect to affected counties or parishes, for 
        reimbursement with respect to individuals receiving medical 
        assistance under existing State plans approved by the Secretary 
        of Health and Human Services for the following non-Federal 
        share of expenditures:
                    (A) For medical assistance furnished under title 
                XIX of the Social Security Act.
                    (B) For child health assistance furnished under 
                title XXI of such Act.
            (4) For other purposes, if approved by the Secretary under 
        the Secretary's authority, to restore access to health care in 
        impacted communities.
    (b) Definitions.--For purposes of this section:
            (1) The term ``affected individual'' means an individual 
        who resided in an individual assistance designation county or 
        parish pursuant to section 408 of the Robert T. Stafford 
        Disaster Relief and Emergency Assistance Act, as declared by 
        the President as a result of Hurricane Katrina and continues to 
        reside in the same State that such county or parish is located 
        in.
            (2) The term ``affected counties or parishes'' means a 
        county or parish described in paragraph (1).
            (3) The term ``evacuee'' means an affected individual who 
        has been displaced to another State.
            (4) The term ``eligible State'' means a State that has 
        provided care to affected individuals or evacuees under a 
        section 1115 project.
    (c) Application to Matching Requirements.--The non-Federal share 
paid under this section shall not be regarded as Federal funds for 
purposes of Medicaid matching requirements, the effect of which is to 
provide fiscal relief to the State in which the Medicaid eligible 
individual originally resided.
    (d) Time Limits on Payments.--
            (1) No payments shall be made by the Secretary under 
        subsection (a)(1)(A) or (a)(1)(C), for costs of health care 
        provided to an eligible evacuee or affected individual for 
        services for such individual incurred after June 30, 2006.
            (2) No payments shall be made by the Secretary under 
        subsection (a)(1)(B) or (a)(1)(D) for costs of health care 
        incurred after January 31, 2006.
            (3) No payments may be made under subsection (a)(1)(B) or 
        (a)(1)(D) for an item or service that an evacuee or an affected 
        individual has received from an individual or organization as 
        part of a public or private hurricane relief effort.
    (e) Appropriations.--For the purpose of providing funds for 
payments under this section, in addition to any funds made available 
for the National Disaster Medical System under the Department of 
Homeland Security for health care costs related to Hurricane Katrina, 
including under a section 1115 project, there is appropriated out of 
any money in the Treasury not otherwise appropriated, $2,000,000,000, 
to remain available to the Secretary until expended. The total amount 
of payments made under subsection (a) may not exceed the total amount 
appropriated under this subsection.

SEC. 6202. STATE HIGH RISK HEALTH INSURANCE POOL FUNDING.

    (a) In General.--There are hereby authorized and appropriated for 
fiscal year 2006--
            (1) $75,000,000 for grants under subsection (b)(1) of 
        section 2745 of the Public Health Service Act (42 U.S.C. 300gg-
        45); and
            (2) $15,000,000 for grants under subsection (a) of such 
        section.
    (b) Treatment.--The amount appropriated under--
            (1) paragraph (1) shall be treated as if it had been 
        appropriated under subsection (c)(2) of such section; and
            (2) paragraph (2) shall be treated as if it had been 
        appropriated under subsection (c)(1) of such section.
    (c) References.--Effective upon the enactment of the State High 
Risk Pool Funding Extension Act of 2005--
            (1) subsection (a)(1) shall be applied by substituting 
        ``subsections (b)(2) and (c)(3)'' for ``subsection ``(b)(1)'';
            (2) subsection (b)(1) shall be applied by substituting 
        ``(d)(1)(B)'' for ``(c)(2)''; and
            (3) subsection (b)(2) shall be applied by substituting 
        ``(d)(1)(A)'' for ``(c)(1)''.

SEC. 6203. IMPLEMENTATION FUNDING.

    For purposes of implementing the provisions of, and amendments made 
by, title V of this Act and this title--
            (1) the Secretary of Health and Human Services shall 
        provide for the transfer, in appropriate part from the Federal 
        Hospital Insurance Trust Fund established under section 1817 of 
        the Social Security Act (42 U.S.C. 1395i) and the Federal 
        Supplementary Medical Insurance Trust Fund established under 
        section 1841 of such Act (42 U.S.C. 1395t), of $30,000,000 to 
        the Centers for Medicare & Medicaid Services Program Management 
        Account for fiscal year 2006; and
            (2) out of any funds in the Treasury not otherwise 
        appropriated, there are appropriated to such Secretary for the 
        Centers for Medicare & Medicaid Services Program Management 
        Account, $30,000,000 for fiscal year 2006.

            TITLE VII--HUMAN RESOURCES AND OTHER PROVISIONS

SEC. 7001. REFERENCES.

    Except as otherwise expressly provided, wherever in this title an 
amendment or repeal is expressed in terms of an amendment to, or repeal 
of, a section or other provision, the amendment or repeal shall be 
considered to be made to a section or other provision of the Social 
Security Act.

                            Subtitle A--TANF

SEC. 7101. TEMPORARY ASSISTANCE FOR NEEDY FAMILIES AND RELATED PROGRAMS 
              FUNDING THROUGH SEPTEMBER 30, 2010.

    (a) In General.--Activities authorized by part A of title IV and 
section 1108(b) of the Social Security Act (adjusted, as applicable, by 
or under this subtitle, the amendments made by this subtitle, and the 
TANF Emergency Response and Recovery Act of 2005) shall continue 
through September 30, 2010, in the manner authorized for fiscal year 
2004, and out of any money in the Treasury of the United States not 
otherwise appropriated, there are hereby appropriated such sums as may 
be necessary for such purpose. Grants and payments may be made pursuant 
to this authority on a quarterly basis through fiscal year 2010 at the 
level provided for such activities for the corresponding quarter of 
fiscal year 2004 (or, as applicable, at such greater level as may 
result from the application of this subtitle, the amendments made by 
this subtitle, and the TANF Emergency Response and Recovery Act of 
2005), except that in the case of section 403(a)(3) of the Social 
Security Act, grants and payments may be made pursuant to this 
authority only through fiscal year 2008 and in the case of section 
403(a)(4) of the Social Security Act, no grants shall be made for any 
fiscal year occurring after fiscal year 2005.
    (b) Conforming Amendments.--Part A of title IV (42 U.S.C. 601 et 
seq.) is amended--
            (1) in section 403(a)(3)(H)(ii), by striking ``December, 
        31, 2005'' and inserting ``fiscal year 2008'';
            (2) in section 403(b)(3)(C)(ii), by striking ``2006'' and 
        inserting ``2010''; and
            (3) in section 409(a)(7)--
                    (A) in subparagraph (A), by striking ``or 2007'' 
                and inserting ``2007, 2008, 2009, 2010, or 2011''; and
                    (B) in subparagraph (B)(ii), by striking ``2006'' 
                and inserting ``2010''.
    (c) Extension of the National Random Sample Study of Child Welfare 
Through September 30, 2010.--Activities authorized by section 429A of 
the Social Security Act shall continue through September 30, 2010, in 
the manner authorized for fiscal year 2004, and out of any money in the 
Treasury of the United States not otherwise appropriated, there are 
hereby appropriated such sums as may be necessary for such purpose. 
Grants and payments may be made pursuant to this authority on a 
quarterly basis through fiscal year 2010 at the level provided for such 
activities for the corresponding quarter of fiscal year 2004.

SEC. 7102. IMPROVED CALCULATION OF WORK PARTICIPATION RATES AND PROGRAM 
              INTEGRITY.

    (a) Recalibration of Caseload Reduction Credit.--
            (1) In general.--Section 407(b)(3)(A) (42 U.S.C. 
        607(b)(3)(A)) is amended--
                    (A) in clause (i), by inserting ``or any other 
                State program funded with qualified State expenditures 
                (as defined in section 409(a)(7)(B)(i))'' after ``this 
                part''; and
                    (B) by striking clause (ii) and inserting the 
                following:
                            ``(ii) the average monthly number of 
                        families that received assistance under any 
                        State program referred to in clause (i) during 
                        fiscal year 2005.''.
            (2) Conforming amendment.--Section 407(b)(3)(B) (42 U.S.C. 
        607(b)(3)(B)) is amended by striking ``and eligibility 
        criteria'' and all that follows through the close parenthesis 
        and inserting ``and the eligibility criteria in effect during 
        fiscal year 2005''.
    (b) Inclusion of Families Receiving Assistance Under Separate State 
Programs in Calculation of Participation Rates.--
            (1) Section 407 (42 U.S.C. 607) is amended in each of 
        subsections (a)(1), (a)(2), (b)(1)(B)(i), (c)(2)(A)(i), (e)(1), 
        and (e)(2), by inserting ``or any other State program funded 
        with qualified State expenditures (as defined in section 
        409(a)(7)(B)(i))'' after ``this part''.
            (2) Section 411(a)(1) (42 U.S.C. 611(a)(1)) is amended--
                    (A) in subparagraph (A), by inserting ``or any 
                other State program funded with qualified State 
                expenditures (as defined in section 409(a)(7)(B)(i))'' 
                before the colon; and
                    (B) in subparagraph (B)(ii), by inserting ``and any 
                other State programs funded with qualified State 
                expenditures (as defined in section 409(a)(7)(B)(i))'' 
                after ``this part''.
    (c) Improved Verification and Oversight of Work Participation.--
            (1) In general.--Section 407(i) (42 U.S.C. 607(i)) is 
        amended to read as follows:
    ``(i) Verification of Work and Work-Eligible Individuals in Order 
To Implement Reforms.--
            ``(1) Secretarial direction and oversight.--
                    ``(A) Regulations for determining whether 
                activities may be counted as `work activities', how to 
                count and verify reported hours of work, and 
                determining who is a work-eligible individual.--
                            ``(i) In general.--Not later than June 30, 
                        2006, the Secretary shall promulgate 
                        regulations to ensure consistent measurement of 
                        work participation rates under State programs 
                        funded under this part and State programs 
                        funded with qualified State expenditures (as 
                        defined in section 409(a)(7)(B)(i)), which 
                        shall include information with respect to--
                                    ``(I) determining whether an 
                                activity of a recipient of assistance 
                                may be treated as a work activity under 
                                subsection (d);
                                    ``(II) uniform methods for 
                                reporting hours of work by a recipient 
                                of assistance;
                                    ``(III) the type of documentation 
                                needed to verify reported hours of work 
                                by a recipient of assistance; and
                                    ``(IV) the circumstances under 
                                which a parent who resides with a child 
                                who is a recipient of assistance should 
                                be included in the work participation 
                                rates.
                            ``(ii) Issuance of regulations on an 
                        interim final basis.--The regulations referred 
                        to in clause (i) may be effective and final 
                        immediately on an interim basis as of the date 
                        of publication of the regulations. If the 
                        Secretary provides for an interim final 
                        regulation, the Secretary shall provide for a 
                        period of public comment on the regulation 
                        after the date of publication. The Secretary 
                        may change or revise the regulation after the 
                        public comment period.
                    ``(B) Oversight of state procedures.--The Secretary 
                shall review the State procedures established in 
                accordance with paragraph (2) to ensure that such 
                procedures are consistent with the regulations 
                promulgated under subparagraph (A) and are adequate to 
                ensure an accurate measurement of work participation 
                under the State programs funded under this part and any 
                other State programs funded with qualified State 
                expenditures (as so defined).
            ``(2) Requirement for states to establish and maintain work 
        participation verification procedures.--Not later than 
        September 30, 2006, a State to which a grant is made under 
        section 403 shall establish procedures for determining, with 
        respect to recipients of assistance under the State program 
        funded under this part or under any State programs funded with 
        qualified State expenditures (as so defined), whether 
        activities may be counted as work activities, how to count and 
        verify reported hours of work, and who is a work-eligible 
        individual, in accordance with the regulations promulgated 
        pursuant to paragraph (1)(A)(i) and shall establish internal 
        controls to ensure compliance with the procedures.''.
            (2) State penalty for failure to establish or comply with 
        work participation verification procedures.--Section 409(a) (42 
        U.S.C. 609(a)) is amended by adding at the end the following:
            ``(15) Penalty for failure to establish or comply with work 
        participation verification procedures.--
                    ``(A) In general.--If the Secretary determines that 
                a State to which a grant is made under section 403 in a 
                fiscal year has violated section 407(i)(2) during the 
                fiscal year, the Secretary shall reduce the grant 
                payable to the State under section 403(a)(1) for the 
                immediately succeeding fiscal year by an amount equal 
                to not less than 1 percent and not more than 5 percent 
                of the State family assistance grant.
                    ``(B) Penalty based on severity of failure.--The 
                Secretary shall impose reductions under subparagraph 
                (A) with respect to a fiscal year based on the degree 
                of noncompliance.''.
    (d) Effective Date.--The amendments made by subsections (a) and (b) 
shall take effect on October 1, 2006.

SEC. 7103. GRANTS FOR HEALTHY MARRIAGE PROMOTION AND RESPONSIBLE 
              FATHERHOOD.

    (a) Healthy Marriage and Family Funds.--Section 403(a)(2) (42 
U.S.C. 603(a)(2)) is amended to read as follows:
            ``(2) Healthy marriage promotion and responsible fatherhood 
        grants.--
                    ``(A) In general.--
                            ``(i) Use of funds.--Subject to 
                        subparagraphs (B) and (C), the Secretary may 
                        use the funds made available under subparagraph 
                        (D) for the purpose of conducting and 
                        supporting research and demonstration projects 
                        by public or private entities, and providing 
                        technical assistance to States, Indian tribes 
                        and tribal organizations, and such other 
                        entities as the Secretary may specify that are 
                        receiving a grant under another provision of 
                        this part.
                            ``(ii) Limitations.--The Secretary may not 
                        award funds made available under this paragraph 
                        on a noncompetitive basis, and may not provide 
                        any such funds to an entity for the purpose of 
                        carrying out healthy marriage promotion 
                        activities or for the purpose of carrying out 
                        activities promoting responsible fatherhood 
                        unless the entity has submitted to the 
                        Secretary an application which--
                                    ``(I) describes--
                                            ``(aa) how the programs or 
                                        activities proposed in the 
                                        application will address, as 
                                        appropriate, issues of domestic 
                                        violence; and
                                            ``(bb) what the applicant 
                                        will do, to the extent 
                                        relevant, to ensure that 
                                        participation in the programs 
                                        or activities is voluntary, and 
                                        to inform potential 
                                        participants that their 
                                        participation is voluntary; and
                                    ``(II) contains a commitment by the 
                                entity--
                                            ``(aa) to not use the funds 
                                        for any other purpose; and
                                            ``(bb) to consult with 
                                        experts in domestic violence or 
                                        relevant community domestic 
                                        violence coalitions in 
                                        developing the programs and 
                                        activities.
                            ``(iii) Healthy marriage promotion 
                        activities.--In clause (ii), the term `healthy 
                        marriage promotion activities' means the 
                        following:
                                    ``(I) Public advertising campaigns 
                                on the value of marriage and the skills 
                                needed to increase marital stability 
                                and health.
                                    ``(II) Education in high schools on 
                                the value of marriage, relationship 
                                skills, and budgeting.
                                    ``(III) Marriage education, 
                                marriage skills, and relationship 
                                skills programs, that may include 
                                parenting skills, financial management, 
                                conflict resolution, and job and career 
                                advancement, for non-married pregnant 
                                women and non-married expectant 
                                fathers.
                                    ``(IV) Pre-marital education and 
                                marriage skills training for engaged 
                                couples and for couples or individuals 
                                interested in marriage.
                                    ``(V) Marriage enhancement and 
                                marriage skills training programs for 
                                married couples.
                                    ``(VI) Divorce reduction programs 
                                that teach relationship skills.
                                    ``(VII) Marriage mentoring programs 
                                which use married couples as role 
                                models and mentors in at-risk 
                                communities.
                                    ``(VIII) Programs to reduce the 
                                disincentives to marriage in means-
                                tested aid programs, if offered in 
                                conjunction with any activity described 
                                in this subparagraph.
                    ``(B) Limitation on use of funds for demonstration 
                projects for coordination of provision of child welfare 
                and tanf services to tribal families at risk of child 
                abuse or neglect.--
                            ``(i) In general.--Of the amounts made 
                        available under subparagraph (D) for a fiscal 
                        year, the Secretary may not award more than 
                        $2,000,000 on a competitive basis to fund 
                        demonstration projects designed to test the 
                        effectiveness of tribal governments or tribal 
                        consortia in coordinating the provision to 
                        tribal families at risk of child abuse or 
                        neglect of child welfare services and services 
                        under tribal programs funded under this part.
                            ``(ii) Limitation on use of funds.--A grant 
                        made pursuant to clause (i) to such a project 
                        shall not be used for any purpose other than--
                                    ``(I) to improve case management 
                                for families eligible for assistance 
                                from such a tribal program;
                                    ``(II) for supportive services and 
                                assistance to tribal children in out-
                                of-home placements and the tribal 
                                families caring for such children, 
                                including families who adopt such 
                                children; and
                                    ``(III) for prevention services and 
                                assistance to tribal families at risk 
                                of child abuse and neglect.
                            ``(iii) Reports.--The Secretary may require 
                        a recipient of funds awarded under this 
                        subparagraph to provide the Secretary with such 
                        information as the Secretary deems relevant to 
                        enable the Secretary to facilitate and oversee 
                        the administration of any project for which 
                        funds are provided under this subparagraph.
                    ``(C) Limitation on use of funds for activities 
                promoting responsible fatherhood.--
                            ``(i) In general.--Of the amounts made 
                        available under subparagraph (D) for a fiscal 
                        year, the Secretary may not award more than 
                        $50,000,000 on a competitive basis to States, 
                        territories, Indian tribes and tribal 
                        organizations, and public and nonprofit 
                        community entities, including religious 
                        organizations, for activities promoting 
                        responsible fatherhood.
                            ``(ii) Activities promoting responsible 
                        fatherhood.--In this paragraph, the term 
                        `activities promoting responsible fatherhood' 
                        means the following:
                                    ``(I) Activities to promote 
                                marriage or sustain marriage through 
                                activities such as counseling, 
                                mentoring, disseminating information 
                                about the benefits of marriage and 2-
                                parent involvement for children, 
                                enhancing relationship skills, 
                                education regarding how to control 
                                aggressive behavior, disseminating 
                                information on the causes of domestic 
                                violence and child abuse, marriage 
                                preparation programs, premarital 
                                counseling, marital inventories, 
                                skills-based marriage education, 
                                financial planning seminars, including 
                                improving a family's ability to 
                                effectively manage family business 
                                affairs by means such as education, 
                                counseling, or mentoring on matters 
                                related to family finances, including 
                                household management, budgeting, 
                                banking, and handling of financial 
                                transactions and home maintenance, and 
                                divorce education and reduction 
                                programs, including mediation and 
                                counseling.
                                    ``(II) Activities to promote 
                                responsible parenting through 
                                activities such as counseling, 
                                mentoring, and mediation, disseminating 
                                information about good parenting 
                                practices, skills-based parenting 
                                education, encouraging child support 
                                payments, and other methods.
                                    ``(III) Activities to foster 
                                economic stability by helping fathers 
                                improve their economic status by 
                                providing activities such as work first 
                                services, job search, job training, 
                                subsidized employment, job retention, 
                                job enhancement, and encouraging 
                                education, including career-advancing 
                                education, dissemination of employment 
                                materials, coordination with existing 
                                employment services such as welfare-to-
                                work programs, referrals to local 
                                employment training initiatives, and 
                                other methods.
                                    ``(IV) Activities to promote 
                                responsible fatherhood that are 
                                conducted through a contract with a 
                                nationally recognized, nonprofit 
                                fatherhood promotion organization, such 
                                as the development, promotion, and 
                                distribution of a media campaign to 
                                encourage the appropriate involvement 
                                of parents in the life of any child and 
                                specifically the issue of responsible 
                                fatherhood, and the development of a 
                                national clearinghouse to assist States 
                                and communities in efforts to promote 
                                and support marriage and responsible 
                                fatherhood.
                    ``(D) Appropriation.--Out of any money in the 
                Treasury of the United States not otherwise 
                appropriated, there are appropriated $150,000,000 for 
                each of fiscal years 2006 through 2010, for expenditure 
                in accordance with this paragraph.''.
    (b) Counting of Spending on Certain Pro-Family Activities.--Section 
409(a)(7)(B)(i) (42 U.S.C. 609(a)(7)(B)(i)) is amended by adding at the 
end the following:
                                    ``(V) Counting of spending on 
                                certain pro-family activities.--The 
                                term `qualified State expenditures' 
                                includes the total expenditures by the 
                                State during the fiscal year under all 
                                State programs for a purpose described 
                                in paragraph (3) or (4) of section 
                                401(a).''.

                         Subtitle B--Child Care

SEC. 7201. ENTITLEMENT FUNDING.

    Section 418(a)(3) (42 U.S.C. 618(a)(3)) is amended--
            (1) by striking ``and'' at the end of subparagraph (E);
            (2) by striking the period at the end of subparagraph (F) 
        and inserting a semicolon; and
            (3) by adding at the end the following:
                    ``(G) $2,917,000,000 for each of fiscal years 2006 
                through 2010.''.

                       Subtitle C--Child Support

SEC. 7301. ASSIGNMENT AND DISTRIBUTION OF CHILD SUPPORT.

    (a) Modification of Rule Requiring Assignment of Support Rights as 
a Condition of Receiving TANF.--Section 408(a)(3) (42 U.S.C. 608(a)(3)) 
is amended to read as follows:
            ``(3) No assistance for families not assigning certain 
        support rights to the state.--A State to which a grant is made 
        under section 403 shall require, as a condition of paying 
        assistance to a family under the State program funded under 
        this part, that a member of the family assign to the State any 
        right the family member may have (on behalf of the family 
        member or of any other person for whom the family member has 
        applied for or is receiving such assistance) to support from 
        any other person, not exceeding the total amount of assistance 
        so paid to the family, which accrues during the period that the 
        family receives assistance under the program.''.
    (b) Increasing Child Support Payments to Families and Simplifying 
Child Support Distribution Rules.--
            (1) Distribution rules.--
                    (A) In general.--Section 457(a) (42 U.S.C. 657(a)) 
                is amended to read as follows:
    ``(a) In General.--Subject to subsections (d) and (e), the amounts 
collected on behalf of a family as support by a State pursuant to a 
plan approved under this part shall be distributed as follows:
            ``(1) Families receiving assistance.--In the case of a 
        family receiving assistance from the State, the State shall--
                    ``(A) pay to the Federal Government the Federal 
                share of the amount collected, subject to paragraph 
                (3)(A);
                    ``(B) retain, or pay to the family, the State share 
                of the amount collected, subject to paragraph (3)(B); 
                and
                    ``(C) pay to the family any remaining amount.
            ``(2) Families that formerly received assistance.--In the 
        case of a family that formerly received assistance from the 
        State:
                    ``(A) Current support.--To the extent that the 
                amount collected does not exceed the current support 
                amount, the State shall pay the amount to the family.
                    ``(B) Arrearages.--Except as otherwise provided in 
                an election made under section 454(34), to the extent 
                that the amount collected exceeds the current support 
                amount, the State--
                            ``(i) shall first pay to the family the 
                        excess amount, to the extent necessary to 
                        satisfy support arrearages not assigned 
                        pursuant to section 408(a)(3);
                            ``(ii) if the amount collected exceeds the 
                        amount required to be paid to the family under 
                        clause (i), shall--
                                    ``(I) pay to the Federal Government 
                                the Federal share of the excess amount 
                                described in this clause, subject to 
                                paragraph (3)(A); and
                                    ``(II) retain, or pay to the 
                                family, the State share of the excess 
                                amount described in this clause, 
                                subject to paragraph (3)(B); and
                            ``(iii) shall pay to the family any 
                        remaining amount.
            ``(3) Limitations.--
                    ``(A) Federal reimbursements.--The total of the 
                amounts paid by the State to the Federal Government 
                under paragraphs (1) and (2) of this subsection with 
                respect to a family shall not exceed the Federal share 
                of the amount assigned with respect to the family 
                pursuant to section 408(a)(3).
                    ``(B) State reimbursements.--The total of the 
                amounts retained by the State under paragraphs (1) and 
                (2) of this subsection with respect to a family shall 
                not exceed the State share of the amount assigned with 
                respect to the family pursuant to section 408(a)(3).
            ``(4) Families that never received assistance.--In the case 
        of any other family, the State shall distribute to the family 
        the portion of the amount so collected that remains after 
        withholding any fee pursuant to section 454(6)(B)(ii).
            ``(5) Families under certain agreements.--Notwithstanding 
        paragraphs (1) through (3), in the case of an amount collected 
        for a family in accordance with a cooperative agreement under 
        section 454(33), the State shall distribute the amount 
        collected pursuant to the terms of the agreement.''.
                    (B) State option to pass through additional support 
                with federal financial participation beginning with 
                fiscal year 2009.--
                            (i) In general.--Section 457(a) (42 U.S.C. 
                        657(a)) is amended by adding at the end the 
                        following:
            ``(7) State option to pass through additional support with 
        federal financial participation.--
                    ``(A) Families that formerly received assistance.--
                Notwithstanding paragraph (2), a State shall not be 
                required to pay to the Federal Government the Federal 
                share of an amount collected on behalf of a family that 
                formerly received assistance from the State to the 
                extent that the State pays the amount to the family.
                    ``(B) Families that currently receive assistance.--
                            ``(i) In general.--Notwithstanding 
                        paragraph (1), in the case of a family that 
                        receives assistance from the State, a State 
                        shall not be required to pay to the Federal 
                        Government the Federal share of the excepted 
                        portion (as defined in clause (ii)) of any 
                        amount collected on behalf of such family 
                        during a month to the extent that--
                                    ``(I) the State pays the excepted 
                                portion to the family; and
                                    ``(II) the excepted portion is 
                                disregarded in determining the amount 
                                and type of assistance provided to the 
                                family under such program.
                            ``(ii) Excepted portion defined.--For 
                        purposes of this subparagraph, the term 
                        ``excepted portion'' means that portion of the 
                        amount collected on behalf of a family during a 
                        month that does not exceed $100 per month, or 
                        in the case of a family that includes 2 or more 
                        children, that does not exceed an amount 
                        established by the State that is not more than 
                        $200 per month.''.
                            (ii) Effective date.--The amendment made by 
                        clause (i) shall take effect on October 1, 
                        2008.
                            (iii) Redesignation.--Effective October 1, 
                        2009, paragraph (7) of section 457(a) of the 
                        Social Security Act (as added by clause (i)) is 
                        redesignated as paragraph (6).
                    (C) State plan to include election as to which 
                rules to apply in distributing child support arrearages 
                collected on behalf of families formerly receiving 
                assistance.--Section 454 (42 U.S.C. 654) is amended--
                            (i) by striking ``and'' at the end of 
                        paragraph (32);
                            (ii) by striking the period at the end of 
                        paragraph (33) and inserting ``; and''; and
                            (iii) by inserting after paragraph (33) the 
                        following:
            ``(34) include an election by the State to apply section 
        457(a)(2)(B) of this Act or former section 457(a)(2)(B) of this 
        Act (as in effect for the State immediately before the date 
        this paragraph first applies to the State) to the distribution 
        of the amounts which are the subject of such sections and, for 
        so long as the State elects to so apply such former section, 
        the amendments made by subsection (b)(1) of section 7301 of the 
        Deficit Reduction Act of 2005 shall not apply with respect to 
        the State, notwithstanding subsection (e) of such section 
        7301.''.
            (2) Current support amount defined.--Section 457(c) (42 
        U.S.C. 657(c)) is amended by adding at the end the following:
            ``(5) Current support amount.--The term `current support 
        amount' means, with respect to amounts collected as support on 
        behalf of a family, the amount designated as the monthly 
        support obligation of the noncustodial parent in the order 
        requiring the support or calculated by the State based on the 
        order.''.
    (c) State Option To Discontinue Older Support Assignments.--Section 
457(b) (42 U.S.C. 657(b)) is amended to read as follows:
    ``(b) Continuation of Assignments.--
            ``(1) State option to discontinue pre-1997 support 
        assignments.--
                    ``(A) In general.--Any rights to support 
                obligations assigned to a State as a condition of 
                receiving assistance from the State under part A and in 
                effect on September 30, 1997 (or such earlier date on 
                or after August 22, 1996, as the State may choose), may 
                remain assigned after such date.
                    ``(B) Distribution of amounts after assignment 
                discontinuation.--If a State chooses to discontinue the 
                assignment of a support obligation described in 
                subparagraph (A), the State may treat amounts collected 
                pursuant to the assignment as if the amounts had never 
                been assigned and may distribute the amounts to the 
                family in accordance with subsection (a)(4).
            ``(2) State option to discontinue post-1997 assignments.--
                    ``(A) In general.--Any rights to support 
                obligations accruing before the date on which a family 
                first receives assistance under part A that are 
                assigned to a State under that part and in effect 
                before the implementation date of this section may 
                remain assigned after such date.
                    ``(B) Distribution of amounts after assignment 
                discontinuation.--If a State chooses to discontinue the 
                assignment of a support obligation described in 
                subparagraph (A), the State may treat amounts collected 
                pursuant to the assignment as if the amounts had never 
                been assigned and may distribute the amounts to the 
                family in accordance with subsection (a)(4).''.
    (d) Conforming Amendments.--Section 6402(c) of the Internal Revenue 
Code of 1986 (relating to offset of past-due support against 
overpayments) is amended--
            (1) in the first sentence, by striking ``the Social 
        Security Act.'' and inserting ``of such Act.''; and
            (2) by striking the third sentence and inserting the 
        following: ``The Secretary shall apply a reduction under this 
        subsection first to an amount certified by the State as past 
        due support under section 464 of the Social Security Act before 
        any other reductions allowed by law.''.
    (e) Effective Date.--
            (1) In general.--Except as otherwise provided in this 
        section, the amendments made by the preceding provisions of 
        this section shall take effect on October 1, 2009, and shall 
        apply to payments under parts A and D of title IV of the Social 
        Security Act for calendar quarters beginning on or after such 
        date, and without regard to whether regulations to implement 
        the amendments (in the case of State programs operated under 
        such part D) are promulgated by such date.
            (2) State option to accelerate effective date.--
        Notwithstanding paragraph (1), a State may elect to have the 
        amendments made by the preceding provisions of this section 
        apply to the State and to amounts collected by the State (and 
        the payments under parts A and D), on and after such date as 
        the State may select that is not earlier than October 1, 2008, 
        and not later than September 30, 2009.
    (f) Use of Tax Refund Intercept Program To Collect Past-Due Child 
Support on Behalf of Children Who Are Not Minors.--
            (1) In general.--Section 464 (42 U.S.C. 664) is amended--
                    (A) in subsection (a)(2)(A), by striking ``(as that 
                term is defined for purposes of this paragraph under 
                subsection (c))''; and
                    (B) in subsection (c)--
                            (i) in paragraph (1)--
                                    (I) by striking ``(1) Except as 
                                provided in paragraph (2), as used in'' 
                                and inserting ``In''; and
                                    (II) by inserting ``(whether or not 
                                a minor)'' after ``a child'' each place 
                                it appears; and
                            (ii) by striking paragraphs (2) and (3).
            (2) Effective date.--The amendments made by paragraph (1) 
        shall take effect on October 1, 2007.
    (g) State Option To Use Statewide Automated Data Processing and 
Information Retrieval System for Interstate Cases.--Section 
466(a)(14)(A)(iii) (42 U.S.C. 666(a)(14)(A)(iii)) is amended by 
inserting before the semicolon the following: ``(but the assisting 
State may establish a corresponding case based on such other State's 
request for assistance)''.

SEC. 7302. MANDATORY REVIEW AND ADJUSTMENT OF CHILD SUPPORT ORDERS FOR 
              FAMILIES RECEIVING TANF.

    (a) In General.--Section 466(a)(10)(A)(i) (42 U.S.C. 
666(a)(10)(A)(i)) is amended--
            (1) by striking ``parent, or,'' and inserting ``parent 
        or''; and
            (2) by striking ``upon the request of the State agency 
        under the State plan or of either parent,''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
take effect on October 1, 2007.

SEC. 7303. DECREASE IN AMOUNT OF CHILD SUPPORT ARREARAGE TRIGGERING 
              PASSPORT DENIAL.

    (a) In General.--Section 452(k)(1) (42 U.S.C. 652(k)(1)) is amended 
by striking ``$5,000'' and inserting ``$2,500''.
    (b) Conforming Amendment.--Section 454(31) (42 U.S.C. 654(31)) is 
amended by striking ``$5,000'' and inserting ``$2,500''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on October 1, 2006.

SEC. 7304. MAINTENANCE OF TECHNICAL ASSISTANCE FUNDING.

    Section 452(j) (42 U.S.C. 652(j)) is amended by inserting ``or the 
amount appropriated under this paragraph for fiscal year 2002, 
whichever is greater'' before ``, which shall be available''.

SEC. 7305. MAINTENANCE OF FEDERAL PARENT LOCATOR SERVICE FUNDING.

    Section 453(o) (42 U.S.C. 653(o)) is amended--
            (1) in the first sentence, by inserting ``or the amount 
        appropriated under this paragraph for fiscal year 2002, 
        whichever is greater'' before ``, which shall be available''; 
        and
            (2) in the second sentence, by striking ``for each of 
        fiscal years 1997 through 2001''.

SEC. 7306. INFORMATION COMPARISONS WITH INSURANCE DATA.

    (a) Duties of the Secretary.--Section 452 (42 U.S.C. 652) is 
amended by adding at the end the following:
    ``(l) Comparisons With Insurance Information.--
            ``(1) In general.--The Secretary, through the Federal 
        Parent Locator Service, may--
                    ``(A) compare information concerning individuals 
                owing past-due support with information maintained by 
                insurers (or their agents) concerning insurance claims, 
                settlements, awards, and payments; and
                    ``(B) furnish information resulting from the data 
                matches to the State agencies responsible for 
                collecting child support from the individuals.
            ``(2) Liability.--An insurer (including any agent of an 
        insurer) shall not be liable under any Federal or State law to 
        any person for any disclosure provided for under this 
        subsection, or for any other action taken in good faith in 
        accordance with this subsection.''.
    (b) State Reimbursement of Federal Costs.--Section 453(k)(3) (42 
U.S.C. 653(k)(3)) is amended by inserting ``or section 452(l)'' after 
``pursuant to this section''.

SEC. 7307. REQUIREMENT THAT STATE CHILD SUPPORT ENFORCEMENT AGENCIES 
              SEEK MEDICAL SUPPORT FOR CHILDREN FROM EITHER PARENT.

    (a) State Agencies Required To Seek Medical Support From Either 
Parent.--
            (1) In general.--Section 466(a)(19)(A) (42 U.S.C. 
        666(a)(19)(A)) is amended by striking ``which include a 
        provision for the health care coverage of the child are 
        enforced'' and inserting ``shall include a provision for 
        medical support for the child to be provided by either or both 
        parents, and shall be enforced''.
            (2) Conforming amendments.--
                    (A) Title iv-d.--
                            (i) Section 452(f) (42 U.S.C. 652(f)) is 
                        amended by striking ``include medical support 
                        as part of any child support order and enforce 
                        medical support'' and inserting ``enforce 
                        medical support included as part of a child 
                        support order''.
                            (ii) Section 466(a)(19) (42 U.S.C. 
                        666(a)(19)), as amended by paragraph (1) of 
                        this subsection, is amended--
                                    (I) in subparagraph (A)--
                                            (aa) by striking ``section 
                                        401(e)(3)(C)'' and inserting 
                                        ``section 401(e)''; and
                                            (bb) by striking ``section 
                                        401(f)(5)(C)'' and inserting 
                                        ``section 401(f)'';
                                    (II) in subparagraph (B)--
                                            (aa) by striking 
                                        ``noncustodial'' each place it 
                                        appears; and
                                            (bb) in clause (iii), by 
                                        striking ``section 466(b)'' and 
                                        inserting ``subsection (b)''; 
                                        and
                                    (III) in subparagraph (C), by 
                                striking ``noncustodial'' each place it 
                                appears and inserting ``obligated''.
                    (B) State or local governmental group health 
                plans.--Section 401(e)(2) of the Child Support 
                Performance and Incentive Act of 1998 (29 U.S.C. 1169 
                note) is amended, in the matter preceding subparagraph 
                (A), by striking ``who is a noncustodial parent of the 
                child''.
                    (C) Church plans.--Section 401(f)(5)(C) of the 
                Child Support Performance and Incentive Act of 1998 (29 
                U.S.C. 1169 note) is amended by striking 
                ``noncustodial'' each place it appears.
    (b) Enforcement of Medical Support Requirements.--Section 452(f) 
(42 U.S.C. 652(f)), as amended by subsection (a)(2)(A)(i), is amended 
by inserting after the first sentence the following: ``A State agency 
administering the program under this part may enforce medical support 
against a custodial parent if health care coverage is available to the 
custodial parent at a reasonable cost, notwithstanding any other 
provision of this part.''.
    (c) Definition of Medical Support.--Section 452(f) (42 U.S.C. 
652(f)), as amended by subsections (a)(2)(A)(i) and (b) of this 
section, is amended by adding at the end the following: ``For purposes 
of this part, the term `medical support' may include health care 
coverage, such as coverage under a health insurance plan (including 
payment of costs of premiums, co-payments, and deductibles) and payment 
for medical expenses incurred on behalf of a child.''.

SEC. 7308. REDUCTION OF FEDERAL MATCHING RATE FOR LABORATORY COSTS 
              INCURRED IN DETERMINING PATERNITY.

    (a) In General.--Section 455(a)(1)(C) (42 U.S.C. 655(a)(1)(C)) is 
amended by striking ``90 percent (rather than the percentage specified 
in subparagraph (A))'' and inserting ``66 percent''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
take effect on October 1, 2006, and shall apply to costs incurred on or 
after that date.

SEC. 7309. ENDING FEDERAL MATCHING OF STATE SPENDING OF FEDERAL 
              INCENTIVE PAYMENTS.

    (a) In General.--Section 455(a)(1) (42 U.S.C. 655(a)(1)) is amended 
by inserting ``from amounts paid to the State under section 458 or'' 
before ``to carry out an agreement''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
take effect on October 1, 2007.

SEC. 7310. MANDATORY FEE FOR SUCCESSFUL CHILD SUPPORT COLLECTION FOR 
              FAMILY THAT HAS NEVER RECEIVED TANF.

    (a) In General.--Section 454(6)(B) (42 U.S.C. 654(6)(B)) is 
amended--
            (1) by inserting ``(i)'' after ``(B)'';
            (2) by redesignating clauses (i) and (ii) as subclauses (I) 
        and (II), respectively;
            (3) by adding ``and'' after the semicolon; and
            (4) by adding after and below the end the following new 
        clause:
                    ``(ii) in the case of an individual who has never 
                received assistance under a State program funded under 
                part A and for whom the State has collected at least 
                $500 of support, the State shall impose an annual fee 
                of $25 for each case in which services are furnished, 
                which shall be retained by the State from support 
                collected on behalf of the individual (but not from the 
                1st $500 so collected), paid by the individual applying 
                for the services, recovered from the absent parent, or 
                paid by the State out of its own funds (the payment of 
                which from State funds shall not be considered as an 
                administrative cost of the State for the operation of 
                the plan, and the fees shall be considered income to 
                the program);''.
    (b) Conforming Amendments.--Section 457(a)(3) (42 U.S.C. 657(a)(3)) 
is amended to read as follows:
            ``(3) Families that never received assistance.--In the case 
        of any other family, the State shall distribute to the family 
        the portion of the amount so collected that remains after 
        withholding any fee pursuant to section 454(6)(B)(ii).''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on October 1, 2006.

SEC. 7311. EXCEPTION TO GENERAL EFFECTIVE DATE FOR STATE PLANS 
              REQUIRING STATE LAW AMENDMENTS.

    In the case of a State plan under part D of title IV of the Social 
Security Act which the Secretary determines requires State legislation 
in order for the plan to meet the additional requirements imposed by 
the amendments made by this subtitle, the effective date of the 
amendments imposing the additional requirements shall be 3 months after 
the first day of the first calendar quarter beginning after the close 
of the first regular session of the State legislature that begins after 
the date of the enactment of this Act. For purposes of the preceding 
sentence, in the case of a State that has a 2-year legislative session, 
each year of the session shall be considered to be a separate regular 
session of the State legislature.

                       Subtitle D--Child Welfare

SEC. 7401. STRENGTHENING COURTS.

    (a) Court Improvement Grants.--
            (1) In general.--Section 438(a) (42 U.S.C. 629h(a)) is 
        amended--
                    (A) by striking ``and'' at the end of paragraph 
                (1);
                    (B) by striking the period at the end of paragraph 
                (2) and inserting a semicolon; and
                    (C) by adding at the end the following:
            ``(3) to ensure that the safety, permanence, and well-being 
        needs of children are met in a timely and complete manner; and
            ``(4) to provide for the training of judges, attorneys and 
        other legal personnel in child welfare cases.''.
            (2) Applications.--Section 438(b) (42 U.S.C. 629h(b)) is 
        amended to read as follows:
    ``(b) Applications.--
            ``(1) In general.--In order to be eligible to receive a 
        grant under this section, a highest State court shall submit to 
        the Secretary an application at such time, in such form, and 
        including such information and assurances as the Secretary may 
        require, including--
                    ``(A) in the case of a grant for the purpose 
                described in subsection (a)(3), a description of how 
                courts and child welfare agencies on the local and 
                State levels will collaborate and jointly plan for the 
                collection and sharing of all relevant data and 
                information to demonstrate how improved case tracking 
                and analysis of child abuse and neglect cases will 
                produce safe and timely permanency decisions;
                    ``(B) in the case of a grant for the purpose 
                described in subsection (a)(4), a demonstration that a 
                portion of the grant will be used for cross-training 
                initiatives that are jointly planned and executed with 
                the State agency or any other agency under contract 
                with the State to administer the State program under 
                the State plan under subpart 1, the State plan approved 
                under section 434, or the State plan approved under 
                part E; and
                    ``(C) in the case of a grant for any purpose 
                described in subsection (a), a demonstration of 
                meaningful and ongoing collaboration among the courts 
                in the State, the State agency or any other agency 
                under contract with the State who is responsible for 
                administering the State program under part B or E, and, 
                where applicable, Indian tribes.
            ``(2) Separate applications.--A highest State court 
        desiring grants under this section for 2 or more purposes shall 
        submit separate applications for the following grants:
                    ``(A) A grant for the purposes described in 
                paragraphs (1) and (2) of subsection (a).
                    ``(B) A grant for the purpose described in 
                subsection (a)(3).
                    ``(C) A grant for the purpose described in 
                subsection (a)(4).''.
            (3) Allotments.--Section 438(c) (42 U.S.C. 429h(c)) is 
        amended--
                    (A) in paragraph (1)--
                            (i) by inserting ``of this section for a 
                        grant described in subsection (b)(2)(A) of this 
                        section'' after ``subsection (b)''; and
                            (ii) by striking ``paragraph (2) of this 
                        subsection'' and inserting ``subparagraph (B) 
                        of this paragraph'';
                    (B) in paragraph (2)--
                            (i) by striking ``this paragraph'' and 
                        inserting ``this subparagraph'';
                            (ii) by striking ``paragraph (1) of this 
                        subsection'' and inserting ``subparagraph (A) 
                        of this paragraph''; and
                            (iii) by inserting ``for such a grant'' 
                        after ``subsection (b)'';
                    (C) by redesignating and indenting paragraphs (1) 
                and (2) as subparagraphs (A) and (B), respectively;
                    (D) by inserting before and above such subparagraph 
                (A) the following:
            ``(1) Grants to assess and improve handling of court 
        proceedings relating to foster care and adoption.--''; and
                    (E) by adding at the end the following:
            ``(2) Grants for improved data collection and training.--
                    ``(A) In general.--Each highest State court which 
                has an application approved under subsection (b) of 
                this section for a grant referred to in subparagraph 
                (B) or (C) of subsection (b)(2) shall be entitled to 
                payment, for each of fiscal years 2006 through 2010, 
                from the amount made available under whichever of 
                paragraph (1) or (2) of subsection (e) applies with 
                respect to the grant, of an amount equal to the sum of 
                $85,000 plus the amount described in subparagraph (B) 
                of this paragraph for the fiscal year with respect to 
                the grant.
                    ``(B) Formula.--The amount described in this 
                subparagraph for any fiscal year with respect to a 
                grant referred to in subparagraph (B) or (C) of 
                subsection (b)(2) is the amount that bears the same 
                ratio to the amount made available under subsection (e) 
                for such a grant (reduced by the dollar amount 
                specified in subparagraph (A) of this paragraph) as the 
                number of individuals in the State who have not 
                attained 21 years of age bears to the total number of 
                such individuals in all States the highest State courts 
                of which have approved applications under subsection 
                (b) for such a grant.''.
            (4) Funding.--Section 438 (42 U.S.C. 629h) is amended by 
        adding at the end the following:
    ``(e) Funding for Grants for Improved Data Collection and 
Training.--Out of any money in the Treasury of the United States not 
otherwise appropriated, there are appropriated to the Secretary, for 
each of fiscal years 2006 through 2010--
            ``(1) $10,000,000 for grants referred to in subsection 
        (b)(2)(B); and
            ``(2) $10,000,000 for grants referred to in subsection 
        (b)(2)(C).''.
    (b) Requirement To Demonstrate Meaningful Collaboration Between 
Courts and Agencies in Child Welfare Services Programs.--Section 422(b) 
(42 U.S.C. 622(b)) is amended--
            (1) by striking ``and'' at the end of paragraph (13);
            (2) by striking the period at the end of paragraph (14) and 
        inserting ``; and''; and
            (3) by adding at the end the following:
            ``(15) demonstrate substantial, ongoing, and meaningful 
        collaboration with State courts in the development and 
        implementation of the State plan under subpart 1, the State 
        plan approved under subpart 2, and the State plan approved 
        under part E, and in the development and implementation of any 
        program improvement plan required under section 1123A.''.
    (c) Use of Child Welfare Records in State Court Proceedings.--
Section 471 (42 U.S.C. 671) is amended--
            (1) in subsection (a)(8), by inserting ``subject to 
        subsection (c),'' after ``(8)''; and
            (2) by adding at the end the following:
    ``(c) Use of Child Welfare Records in State Court Proceedings.--
Subsection (a)(8) shall not be construed to limit the flexibility of a 
State in determining State policies relating to public access to court 
proceedings to determine child abuse and neglect or other court 
hearings held pursuant to part B or this part, except that such 
policies shall, at a minimum, ensure the safety and well-being of the 
child, parents, and family.''.

SEC. 7402. FUNDING OF SAFE AND STABLE FAMILIES PROGRAMS.

    Section 436(a) (42 U.S.C. 629f(a)) is amended to read as follows:
    ``(a) Authorization.--In addition to any amount otherwise made 
available to carry out this subpart, there are authorized to be 
appropriated to carry out this subpart $345,000,000 for fiscal year 
2006. Notwithstanding the preceding sentence, the total amount 
authorized to be so appropriated for fiscal year 2006 under this 
subsection and under this subsection (as in effect before the date of 
the enactment of the Deficit Reduction Act of 2005) is $345,000,000.''.

SEC. 7403. CLARIFICATION REGARDING FEDERAL MATCHING OF CERTAIN 
              ADMINISTRATIVE COSTS UNDER THE FOSTER CARE MAINTENANCE 
              PAYMENTS PROGRAM.

    (a) Administrative Costs Relating to Unlicensed Care.--Section 472 
(42 U.S.C. 672) is amended by inserting after subsection (h) the 
following:
    ``(i) Administrative Costs Associated With Otherwise Eligible 
Children not in Licensed Foster Care Settings.--Expenditures by a State 
that would be considered administrative expenditures for purposes of 
section 474(a)(3) if made with respect to a child who was residing in a 
foster family home or child-care institution shall be so considered 
with respect to a child not residing in such a home or institution--
            ``(1) in the case of a child who has been removed in 
        accordance with subsection (a) of this section from the home of 
        a relative specified in section 406(a) (as in effect on July 
        16, 1996), only for expenditures--
                    ``(A) with respect to a period of not more than the 
                lesser of 12 months or the average length of time it 
                takes for the State to license or approve a home as a 
                foster home, in which the child is in the home of a 
                relative and an application is pending for licensing or 
                approval of the home as a foster family home; or
                    ``(B) with respect to a period of not more than 1 
                calendar month when a child moves from a facility not 
                eligible for payments under this part into a foster 
                family home or child care institution licensed or 
                approved by the State; and
            ``(2) in the case of any other child who is potentially 
        eligible for benefits under a State plan approved under this 
        part and at imminent risk of removal from the home, only if--
                    ``(A) reasonable efforts are being made in 
                accordance with section 471(a)(15) to prevent the need 
                for, or if necessary to pursue, removal of the child 
                from the home; and
                    ``(B) the State agency has made, not less often 
                than every 6 months, a determination (or 
                redetermination) as to whether the child remains at 
                imminent risk of removal from the home.''.
    (b) Conforming Amendment.--Section 474(a)(3) (42 U.S.C. 674(a)(3)) 
is amended by inserting ``subject to section 472(i)'' before ``an 
amount equal to''.

SEC. 7404. CLARIFICATION OF ELIGIBILITY FOR FOSTER CARE MAINTENANCE 
              PAYMENTS AND ADOPTION ASSISTANCE.

    (a) Foster Care Maintenance Payments.--Section 472(a) (42 U.S.C. 
672(a)) is amended to read as follows:
    ``(a) In General.--
            ``(1) Eligibility.--Each State with a plan approved under 
        this part shall make foster care maintenance payments on behalf 
        of each child who has been removed from the home of a relative 
        specified in section 406(a) (as in effect on July 16, 1996) 
        into foster care if--
                    ``(A) the removal and foster care placement met, 
                and the placement continues to meet, the requirements 
                of paragraph (2); and
                    ``(B) the child, while in the home, would have met 
                the AFDC eligibility requirement of paragraph (3).
            ``(2) Removal and foster care placement requirements.--The 
        removal and foster care placement of a child meet the 
        requirements of this paragraph if--
                    ``(A) the removal and foster care placement are in 
                accordance with--
                            ``(i) a voluntary placement agreement 
                        entered into by a parent or legal guardian of 
                        the child who is the relative referred to in 
                        paragraph (1); or
                            ``(ii) a judicial determination to the 
                        effect that continuation in the home from which 
                        removed would be contrary to the welfare of the 
                        child and that reasonable efforts of the type 
                        described in section 471(a)(15) for a child 
                        have been made;
                    ``(B) the child's placement and care are the 
                responsibility of--
                            ``(i) the State agency administering the 
                        State plan approved under section 471; or
                            ``(ii) any other public agency with which 
                        the State agency administering or supervising 
                        the administration of the State plan has made 
                        an agreement which is in effect; and
                    ``(C) the child has been placed in a foster family 
                home or child-care institution.
            ``(3) AFDC eligibility requirement.--
                    ``(A) In general.--A child in the home referred to 
                in paragraph (1) would have met the AFDC eligibility 
                requirement of this paragraph if the child--
                            ``(i) would have received aid under the 
                        State plan approved under section 402 (as in 
                        effect on July 16, 1996) in the home, in or for 
                        the month in which the agreement was entered 
                        into or court proceedings leading to the 
                        determination referred to in paragraph 
                        (2)(A)(ii) of this subsection were initiated; 
                        or
                            ``(ii)(I) would have received the aid in 
                        the home, in or for the month referred to in 
                        clause (i), if application had been made 
                        therefor; or
                            ``(II) had been living in the home within 6 
                        months before the month in which the agreement 
                        was entered into or the proceedings were 
                        initiated, and would have received the aid in 
                        or for such month, if, in such month, the child 
                        had been living in the home with the relative 
                        referred to in paragraph (1) and application 
                        for the aid had been made.
                    ``(B) Resources determination.--For purposes of 
                subparagraph (A), in determining whether a child would 
                have received aid under a State plan approved under 
                section 402 (as in effect on July 16, 1996), a child 
                whose resources (determined pursuant to section 
                402(a)(7)(B), as so in effect) have a combined value of 
                not more than $10,000 shall be considered a child whose 
                resources have a combined value of not more than $1,000 
                (or such lower amount as the State may determine for 
                purposes of section 402(a)(7)(B)).
            ``(4) Eligibility of certain alien children.--Subject to 
        title IV of the Personal Responsibility and Work Opportunity 
        Reconciliation Act of 1996, if the child is an alien 
        disqualified under section 245A(h) or 210(f) of the Immigration 
        and Nationality Act from receiving aid under the State plan 
        approved under section 402 in or for the month in which the 
        agreement described in paragraph (2)(A)(i) was entered into or 
        court proceedings leading to the determination described in 
        paragraph (2)(A)(ii) were initiated, the child shall be 
        considered to satisfy the requirements of paragraph (3), with 
        respect to the month, if the child would have satisfied the 
        requirements but for the disqualification.''.
    (b) Adoption Assistance.--Section 473(a)(2) (42 U.S.C. 673(a)(2)) 
is amended to read as follows:
    ``(2)(A) For purposes of paragraph (1)(B)(ii), a child meets the 
requirements of this paragraph if the child--
            ``(i)(I)(aa) was removed from the home of a relative 
        specified in section 406(a) (as in effect on July 16, 1996) and 
        placed in foster care in accordance with a voluntary placement 
        agreement with respect to which Federal payments are provided 
        under section 474 (or section 403, as such section was in 
        effect on July 16, 1996), or in accordance with a judicial 
        determination to the effect that continuation in the home would 
        be contrary to the welfare of the child; and
            ``(bb) met the requirements of section 472(a)(3) with 
        respect to the home referred to in item (aa) of this subclause;
            ``(II) meets all of the requirements of title XVI with 
        respect to eligibility for supplemental security income 
        benefits; or
            ``(III) is a child whose costs in a foster family home or 
        child-care institution are covered by the foster care 
        maintenance payments being made with respect to the minor 
        parent of the child as provided in section 475(4)(B); and
            ``(ii) has been determined by the State, pursuant to 
        subsection (c) of this section, to be a child with special 
        needs.
    ``(B) Section 472(a)(4) shall apply for purposes of subparagraph 
(A) of this paragraph, in any case in which the child is an alien 
described in such section.
    ``(C) A child shall be treated as meeting the requirements of this 
paragraph for the purpose of paragraph (1)(B)(ii) if the child--
            ``(i) meets the requirements of subparagraph (A)(ii);
            ``(ii) was determined eligible for adoption assistance 
        payments under this part with respect to a prior adoption;
            ``(iii) is available for adoption because--
                    ``(I) the prior adoption has been dissolved, and 
                the parental rights of the adoptive parents have been 
                terminated; or
                    ``(II) the child's adoptive parents have died; and
            ``(iv) fails to meet the requirements of subparagraph (A) 
        but would meet such requirements if--
                    ``(I) the child were treated as if the child were 
                in the same financial and other circumstances the child 
                was in the last time the child was determined eligible 
                for adoption assistance payments under this part; and
                    ``(II) the prior adoption were treated as never 
                having occurred.''.

                Subtitle E--Supplemental Security Income

SEC. 7501. REVIEW OF STATE AGENCY BLINDNESS AND DISABILITY 
              DETERMINATIONS.

     Section 1633 (42 U.S.C. 1383b) is amended by adding at the end the 
following:
    ``(e)(1) The Commissioner of Social Security shall review 
determinations, made by State agencies pursuant to subsection (a) in 
connection with applications for benefits under this title on the basis 
of blindness or disability, that individuals who have attained 18 years 
of age are blind or disabled as of a specified onset date. The 
Commissioner of Social Security shall review such a determination 
before any action is taken to implement the determination.
    ``(2)(A) In carrying out paragraph (1), the Commissioner of Social 
Security shall review--
            ``(i) at least 20 percent of all determinations referred to 
        in paragraph (1) that are made in fiscal year 2006;
            ``(ii) at least 40 percent of all such determinations that 
        are made in fiscal year 2007; and
            ``(iii) at least 50 percent of all such determinations that 
        are made in fiscal year 2008 or thereafter.
    ``(B) In carrying out subparagraph (A), the Commissioner of Social 
Security shall, to the extent feasible, select for review the 
determinations which the Commissioner of Social Security identifies as 
being the most likely to be incorrect.''.

SEC. 7502. PAYMENT OF CERTAIN LUMP SUM BENEFITS IN INSTALLMENTS UNDER 
              THE SUPPLEMENTAL SECURITY INCOME PROGRAM.

    (a) In General.--Section 1631(a)(10)(A)(i) (42 U.S.C. 
1383(a)(10)(A)(i)) is amended by striking ``12'' and inserting ``3''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
take effect 3 months after the date of the enactment of this Act.

       Subtitle F--Repeal of Continued Dumping and Subsidy Offset

SEC. 7601. REPEAL OF CONTINUED DUMPING AND SUBSIDY OFFSET.

    (a) Repeal.--Effective upon the date of enactment of this Act, 
section 754 of the Tariff Act of 1930 (19 U.S.C. 1675c), and the item 
relating to section 754 in the table of contents of title VII of that 
Act, are repealed.
    (b) Distributions on Certain Entries.--All duties on entries of 
goods made and filed before October 1, 2007, that would, but for 
subsection (a) of this section, be distributed under section 754 of the 
Tariff Act of 1930, shall be distributed as if section 754 of the 
Tariff Act of 1930 had not been repealed by subsection (a).

                       Subtitle G--Effective Date

SEC. 7701. EFFECTIVE DATE.

    Except as otherwise provided in this title, this title and the 
amendments made by this title shall take effect as if enacted on 
October 1, 2005.

          TITLE VIII--EDUCATION AND PENSION BENEFIT PROVISIONS

                Subtitle A--Higher Education Provisions

SEC. 8001. SHORT TITLE; REFERENCE; EFFECTIVE DATE.

    (a) Short Title.--This subtitle may be cited as the ``Higher 
Education Reconciliation Act of 2005''.
    (b) References.--Except as otherwise expressly provided, whenever 
in this subtitle an amendment or repeal is expressed in terms of an 
amendment to, or repeal of, a section or other provision, the reference 
shall be considered to be made to a section or other provision of the 
Higher Education Act of 1965 (20 U.S.C. 1001 et seq.).
    (c) Effective Date.--Except as otherwise provided in this subtitle 
or the amendments made by this subtitle, the amendments made by this 
subtitle shall be effective July 1, 2006.

SEC. 8002. MODIFICATION OF 50/50 RULE.

    Section 102(a)(3) (20 U.S.C. 1002(a)(3)) is amended--
            (1) in subparagraph (A), by inserting ``(excluding courses 
        offered by telecommunications as defined in section 
        484(l)(4))'' after ``courses by correspondence''; and
            (2) in subparagraph (B), by inserting ``(excluding courses 
        offered by telecommunications as defined in section 
        484(l)(4))'' after ``correspondence courses''.

SEC. 8003. ACADEMIC COMPETITIVENESS GRANTS.

    Subpart 1 of part A of title IV (20 U.S.C. 1070a) is amended by 
adding after section 401 the following new section:

``SEC. 401A. ACADEMIC COMPETITIVENESS GRANTS.

    ``(a) Academic Competitiveness Grant Program.--
            ``(1) Academic competitiveness grants authorized.--The 
        Secretary shall award grants, in the amounts specified in 
        subsection (d)(1), to eligible students to assist the eligible 
        students in paying their college education expenses.
            ``(2) Academic competitiveness council.--
                    ``(A) Establishment.--There is established an 
                Academic Competitiveness Council (referred to in this 
                paragraph as the `Council'). From the funds made 
                available under subsection (e) for fiscal year 2006, 
                $50,000 shall be available to the Council to carry out 
                the duties described in subparagraph (B). The Council 
                shall be chaired by the Secretary of Education, and the 
                membership of the Council shall consist of officials 
                from Federal agencies with responsibilities for 
                managing existing Federal programs that promote 
                mathematics and science (or designees of such officials 
                with significant decision-making authority).
                    ``(B) Duties.--The Council shall--
                            ``(i) identify all Federal programs with a 
                        mathematics or science focus;
                            ``(ii) identify the target populations 
                        being served by such programs;
                            ``(iii) determine the effectiveness of such 
                        programs;
                            ``(iv) identify areas of overlap or 
                        duplication in such programs; and
                            ``(v) recommend ways to efficiently 
                        integrate and coordinate such programs.
                    ``(C) Report.--Not later than one year after the 
                date of enactment of the Higher Education 
                Reconciliation Act of 2005, the Council shall transmit 
                a report to each committee of Congress with 
                jurisdiction over a Federal program identified under 
                subparagraph (B)(i), detailing the findings and 
                recommendations under subparagraph (B), including 
                recommendations for legislative or administrative 
                action.
    ``(b) Designation.--A grant under this section--
            ``(1) for the first or second academic year of a program of 
        undergraduate education shall be known as an `Academic 
        Competitiveness Grant'; and
            ``(2) for the third or fourth academic year of a program of 
        undergraduate education shall be known as a `National Science 
        and Mathematics Access to Retain Talent Grant' or a `National 
        SMART Grant'.
    ``(c) Definition of Eligible Student.--In this section the term 
`eligible student' means a full-time student who, for the academic year 
for which the determination of eligibility is made--
            ``(1) is a citizen of the United States;
            ``(2) is eligible for a Federal Pell Grant; and
            ``(3) in the case of a student enrolled or accepted for 
        enrollment in--
                    ``(A) the first academic year of a program of 
                undergraduate education at a two- or four-year degree-
                granting institution of higher education--
                            ``(i) has successfully completed, after 
                        January 1, 2006, a rigorous secondary school 
                        program of study established by a State or 
                        local educational agency and recognized as such 
                        by the Secretary; and
                            ``(ii) has not been previously enrolled in 
                        a program of undergraduate education;
                    ``(B) the second academic year of a program of 
                undergraduate education at a two- or four-year degree-
                granting institution of higher education--
                            ``(i) has successfully completed, after 
                        January 1, 2005, a rigorous secondary school 
                        program of study established by a State or 
                        local educational agency and recognized as such 
                        by the Secretary; and
                            ``(ii) has obtained a cumulative grade 
                        point average of at least 3.0 (or the 
                        equivalent as determined under regulations 
                        prescribed by the Secretary) at the end of the 
                        first academic year of such program of 
                        undergraduate education; or
                    ``(C) the third or fourth academic year of a 
                program of undergraduate education at a four-year 
                degree-granting institution of higher education--
                            ``(i) is pursuing a major in--
                                    ``(I) the physical, life, or 
                                computer sciences, mathematics, 
                                technology, or engineering (as 
                                determined by the Secretary pursuant to 
                                regulations); or
                                    ``(II) a foreign language that the 
                                Secretary, in consultation with the 
                                Director of National Intelligence, 
                                determines is critical to the national 
                                security of the United States; and
                            ``(ii) has obtained a cumulative grade 
                        point average of at least 3.0 (or the 
                        equivalent as determined under regulations 
                        prescribed by the Secretary) in the coursework 
                        required for the major described in clause (i).
    ``(d) Grant Award.--
            ``(1) Amounts.--
                    ``(A) The Secretary shall award a grant under this 
                section in the amount of--
                            ``(i) $750 for an eligible student under 
                        subsection (c)(3)(A);
                            ``(ii) $1,300 for an eligible student under 
                        subsection (c)(3)(B); or
                            ``(iii) $4,000 for an eligible student 
                        under subsection (c)(3)(C).
                    ``(B) Notwithstanding subparagraph (A)--
                            ``(i) the amount of such grant, in 
                        combination with the Federal Pell Grant 
                        assistance and other student financial 
                        assistance available to such student, shall not 
                        exceed the student's cost of attendance;
                            ``(ii) if the amount made available under 
                        subsection (e) for any fiscal year is less than 
                        the amount required to be provided grants to 
                        all eligible students in the amounts determined 
                        under subparagraph (A) and clause (i) of this 
                        subparagraph, then the amount of the grant to 
                        each eligible student shall be ratably reduced; 
                        and
                            ``(iii) if additional amounts are 
                        appropriated for any such fiscal year, such 
                        reduced amounts shall be increased on the same 
                        basis as they were reduced.
            ``(2) Limitations.--The Secretary shall not award a grant 
        under this section--
                    ``(A) to any student for an academic year of a 
                program of undergraduate education described in 
                subparagraph (A), (B), or (C) of subsection (c)(3) for 
                which the student received credit before the date of 
                enactment of the Higher Education Reconciliation Act of 
                2005; or
                    ``(B) to any student for more than--
                            ``(i) one academic year under subsection 
                        (c)(3)(A);
                            ``(ii) one academic year under subsection 
                        (c)(3)(B); or
                            ``(iii) two academic years under subsection 
                        (c)(3)(C).
    ``(e) Funding.--
            ``(1) Authorization and appropriation of funds.--There are 
        authorized to be appropriated, and there are appropriated, out 
        of any money in the Treasury not otherwise appropriated, for 
        the Department of Education to carry out this section--
                    ``(A) $790,000,000 for fiscal year 2006;
                    ``(B) $850,000,000 for fiscal year 2007;
                    ``(C) $920,000,000 for fiscal year 2008;
                    ``(D) $960,000,000 for fiscal year 2009; and
                    ``(E) $1,010,000,000 for fiscal year 2010.
            ``(2) Use of excess funds.--If, at the end of a fiscal 
        year, the funds available for awarding grants under this 
        section exceed the amount necessary to make such grants in the 
        amounts authorized by subsection (d), then all of the excess 
        funds shall remain available for awarding grants under this 
        section during the subsequent fiscal year.
    ``(f) Recognition of Programs of Study.--The Secretary shall 
recognize at least one rigorous secondary school program of study in 
each State under subsection (c)(3)(A) and (B) for the purpose of 
determining student eligibility under such subsection.
    ``(g) Sunset Provision.--The authority to make grants under this 
section shall expire at the end of academic year 2010-2011.''.

SEC. 8004. REAUTHORIZATION OF FEDERAL FAMILY EDUCATION LOAN PROGRAM.

    (a) Authorization of Appropriations.--Section 421(b)(5) (20 U.S.C. 
1071(b)(5)) is amended by striking ``an administrative cost allowance'' 
and inserting ``a loan processing and issuance fee''.
    (b) Extension of Authority.--
            (1) Federal insurance limitations.--Section 424(a) (20 
        U.S.C. 1074(a)) is amended--
                    (A) by striking ``2004'' and inserting ``2012''; 
                and
                    (B) by striking ``2008'' and inserting ``2016''.
            (2) Guaranteed loans.--Section 428(a)(5) (20 U.S.C. 
        1078(a)(5)) is amended--
                    (A) by striking ``2004'' and inserting ``2012''; 
                and
                    (B) by striking ``2008'' and inserting ``2016''.
            (3) Consolidation loans.--Section 428C(e) (20 U.S.C. 1078-
        3(e)) is amended by striking ``2004'' and inserting ``2012''.

SEC. 8005. LOAN LIMITS.

    (a) Federal Insurance Limits.--Section 425(a)(1)(A) (20 U.S.C. 
1075(a)(1)(A)) is amended--
            (1) in clause (i)(I), by striking ``$2,625'' and inserting 
        ``$3,500''; and
            (2) in clause (ii)(I), by striking ``$3,500'' and inserting 
        ``$4,500''.
    (b) Guarantee Limits.--Section 428(b)(1)(A) (20 U.S.C. 
1078(b)(1)(A)) is amended--
            (1) in clause (i)(I), by striking ``$2,625'' and inserting 
        ``$3,500''; and
            (2) in clause (ii)(I), by striking ``$3,500'' and inserting 
        ``$4,500''.
    (c) Federal PLUS Loans.--Section 428B (20 U.S.C. 1078-2) is 
amended--
            (1) in subsection (a)(1)--
                    (A) in the matter preceding subparagraph (A), by 
                striking ``Parents'' and inserting ``A graduate or 
                professional student or the parents'';
                    (B) in subparagraph (A), by striking ``the 
                parents'' and inserting ``the graduate or professional 
                student or the parents''; and
                    (C) in subparagraph (B), by striking ``the 
                parents'' and inserting ``the graduate or professional 
                student or the parents'';
            (2) in subsection (b), by striking ``any parent'' and 
        inserting ``any graduate or professional student or any 
        parent'';
            (3) in subsection (c)(2), by striking ``parent'' and 
        inserting ``graduate or professional student or parent''; and
            (4) in subsection (d)(1), by striking ``the parent'' and 
        inserting ``the graduate or professional student or the 
        parent''.
    (d) Unsubsidized Stafford Loans for Graduate or Professional 
Students.--Section 428H(d)(2) (20 U.S.C. 1078-8(d)(2)) is amended--
            (1) in subparagraph (C), by striking ``$10,000'' and 
        inserting ``$12,000''; and
            (2) in subparagraph (D)--
                    (A) in clause (i), by striking ``$5,000'' and 
                inserting ``$7,000''; and
                    (B) in clause (ii), by striking ``$5,000'' and 
                inserting ``$7,000''.
    (e) Effective Date of Increases.--The amendments made by 
subsections (a), (b), and (d) shall be effective July 1, 2007.

SEC. 8006. PLUS LOAN INTEREST RATES AND ZERO SPECIAL ALLOWANCE PAYMENT.

    (a) PLUS Loans.--Section 427A(l)(2) (20 U.S.C. 1077a(l)(2)) is 
amended by striking ``7.9 percent'' and inserting ``8.5 percent''.
    (b) Conforming Amendments for Special Allowances.--
            (1) Amendments.--Subparagraph (I) of section 438(b)(2) (20 
        U.S.C. 1087-1(b)(2)) is amended--
                    (A) in clause (iii), by striking ``, subject to 
                clause (v) of this subparagraph'';
                    (B) in clause (iv), by striking ``, subject to 
                clause (vi) of this subparagraph''; and
                    (C) by striking clauses (v), (vi), and (vii) and 
                inserting the following:
                            ``(v) Recapture of excess interest.--
                                    ``(I) Excess credited.--With 
                                respect to a loan on which the 
                                applicable interest rate is determined 
                                under subsection (k) or (l) of section 
                                427A and for which the first 
                                disbursement of principal is made on or 
                                after April 1, 2006, if the applicable 
                                interest rate for any 3-month period 
                                exceeds the special allowance support 
                                level applicable to such loan under 
                                this subparagraph for such period, then 
                                an adjustment shall be made by 
                                calculating the excess interest in the 
                                amount computed under subclause (II) of 
                                this clause, and by crediting the 
                                excess interest to the Government not 
                                less often than annually.
                                    ``(II) Calculation of excess.--The 
                                amount of any adjustment of interest on 
                                a loan to be made under this subsection 
                                for any quarter shall be equal to--
                                            ``(aa) the applicable 
                                        interest rate minus the special 
                                        allowance support level 
                                        determined under this 
                                        subparagraph; multiplied by
                                            ``(bb) the average daily 
                                        principal balance of the loan 
                                        (not including unearned 
                                        interest added to principal) 
                                        during such calendar quarter; 
                                        divided by
                                            ``(cc) four.
                                    ``(III) Special allowance support 
                                level.--For purposes of this clause, 
                                the term `special allowance support 
                                level' means, for any loan, a number 
                                expressed as a percentage equal to the 
                                sum of the rates determined under 
                                subclauses (I) and (III) of clause (i), 
                                and applying any substitution rules 
                                applicable to such loan under clauses 
                                (ii), (iii), and (iv) in determining 
                                such sum.''.
            (2) Effective date.--The amendments made by this subsection 
        shall not apply with respect to any special allowance payment 
        made under section 438 of the Higher Education Act of 1965 (20 
        U.S.C. 1087-1) before April 1, 2006.

SEC. 8007. DEFERMENT OF STUDENT LOANS FOR MILITARY SERVICE.

    (a) Federal Family Education Loans.--Section 428(b)(1)(M) (20 
U.S.C. 1078(b)(1)(M)) is amended--
            (1) by striking ``or'' at the end of clause (ii);
            (2) by redesignating clause (iii) as clause (iv); and
            (3) by inserting after clause (ii) the following new 
        clause:
                            ``(iii) not in excess of 3 years during 
                        which the borrower--
                                    ``(I) is serving on active duty 
                                during a war or other military 
                                operation or national emergency; or
                                    ``(II) is performing qualifying 
                                National Guard duty during a war or 
                                other military operation or national 
                                emergency; or''.
    (b) Direct Loans.--Section 455(f)(2) (20 U.S.C. 1087e(f)(2)) is 
amended--
            (1) by redesignating subparagraph (C) as subparagraph (D); 
        and
            (2) by inserting after subparagraph (B) the following new 
        subparagraph:
                    ``(C) not in excess of 3 years during which the 
                borrower--
                            ``(i) is serving on active duty during a 
                        war or other military operation or national 
                        emergency; or
                            ``(ii) is performing qualifying National 
                        Guard duty during a war or other military 
                        operation or national emergency; or''.
    (c) Perkins Loans.--Section 464(c)(2)(A) (20 U.S.C. 
1087dd(c)(2)(A)) is amended--
            (1) by redesignating clauses (iii) and (iv) as clauses (iv) 
        and (v), respectively; and
            (2) by inserting after clause (ii) the following new 
        clause:
                            ``(iii) not in excess of 3 years during 
                        which the borrower--
                                    ``(I) is serving on active duty 
                                during a war or other military 
                                operation or national emergency; or
                                    ``(II) is performing qualifying 
                                National Guard duty during a war or 
                                other military operation or national 
                                emergency;''.
    (d) Definitions.--Section 481 (20 U.S.C. 1088) is amended by adding 
at the end the following new subsection:
    ``(d) Definitions for Military Deferments.--For purposes of parts 
B, D, and E of this title:
            ``(1) Active duty.--The term `active duty' has the meaning 
        given such term in section 101(d)(1) of title 10, United States 
        Code, except that such term does not include active duty for 
        training or attendance at a service school.
            ``(2) Military operation.--The term `military operation' 
        means a contingency operation as such term is defined in 
        section 101(a)(13) of title 10, United States Code.
            ``(3) National emergency.--The term `national emergency' 
        means the national emergency by reason of certain terrorist 
        attacks declared by the President on September 14, 2001, or 
        subsequent national emergencies declared by the President by 
        reason of terrorist attacks.
            ``(4) Serving on active duty.--The term `serving on active 
        duty during a war or other military operation or national 
        emergency' means service by an individual who is--
                    ``(A) a Reserve of an Armed Force ordered to active 
                duty under section 12301(a), 12301(g), 12302, 12304, or 
                12306 of title 10, United States Code, or any retired 
                member of an Armed Force ordered to active duty under 
                section 688 of such title, for service in connection 
                with a war or other military operation or national 
                emergency, regardless of the location at which such 
                active duty service is performed; and
                    ``(B) any other member of an Armed Force on active 
                duty in connection with such emergency or subsequent 
                actions or conditions who has been assigned to a duty 
                station at a location other than the location at which 
                such member is normally assigned.
            ``(5) Qualifying national guard duty.--The term `qualifying 
        National Guard duty during a war or other military operation or 
        national emergency' means service as a member of the National 
        Guard on full-time National Guard duty (as defined in section 
        101(d)(5) of title 10, United States Code) under a call to 
        active service authorized by the President or the Secretary of 
        Defense for a period of more than 30 consecutive days under 
        section 502(f) of title 32, United States Code, in connection 
        with a war, other military operation, or a national emergency 
        declared by the President and supported by Federal funds.''.
    (e) Rule of Construction.--Nothing in the amendments made by this 
section shall be construed to authorize any refunding of any repayment 
of a loan.
    (f) Effective Date.--The amendments made by this section shall 
apply with respect to loans for which the first disbursement is made on 
or after July 1, 2001.

SEC. 8008. ADDITIONAL LOAN TERMS AND CONDITIONS.

    (a) Disbursement.--Section 428(b)(1)(N) (20 U.S.C. 1078(b)(1)(N)) 
is amended--
            (1) by striking ``or'' at the end of clause (i); and
            (2) by striking clause (ii) and inserting the following:
                            ``(ii) in the case of a student who is 
                        studying outside the United States in a program 
                        of study abroad that is approved for credit by 
                        the home institution at which such student is 
                        enrolled, and only after verification of the 
                        student's enrollment by the lender or guaranty 
                        agency, are, at the request of the student, 
                        disbursed directly to the student by the means 
                        described in clause (i), unless such student 
                        requests that the check be endorsed, or the 
                        funds transfer be authorized, pursuant to an 
                        authorized power-of-attorney; or
                            ``(iii) in the case of a student who is 
                        studying outside the United States in a program 
                        of study at an eligible foreign institution, 
                        are, at the request of the foreign institution, 
                        disbursed directly to the student, only after 
                        verification of the student's enrollment by the 
                        lender or guaranty agency by the means 
                        described in clause (i).''.
    (b) Repayment Plans: Direct Loans.--Section 455(d)(1) (20 U.S.C. 
1087e(d)(1)) is amended by striking subparagraphs (A), (B), and (C) and 
inserting the following:
                    ``(A) a standard repayment plan, consistent with 
                subsection (a)(1) of this section and with section 
                428(b)(9)(A)(i);
                    ``(B) a graduated repayment plan, consistent with 
                section 428(b)(9)(A)(ii);
                    ``(C) an extended repayment plan, consistent with 
                section 428(b)(9)(A)(v), except that the borrower shall 
                annually repay a minimum amount determined by the 
                Secretary in accordance with section 428(b)(1)(L); 
                and''.
    (c) Origination Fees.--
            (1) FFEL program.--Paragraph (2) of section 438(c) (20 
        U.S.C. 1087-1(c)) is amended--
                    (A) by striking the designation and heading of such 
                paragraph and inserting the following:
            ``(2) Amount of origination fees.--
                    ``(A) In general.--''; and
                    (B) by adding at the end the following new 
                subparagraph:
                    ``(B) Subsequent reductions.--Subparagraph (A) 
                shall be applied to loans made under this part (other 
                than loans made under sections 428C and 439(o))--
                            ``(i) by substituting `2.0 percent' for 
                        `3.0 percent' with respect to loans for which 
                        the first disbursement of principal is made on 
                        or after July 1, 2006, and before July 1, 2007;
                            ``(ii) by substituting `1.5 percent' for 
                        `3.0 percent' with respect to loans for which 
                        the first disbursement of principal is made on 
                        or after July 1, 2007, and before July 1, 2008;
                            ``(iii) by substituting `1.0 percent' for 
                        `3.0 percent' with respect to loans for which 
                        the first disbursement of principal is made on 
                        or after July 1, 2008, and before July 1, 2009;
                            ``(iv) by substituting `0.5 percent' for 
                        `3.0 percent' with respect to loans for which 
                        the first disbursement of principal is made on 
                        or after July 1, 2009, and before July 1, 2010; 
                        and
                            ``(v) by substituting `0.0 percent' for 
                        `3.0 percent' with respect to loans for which 
                        the first disbursement of principal is made on 
                        or after July 1, 2010.''.
            (2) Direct loan program.--Subsection (c) of section 455 (20 
        U.S.C. 1087e(c)) is amended--
                    (A) by striking ``(c) Loan Fee.--'' and inserting 
                the following:
    ``(c) Loan Fee.--
            ``(1) In general.--''; and
                    (B) by adding at the end the following:
            ``(2) Subsequent reduction.--Paragraph (1) shall be applied 
        to loans made under this part, other than Federal Direct 
        Consolidation loans and Federal Direct PLUS loans--
                    ``(A) by substituting `3.0 percent' for `4.0 
                percent' with respect to loans for which the first 
                disbursement of principal is made on or after the date 
                of enactment of the Higher Education Reconciliation Act 
                of 2005, and before July 1, 2007;
                    ``(B) by substituting `2.5 percent' for `4.0 
                percent' with respect to loans for which the first 
                disbursement of principal is made on or after July 1, 
                2007, and before July 1, 2008;
                    ``(C) by substituting `2.0 percent' for `4.0 
                percent' with respect to loans for which the first 
                disbursement of principal is made on or after July 1, 
                2008, and before July 1, 2009;
                    ``(D) by substituting `1.5 percent' for `4.0 
                percent' with respect to loans for which the first 
                disbursement of principal is made on or after July 1, 
                2009, and before July 1, 2010; and
                    ``(E) by substituting `1.0 percent' for `4.0 
                percent' with respect to loans for which the first 
                disbursement of principal is made on or after July 1, 
                2010.''.
            (3) Conforming amendment.--Section 455(b)(8)(A) (20 U.S.C. 
        1087e(b)(8)(A)) is amended by inserting ``or origination fee'' 
        after ``reductions in the interest rate''.

SEC. 8009. CONSOLIDATION LOAN CHANGES.

    (a) Consolidation Between Programs.--Section 428C (20 U.S.C. 1078-
3) is amended--
            (1) in subsection (a)(3)(B)(i)--
                    (A) by inserting ``or under section 455(g)'' after 
                ``under this section'' both places it appears;
                    (B) by inserting ``under both sections'' after 
                ``terminates''
                    (C) by striking ``and'' at the end of subclause 
                (III);
                    (D) by striking the period at the end of subclause 
                (IV) and inserting ``; and''; and
                    (E) by adding at the end the following new 
                subclause:
                    ``(V) an individual may obtain a subsequent 
                consolidation loan under section 455(g) only for the 
                purposes of obtaining an income contingent repayment 
                plan, and only if the loan has been submitted to the 
                guaranty agency for default aversion.''; and
            (2) in subsection (b)(5), by striking the first sentence 
        and inserting the following: ``In the event that a lender with 
        an agreement under subsection (a)(1) of this section denies a 
        consolidation loan application submitted to the lender by an 
        eligible borrower under this section, or denies an application 
        submitted to the lender by such a borrower for a consolidation 
        loan with income-sensitive repayment terms, the Secretary shall 
        offer any such borrower who applies for it, a Federal Direct 
        Consolidation loan. The Secretary shall offer such a loan to a 
        borrower who has defaulted, for the purpose of resolving the 
        default.''.
    (b) Repeal of In-School Consolidation.--
            (1) Definition of repayment period.--Section 428(b)(7)(A) 
        (20 U.S.C. 1078(b)(7)(A)) is amended by striking ``shall 
        begin--'' and all that follows through ``earlier date.'' and 
        inserting the following: ``shall begin the day after 6 months 
        after the date the student ceases to carry at least one-half 
        the normal full-time academic workload (as determined by the 
        institution).''.
            (2) Conforming change to eligible borrower definition.--
        Section 428C(a)(3)(A)(ii)(I) (20 U.S.C. 1078-3(a)(3)(A)(ii)(I)) 
        is amended by inserting ``as determined under section 
        428(b)(7)(A)'' after ``repayment status''.
    (c) Additional Amendments.--Section 428C (20 U.S.C. 1078-3) is 
amended in subsection (a)(3), by striking subparagraph (C).
    (d) Conforming Amendments to Direct Loan Program.--Section 455 (20 
U.S.C. 1087e) is amended
            (1) in subsection (a)(1) by inserting ``428C,'' after 
        ``428B,'';
            (2) in subsection (a)(2)--
                    (A) by striking ``and'' at the end of subparagraph 
                (B);
                    (B) by redesignating subparagraph (C) as 
                subparagraph (D); and
                    (C) by inserting after subparagraph (B) the 
                following:
                    ``(C) section 428C shall be known as `Federal 
                Direct Consolidation Loans'; and ''; and
            (3) in subsection (g)--
                    (A) by striking the second sentence; and
                    (B) by adding at the end the following new 
                sentences: ``To be eligible for a consolidation loan 
                under this part, a borrower shall meet the eligibility 
                criteria set forth in section 428C(a)(3). The 
                Secretary, upon application for such a loan, shall 
                comply with the requirements applicable to a lender 
                under section 428C(b)(1)(F).''.

SEC. 8010. REQUIREMENTS FOR DISBURSEMENTS OF STUDENT LOANS.

    Section 428G (20 U.S.C. 1078-7) is amended--
            (1) in subsection (a)(3), by adding at the end the 
        following: ``Notwithstanding section 422(d) of the Higher 
        Education Amendments of 1998, this paragraph shall be effective 
        beginning on the date of enactment of the Higher Education 
        Reconciliation Act of 2005.'';
            (2) in subsection (b)(1), by adding at the end the 
        following: ``Notwithstanding section 422(d) of the Higher 
        Education Amendments of 1998, the second sentence of this 
        paragraph shall be effective beginning on the date of enactment 
        of the Higher Education Reconciliation Act of 2005.''; and
            (3) in subsection (e), by striking ``, made to a student to 
        cover the cost of attendance at an eligible institution outside 
        the United States''.

SEC. 8011. SCHOOL AS LENDER.

    Paragraph (2) of section 435(d) (20 U.S.C. 1085(d)(2)) is amended 
to read as follows:
            ``(2) Requirements for eligible institutions.--
                    ``(A) In general.--To be an eligible lender under 
                this part, an eligible institution--
                            ``(i) shall employ at least one person 
                        whose full-time responsibilities are limited to 
                        the administration of programs of financial aid 
                        for students attending such institution;
                            ``(ii) shall not be a home study school;
                            ``(iii) shall not--
                                    ``(I) make a loan to any 
                                undergraduate student;
                                    ``(II) make a loan other than a 
                                loan under section 428 or 428H to a 
                                graduate or professional student; or
                                    ``(III) make a loan to a borrower 
                                who is not enrolled at that 
                                institution;
                            ``(iv) shall award any contract for 
                        financing, servicing, or administration of 
                        loans under this title on a competitive basis;
                            ``(v) shall offer loans that carry an 
                        origination fee or an interest rate, or both, 
                        that are less than such fee or rate authorized 
                        under the provisions of this title;
                            ``(vi) shall not have a cohort default rate 
                        (as defined in section 435(m)) greater than 10 
                        percent;
                            ``(vii) shall, for any year for which the 
                        institution engages in activities as an 
                        eligible lender, provide for a compliance audit 
                        conducted in accordance with section 
                        428(b)(1)(U)(iii)(I), and the regulations 
                        thereunder, and submit the results of such 
                        audit to the Secretary;
                            ``(viii) shall use any proceeds from 
                        special allowance payments and interest 
                        payments from borrowers, interest subsidies 
                        received from the Department of Education, and 
                        any proceeds from the sale or other disposition 
                        of loans, for need-based grant programs; and
                            ``(ix) shall have met the requirements of 
                        subparagraphs (A) through (F) of this paragraph 
                        as in effect on the day before the date of 
                        enactment of the Higher Education 
                        Reconciliation Act of 2005, and made loans 
                        under this part, on or before April 1, 2006.
                    ``(B) Administrative expenses.--An eligible lender 
                under subparagraph (A) shall be permitted to use a 
                portion of the proceeds described in subparagraph 
                (A)(viii) for reasonable and direct administrative 
                expenses.
                    ``(C) Supplement, not supplant.--An eligible lender 
                under subparagraph (A) shall ensure that the proceeds 
                described in subparagraph (A)(viii) are used to 
                supplement, and not to supplant, non-Federal funds that 
                would otherwise be used for need-based grant 
                programs.''.

SEC. 8012. REPAYMENT BY THE SECRETARY OF LOANS OF BANKRUPT, DECEASED, 
              OR DISABLED BORROWERS; TREATMENT OF BORROWERS ATTENDING 
              SCHOOLS THAT FAIL TO PROVIDE A REFUND, ATTENDING CLOSED 
              SCHOOLS, OR FALSELY CERTIFIED AS ELIGIBLE TO BORROW.

    Section 437 (20 U.S.C. 1087) is amended--
            (1) in the section heading, by striking ``closed schools or 
        falsely certified as eligible to borrow'' and inserting 
        ``schools that fail to provide a refund, attending closed 
        schools, or falsely certified as eligible to borrow''; and
            (2) in the first sentence of subsection (c)(1), by 
        inserting ``or was falsely certified as a result of a crime of 
        identity theft'' after ``falsely certified by the eligible 
        institution''.

SEC. 8013. ELIMINATION OF TERMINATION DATES FROM TAXPAYER-TEACHER 
              PROTECTION ACT OF 2004.

    (a) Extension of Limitations on Special Allowance for Loans From 
the Proceeds of Tax Exempt Issues.--Section 438(b)(2)(B) (20 U.S.C. 
1087-1(b)(2)(B)) is amended--
            (1) in clause (iv), by striking ``and before January 1, 
        2006,''; and
            (2) in clause (v)(II)--
                    (A) by striking ``and before January 1, 2006,'' 
                each place it appears in divisions (aa) and (bb); and
                    (B) by striking ``, and before January 1, 2006'' in 
                division (cc).
    (b) Additional Limitation on Special Allowance for Loans From the 
Proceeds of Tax Exempt Issues.--Section 438(b)(2)(B) (20 U.S.C 1087-
1(b)(2)(B)) is further amended by adding at the end thereof the 
following new clauses:
            ``(vi) Notwithstanding clauses (i), (ii), and (v), but 
        subject to clause (vii), the quarterly rate of the special 
        allowance shall be the rate determined under subparagraph (A), 
        (E), (F), (G), (H), or (I) of this paragraph, as the case may 
        be, for a holder of loans--
                    ``(I) that were made or purchased on or after the 
                date of enactment of the Higher Education 
                Reconciliation Act of 2005; or
                    ``(II) that were not earning a quarterly rate of 
                special allowance determined under clauses (i) or (ii) 
                of subparagraph (B) of this paragraph (20 U.S.C. 1087-
                1(b)(2)(b)) as of the date of enactment of the Higher 
                Education Reconciliation Act of 2005.
            ``(vii) Clause (vi) shall be applied by substituting 
        `December 31, 2010' for `the date of enactment of the Higher 
        Education Reconciliation Act of 2005' in the case of a holder 
        of loans that--
                    ``(I) was, as of the date of enactment of the 
                Higher Education Reconciliation Act of 2005, and during 
                the quarter for which the special allowance is paid, a 
                unit of State or local government or a nonprofit 
                private entity;
                    ``(II) was, as of such date of enactment, and 
                during such quarter, not owned or controlled by, or 
                under common ownership or control with, a for-profit 
                entity; and
                    ``(III) held, directly or through any subsidiary, 
                affiliate, or trustee, a total unpaid balance of 
                principal equal to or less than $100,000,000 on loans 
                for which special allowances were paid under this 
                subparagraph in the most recent quarterly payment prior 
                to September 30, 2005.''.
    (c) Elimination of Effective Date Limitation on Higher Teacher Loan 
Forgiveness Benefits.--
            (1) Technical clarification.--The matter preceding 
        paragraph (1) of section 2 of the Taxpayer-Teacher Protection 
        Act of 2004 (Pub. L. 108-409; 118 Stat. 2299) is amended by 
        inserting ``of the Higher Education Act of 1965'' after 
        ``Section 438(b)(2)(B)''.
            (2) Amendment.--Paragraph (3) of section 3(b) of the 
        Taxpayer-Teacher Protection Act of 2004 (20 U.S.C. 1078-10 
        note) is amended by striking ``, and before October 1, 2005''.
            (3) Effective dates.--The amendment made by paragraph (1) 
        shall be effective as if enacted on October 30, 2004, and the 
        amendment made by paragraph (2) shall be effective as if 
        enacted on October 1, 2005.
    (d) Coordination With Second Higher Education Extension Act of 
2005.--
            (1) Repeal.--Section 2 of the Second Higher Education 
        Extension Act of 2005 is amended by striking subsections (b) 
        and (c).
            (2) Effect on amendments.--The amendments made by 
        subsections (a) and (c) of this section shall be effective as 
        if the amendments made in subsections (b) and (c) of section 2 
        of the Second Higher Education Extension Act of 2005 had not 
        been enacted.
    (e) Additional Changes to Teacher Loan Forgiveness Provisions.--
            (1) FFEL provisions.--Section 428J (20 U.S.C. 1078-10) is 
        amended--
                    (A) in subsection (b)(1)(B), by inserting after 
                ``1965'' the following: ``, or meets the requirements 
                of subsection (g)(3)''; and
                    (B) in subsection (g), by adding at the end the 
                following new paragraph:
            ``(3) Private school teachers.--An individual who is 
        employed as a teacher in a private school and is exempt from 
        State certification requirements (unless otherwise applicable 
        under State law), may, in lieu of the requirement of subsection 
        (b)(1)(B), have such employment treated as qualifying 
        employment under this section if such individual is permitted 
        to and does satisfy rigorous subject knowledge and skills tests 
        by taking competency tests in the applicable grade levels and 
        subject areas. For such purposes, the competency tests taken by 
        such a private school teacher shall be recognized by 5 or more 
        States for the purpose of fulfilling the highly qualified 
        teacher requirements under section 9101 of the Elementary and 
        Secondary Education Act of 1965, and the score achieved by such 
        teacher on each test shall equal or exceed the average passing 
        score of those 5 States.''.
            (2) Direct loan provisions.--Section 460 (20 U.S.C. 1087j) 
        is amended--
                    (A) in subsection (b)(1)(A)(ii), by inserting after 
                ``1965'' the following: ``, or meets the requirements 
                of subsection (g)(3)''; and
                    (B) in subsection (g), by adding at the end the 
                following new paragraph:
            ``(3) Private school teachers.--An individual who is 
        employed as a teacher in a private school and is exempt from 
        State certification requirements (unless otherwise applicable 
        under State law), may, in lieu of the requirement of subsection 
        (b)(1)(A)(ii), have such employment treated as qualifying 
        employment under this section if such individual is permitted 
        to and does satisfy rigorous subject knowledge and skills tests 
        by taking competency tests in the applicable grade levels and 
        subject areas. For such purposes, the competency tests taken by 
        such a private school teacher shall be recognized by 5 or more 
        States for the purpose of fulfilling the highly qualified 
        teacher requirements under section 9101 of the Elementary and 
        Secondary Education Act of 1965, and the score achieved by such 
        teacher on each test shall equal or exceed the average passing 
        score of those 5 States.''.

SEC. 8014. ADDITIONAL ADMINISTRATIVE PROVISIONS.

    (a) Insurance Percentage.--
            (1) Amendment.--Subparagraph (G) of section 428(b)(1) (20 
        U.S.C. 1078(b)(1)(G)) is amended to read as follows:
                    ``(G) insures 98 percent of the unpaid principal of 
                loans insured under the program, except that--
                            ``(i) such program shall insure 100 percent 
                        of the unpaid principal of loans made with 
                        funds advanced pursuant to section 428(j) or 
                        439(q);
                            ``(ii) for any loan for which the first 
                        disbursement of principal is made on or after 
                        July 1, 2006, the preceding provisions of this 
                        subparagraph shall be applied by substituting 
                        `97 percent' for `98 percent'; and
                            ``(iii) notwithstanding the preceding 
                        provisions of this subparagraph, such program 
                        shall insure 100 percent of the unpaid 
                        principal amount of exempt claims as defined in 
                        subsection (c)(1)(G);''.
            (2) Effective date of amendment.--The amendment made by 
        this subsection shall apply with respect to loans for which the 
        first disbursement of principal is made on or after July 1, 
        2006.
    (b) Federal Default Fees.--
            (1) In general.--Subparagraph (H) of section 428(b)(1) (20 
        U.S.C. 1078(b)(1)(H)) is amended to read as follows:
                    ``(H) provides--
                            ``(i) for loans for which the date of 
                        guarantee of principal is before July 1, 2006, 
                        for the collection of a single insurance 
                        premium equal to not more than 1.0 percent of 
                        the principal amount of the loan, by deduction 
                        proportionately from each installment payment 
                        of the proceeds of the loan to the borrower, 
                        and ensures that the proceeds of the premium 
                        will not be used for incentive payments to 
                        lenders; or
                            ``(ii) for loans for which the date of 
                        guarantee of principal is on or after July 1, 
                        2006, for the collection, and the deposit into 
                        the Federal Student Loan Reserve Fund under 
                        section 422A of a Federal default fee of an 
                        amount equal to 1.0 percent of the principal 
                        amount of the loan, which fee shall be 
                        collected either by deduction from the proceeds 
                        of the loan or by payment from other non-
                        Federal sources, and ensures that the proceeds 
                        of the Federal default fee will not be used for 
                        incentive payments to lenders;''.
            (2) Unsubsidized loans.--Section 428H(h) (20 U.S.C. 1078-
        8(h)) is amended by adding at the end the following new 
        sentences: ``Effective for loans for which the date of 
        guarantee of principal is on or after July 1, 2006, in lieu of 
        the insurance premium authorized under the preceding sentence, 
        each State or nonprofit private institution or organization 
        having an agreement with the Secretary under section 428(b)(1) 
        shall collect and deposit into the Federal Student Loan Reserve 
        Fund under section 422A, a Federal default fee of an amount 
        equal to 1.0 percent of the principal amount of the loan, which 
        fee shall be collected either by deduction from the proceeds of 
        the loan or by payment from other non-Federal sources. The 
        Federal default fee shall not be used for incentive payments to 
        lenders.''.
            (3) Voluntary flexible agreements.--Section 428A(a)(1) (20 
        U.S.C. 1078-1(a)(1)) is amended--
                    (A) by striking ``or'' at the end of subparagraph 
                (A);
                    (B) by striking the period at the end of 
                subparagraph (B) and inserting ``; or''; and
                    (C) by adding at the end the following new 
                subparagraph:
                    ``(C) the Federal default fee required by section 
                428(b)(1)(H) and the second sentence of section 
                428H(h).''.
    (c) Treatment of Exempt Claims.--
            (1) Amendment.--Section 428(c)(1) (20 U.S.C. 1078(c)(1)) is 
        amended--
                    (A) by redesignating subparagraph (G) as 
                subparagraph (H), and moving such subparagraph 2 em 
                spaces to the left; and
                    (B) by inserting after subparagraph (F) the 
                following new subparagraph:
            ``(G)(i) Notwithstanding any other provisions of this 
        section, in the case of exempt claims, the Secretary shall 
        apply the provisions of--
                    ``(I) the fourth sentence of subparagraph (A) by 
                substituting `100 percent' for `95 percent';
                    ``(II) subparagraph (B)(i) by substituting `100 
                percent' for `85 percent'; and
                    ``(III) subparagraph (B)(ii) by substituting `100 
                percent' for `75 percent'.
            ``(ii) For purposes of clause (i) of this subparagraph, the 
        term `exempt claims' means claims with respect to loans for 
        which it is determined that the borrower (or the student on 
        whose behalf a parent has borrowed), without the lender's or 
        the institution's knowledge at the time the loan was made, 
        provided false or erroneous information or took actions that 
        caused the borrower or the student to be ineligible for all or 
        a portion of the loan or for interest benefits thereon.''.
            (2) Effective date of amendments.--The amendments made by 
        this subsection shall apply with respect to loans for which the 
        first disbursement of principal is made on or after July 1, 
        2006.
    (d) Consolidation of Defaulted Loans.--Section 428(c) (20 U.S.C. 
1078(c)) is further amended--
            (1) in paragraph (2)(A)--
                    (A) by inserting ``(i)'' after ``including''; and
                    (B) by inserting before the semicolon at the end 
                the following: ``and (ii) requirements establishing 
                procedures to preclude consolidation lending from being 
                an excessive proportion of guaranty agency recoveries 
                on defaulted loans under this part'';
            (2) in paragraph (2)(D), by striking ``paragraph (6)'' and 
        inserting ``paragraph (6)(A)''; and
            (3) in paragraph (6)--
                    (A) by redesignating subparagraphs (A) and (B) as 
                clauses (i) and (ii), respectively;
                    (B) by inserting ``(A)'' before ``For the purpose 
                of paragraph (2)(D),''; and
                    (C) by adding at the end the following new 
                subparagraphs:
            ``(B) A guaranty agency shall--
                    ``(i) on or after October 1, 2006--
                            ``(I) not charge the borrower collection 
                        costs in an amount in excess of 18.5 percent of 
                        the outstanding principal and interest of a 
                        defaulted loan that is paid off through 
                        consolidation by the borrower under this title; 
                        and
                            ``(II) remit to the Secretary a portion of 
                        the collection charge under subclause (I) equal 
                        to 8.5 percent of the outstanding principal and 
                        interest of such defaulted loan; and
                    ``(ii) on and after October 1, 2009, remit to the 
                Secretary the entire amount charged under clause (i)(I) 
                with respect to each defaulted loan that is paid off 
                with excess consolidation proceeds.
            ``(C) For purposes of subparagraph (B), the term `excess 
        consolidation proceeds' means, with respect to any guaranty 
        agency for any Federal fiscal year beginning on or after 
        October 1, 2009, the proceeds of consolidation of defaulted 
        loans under this title that exceed 45 percent of the agency's 
        total collections on defaulted loans in such Federal fiscal 
        year.''.
    (e) Documentation of Forbearance Agreements.--Section 428(c) (20 
U.S.C. 1078(c)) is further amended--
            (1) in paragraph (3)(A)(i)--
                    (A) by striking ``in writing''; and
                    (B) by inserting ``and documented in accordance 
                with paragraph (10)'' after ``approval of the 
                insurer''; and
            (2) by adding at the end the following new paragraph:
            ``(10) Documentation of forbearance agreements.--For the 
        purposes of paragraph (3), the terms of forbearance agreed to 
        by the parties shall be documented by confirming the agreement 
        of the borrower by notice to the borrower from the lender, and 
        by recording the terms in the borrower's file.''.
    (f) Voluntary Flexible Agreements.--Section 428A(a) (20 U.S.C. 
1078-1(a)) is further amended--
            (1) in paragraph (1)(B), by striking ``unless the 
        Secretary'' and all that follows through ``designated 
        guarantor'';
            (2) by striking paragraph (2);
            (3) by redesignating paragraph (3) as paragraph (2); and
            (4) by striking paragraph (4).
    (g) Fraud; Repayment Required.--Section 428B(a)(1) (20 U.S.C. 1078-
2(a)(1)) is further amended--
            (1) by striking ``and'' at the end of subparagraph (A);
            (2) by redesignating subparagraph (B) as subparagraph (C); 
        and
            (3) by inserting after subparagraph (A) the following new 
        subparagraph:
                    ``(B) in the case of a graduate or professional 
                student or parent who has been convicted of, or has 
                pled nolo contendere or guilty to, a crime involving 
                fraud in obtaining funds under this title, such 
                graduate or professional student or parent has 
                completed the repayment of such funds to the Secretary, 
                or to the holder in the case of a loan under this title 
                obtained by fraud; and''.
    (h) Default Reduction Program.--Section 428F(a)(1) (20 U.S.C. 1078-
6(a)(1)) is amended--
            (1) in subparagraph (A), by striking ``consecutive payments 
        for 12 months'' and inserting ``9 payments made within 20 days 
        of the due date during 10 consecutive months'';
            (2) by redesignating subparagraph (C) as subparagraph (D); 
        and
            (3) by inserting after subparagraph (B) the following new 
        subparagraph:
                    ``(C) A guaranty agency may charge the borrower and 
                retain collection costs in an amount not to exceed 18.5 
                percent of the outstanding principal and interest at 
                the time of sale of a loan rehabilitated under 
                subparagraph (A).''.
    (i) Exceptional Performance Insurance Rate.--Section 428I(b)(1) (20 
U.S.C. 1078-9(b)(1)) is amended--
            (1) in the heading, by striking ``100 percent'' and 
        inserting ``99 percent''; and
            (2) by striking ``100 percent of the unpaid'' and inserting 
        ``99 percent of the unpaid''.
    (j) Uniform Administrative and Claims Procedure.--Section 
432(l)(1)(H) (20 U.S.C. 1082(l)(1)(H)) is amended by inserting ``and 
anticipated graduation date'' after ``status change''.
            (1) Section 428(a)(3)(A)(v) (20 U.S.C. 1078(a)(3)(A)(v)) is 
        amended--
                    (A) by striking ``or'' at the end of subclause (I);
                    (B) by striking the period at the end of subclause 
                (II) and inserting ``; or''; and
                    (C) by adding after subclause (II) the following 
                new subclause:
                    ``(III) in the case of a loan disbursed through an 
                escrow agent, 3 days before the first disbursement of 
                the loan.''.
            (2) Section 428(c)(1)(A) (20 U.S.C. 1078(c)(1)(A)) is 
        amended by striking ``45 days'' in the last sentence and 
        inserting ``30 days''.
            (3) Section 428(i)(1) (20 U.S.C. 1078(i)(1)) is amended by 
        striking ``21 days'' in the third sentence and inserting ``10 
        days''.

SEC. 8015. FUNDS FOR ADMINISTRATIVE EXPENSES.

    Section 458 is amended to read as follows:

``SEC. 458. FUNDS FOR ADMINISTRATIVE EXPENSES.

    ``(a) Administrative Expenses.--
            ``(1) Mandatory funds for fiscal year 2006.--For fiscal 
        year 2006, there shall be available to the Secretary, from 
        funds not otherwise appropriated, funds to be obligated for--
                    ``(A) administrative costs under this part and part 
                B, including the costs of the direct student loan 
                programs under this part; and
                    ``(B) account maintenance fees payable to guaranty 
                agencies under part B and calculated in accordance with 
                subsections (b) and (c),
        not to exceed (from such funds not otherwise appropriated) 
        $820,000,000 in fiscal year 2006.
            ``(2) Authorization for administrative costs beginning in 
        fiscal years 2007 through 2011.--For each of the fiscal years 
        2007 through 2011, there are authorized to be appropriated such 
        sums as may be necessary for administrative costs under this 
        part and part B, including the costs of the direct student loan 
        programs under this part.
            ``(3) Continuing mandatory funds for account maintenance 
        fees.--For each of the fiscal years 2007 through 2011, there 
        shall be available to the Secretary, from funds not otherwise 
        appropriated, funds to be obligated for account maintenance 
        fees payable to guaranty agencies under part B and calculated 
        in accordance with subsection (b).
            ``(4) Account maintenance fees.--Account maintenance fees 
        under paragraph (3) shall be paid quarterly and deposited in 
        the Agency Operating Fund established under section 422B.
            ``(5) Carryover.--The Secretary may carry over funds made 
        available under this section to a subsequent fiscal year.
    ``(b) Calculation Basis.--Account maintenance fees payable to 
guaranty agencies under subsection (a)(3) shall not exceed the basis of 
0.10 percent of the original principal amount of outstanding loans on 
which insurance was issued under part B.
    ``(c) Budget Justification.--No funds may be expended under this 
section unless the Secretary includes in the Department of Education's 
annual budget justification to Congress a detailed description of the 
specific activities for which the funds made available by this section 
have been used in the prior and current years (if applicable), the 
activities and costs planned for the budget year, and the projection of 
activities and costs for each remaining year for which administrative 
expenses under this section are made available.''.

SEC. 8016. COST OF ATTENDANCE.

    Section 472 (20 U.S.C. 1087ll) is amended--
            (1) by striking paragraph (4) and inserting the following:
            ``(4) for less than half-time students (as determined by 
        the institution), tuition and fees and an allowance for only--
                    ``(A) books, supplies, and transportation (as 
                determined by the institution);
                    ``(B) dependent care expenses (determined in 
                accordance with paragraph (8)); and
                    ``(C) room and board costs (determined in 
                accordance with paragraph (3)), except that a student 
                may receive an allowance for such costs under this 
                subparagraph for not more than 3 semesters or the 
                equivalent, of which not more than 2 semesters or the 
                equivalent may be consecutive;'';
            (2) in paragraph (11), by striking ``and'' after the 
        semicolon;
            (3) in paragraph (12), by striking the period and inserting 
        ``; and''; and
            (4) by adding at the end the following:
            ``(13) at the option of the institution, for a student in a 
        program requiring professional licensure or certification, the 
        one-time cost of obtaining the first professional credentials 
        (as determined by the institution).''.

SEC. 8017. FAMILY CONTRIBUTION.

    (a) Family Contribution for Dependent Students.--
            (1) Amendments.--Section 475 (20 U.S.C. 1087oo) is 
        amended--
                    (A) in subsection (g)(2)(D), by striking ``$2,200'' 
                and inserting ``$3,000''; and
                    (B) in subsection (h), by striking ``35'' and 
                inserting ``20''.
            (2) Effective date.--The amendments made by paragraph (1) 
        shall apply with respect to determinations of need for periods 
        of enrollment beginning on or after July 1, 2007.
    (b) Family Contribution for Independent Students Without Dependents 
Other Than a Spouse.--
            (1) Amendments.--Section 476 (20 U.S.C. 1087pp) is 
        amended--
                    (A) in subsection (b)(1)(A)(iv)--
                            (i) in subclause (I), by striking 
                        ``$5,000'' and inserting ``$6,050'';
                            (ii) in subclause (II), by striking 
                        ``$5,000'' and inserting ``$6,050''; and
                            (iii) in subclause (III), by striking 
                        ``$8,000'' and inserting ``$9,700''; and
                    (B) in subsection (c)(4), by striking ``35'' and 
                inserting ``20''.
            (2) Effective date.--The amendments made by paragraph (1) 
        shall apply with respect to determinations of need for periods 
        of enrollment beginning on or after July 1, 2007.
    (c) Family Contribution for Independent Students With Dependents 
Other Than a Spouse.--
            (1) Amendment.--Section 477(c)(4) (20 U.S.C. 1087qq(c)(4)) 
        is amended by striking ``12'' and inserting ``7''.
            (2) Effective date.--The amendment made by paragraph (1) 
        shall apply with respect to determinations of need for periods 
        of enrollment beginning on or after July 1, 2007.
    (d) Regulations; Updated Tables.--Section 478(b) (20 U.S.C. 
1087rr(b)) is amended--
            (1) in paragraph (1), by adding at the end the following: 
        ``For the 2007-2008 academic year, the Secretary shall revise 
        the tables in accordance with this paragraph, except that the 
        Secretary shall increase the amounts contained in the table in 
        section 477(b)(4) by a percentage equal to the greater of the 
        estimated percentage increase in the Consumer Price Index (as 
        determined under the preceding sentence) or 5 percent.''; and
            (2) in paragraph (2)--
                    (A) by striking ``2000-2001'' and inserting ``2007-
                2008''; and
                    (B) by striking ``1999'' and inserting ``2006''.
    (e) Employment Expense Allowance.--Section 478(h) (20 U.S.C. 
1087rr(h)) is amended--
            (1) by striking ``476(b)(4)(B),''; and
            (2) by striking ``meals away from home, apparel and upkeep, 
        transportation, and housekeeping services'' and inserting 
        ``food away from home, apparel, transportation, and household 
        furnishings and operations''.

SEC. 8018. SIMPLIFIED NEED TEST AND AUTOMATIC ZERO IMPROVEMENTS.

    (a) Amendments.--Section 479 (20 U.S.C. 1087ss) is amended--
            (1) in subsection (b)--
                    (A) in paragraph (1)--
                            (i) in subparagraph (A), by striking clause 
                        (i) and inserting the following:
                            ``(i) the student's parents--
                                    ``(I) file, or are eligible to 
                                file, a form described in paragraph 
                                (3);
                                    ``(II) certify that the parents are 
                                not required to file a Federal income 
                                tax return; or
                                    ``(III) received, or the student 
                                received, benefits at some time during 
                                the previous 12-month period under a 
                                means-tested Federal benefit program as 
                                defined under subsection (d); and''; 
                                and
                            (ii) in subparagraph (B), by striking 
                        clause (i) and inserting the following:
                            ``(i) the student (and the student's 
                        spouse, if any)--
                                    ``(I) files, or is eligible to 
                                file, a form described in paragraph 
                                (3);
                                    ``(II) certifies that the student 
                                (and the student's spouse, if any) is 
                                not required to file a Federal income 
                                tax return; or
                                    ``(III) received benefits at some 
                                time during the previous 12-month 
                                period under a means-tested Federal 
                                benefit program as defined under 
                                subsection (d); and''; and
                    (B) in the matter preceding subparagraph (A) of 
                paragraph (3), by striking ``A student or family files 
                a form described in this subsection, or subsection (c), 
                as the case maybe, if the student or family, 
                respectively, files'' and inserting ``In the case of an 
                independent student, the student, or in the case of a 
                dependent student, the family, files a form described 
                in this subsection, or subsection (c), as the case may 
                be, if the student or family, as appropriate, files'';
            (2) in subsection (c)--
                    (A) in paragraph (1)--
                            (i) by striking subparagraph (A) and 
                        inserting the following:
                    ``(A) the student's parents--
                            ``(i) file, or are eligible to file, a form 
                        described in subsection (b)(3);
                            ``(ii) certify that the parents are not 
                        required to file a Federal income tax return; 
                        or
                            ``(iii) received, or the student received, 
                        benefits at some time during the previous 12-
                        month period under a means-tested Federal 
                        benefit program as defined under subsection 
                        (d); and''; and
                            (ii) by striking subparagraph (B) and 
                        inserting the following:
                    ``(B) the sum of the adjusted gross income of the 
                parents is less than or equal to $20,000; or''; and
                    (B) in paragraph (2)--
                            (i) by striking subparagraph (A) and 
                        inserting the following:
                    ``(A) the student (and the student's spouse, if 
                any)--
                            ``(i) files, or is eligible to file, a form 
                        described in subsection (b)(3);
                            ``(ii) certifies that the student (and the 
                        student's spouse, if any) is not required to 
                        file a Federal income tax return; or
                            ``(iii) received benefits at some time 
                        during the previous 12-month period under a 
                        means-tested Federal benefit program as defined 
                        under subsection (d); and''; and
                            (ii) by striking subparagraph (B) and 
                        inserting the following:
                    ``(B) the sum of the adjusted gross income of the 
                student and spouse (if appropriate) is less than or 
                equal to $20,000.''; and
            (3) by adding at the end the following:
    ``(d) Definition of Means-Tested Federal Benefit Program.--In this 
section, the term `means-tested Federal benefit program' means a 
mandatory spending program of the Federal Government, other than a 
program under this title, in which eligibility for the program's 
benefits, or the amount of such benefits, are determined on the basis 
of income or resources of the individual or family seeking the benefit, 
and may include such programs as--
            ``(1) the supplemental security income program under title 
        XVI of the Social Security Act (42 U.S.C. 1381 et seq.);
            ``(2) the food stamp program under the Food Stamp Act of 
        1977 (7 U.S.C. 2011 et seq.);
            ``(3) the free and reduced price school lunch program 
        established under the Richard B. Russell National School Lunch 
        Act (42 U.S.C. 1751 et seq.);
            ``(4) the program of block grants for States for temporary 
        assistance for needy families established under part A of title 
        IV of the Social Security Act (42 U.S.C. 601 et seq.);
            ``(5) the special supplemental nutrition program for women, 
        infants, and children established by section 17 of the Child 
        Nutrition Act of 1966 (42 U.S.C. 1786); and
            ``(6) other programs identified by the Secretary.''.
    (b) Evaluation of Simplified Needs Test.--
            (1) Eligibility guidelines.--The Secretary of Education 
        shall regularly evaluate the impact of the eligibility 
        guidelines in subsections (b)(1)(A)(i), (b)(1)(B)(i), 
        (c)(1)(A), and (c)(2)(A) of section 479 of the Higher Education 
        Act of 1965 (20 U.S.C. 1087ss(b)(1)(A)(i), (b)(1)(B)(i), 
        (c)(1)(A), and (c)(2)(A)).
            (2) Means-tested federal benefit program.--For each 3-year 
        period, the Secretary of Education shall evaluate the impact of 
        including the receipt of benefits by a student or parent under 
        a means-tested Federal benefit program (as defined in section 
        479(d) of the Higher Education Act of 1965 (20 U.S.C. 
        1087ss(d)) as a factor in determining eligibility under 
        subsections (b) and (c) of section 479 of the Higher Education 
        Act of 1965 (20 U.S.C. 1087ss(b) and (c)).

SEC. 8019. ADDITIONAL NEED ANALYSIS AMENDMENTS.

    (a) Treating Active Duty Members of the Armed Forces as Independent 
Students.--Section 480(d)(3) (20 U.S.C. 1087vv(d)(3)) is amended by 
inserting before the semicolon at the end the following: ``or is 
currently serving on active duty in the Armed Forces for other than 
training purposes''.
    (b) Definition of Assets.--Section 480(f)(1) (20 U.S.C. 
1087vv(f)(1)) is amended by inserting ``qualified education benefits 
(except as provided in paragraph (3)),'' after ``tax shelters,''.
    (c) Treatment of Family Ownership of Small Businesses.--Section 
480(f)(2) (20 U.S.C. 1087vv(f)(2)) is amended--
            (1) in subparagraph (A), by striking ``or'';
            (2) in subparagraph (B), by striking the period at the end 
        and inserting ``; or''; and
            (3) by adding at the end the following new subparagraph:
            ``(C) a small business with not more than 100 full-time or 
        full-time equivalent employees (or any part of such a small 
        business) that is owned and controlled by the family.''.
    (d) Additional Definitions.--Section 480(f) is further amended by 
adding at the end the following new paragraphs:
    ``(3) A qualified education benefit shall not be considered an 
asset of a student for purposes of section 475.
    ``(4) In determining the value of assets in a determination of need 
under this title (other than for subpart 4 of part A), the value of a 
qualified education benefit shall be--
            ``(A) the refund value of any tuition credits or 
        certificates purchased under a qualified education benefit; and
            ``(B) in the case of a program in which contributions are 
        made to an account that is established for the purpose of 
        meeting the qualified higher education expenses of the 
        designated beneficiary of the account, the current balance of 
        such account.
    ``(5) In this subsection:
            ``(A) The term `qualified education benefit' means--
                    ``(i) a qualified tuition program (as defined in 
                section 529(b)(1)(A) of the Internal Revenue Code of 
                1986) or other prepaid tuition plan offered by a State; 
                and
                    ``(ii) a Coverdell education savings account (as 
                defined in section 530(b)(1) of the Internal Revenue 
                Code of 1986).
            ``(B) The term `qualified higher education expenses' has 
        the meaning given the term in section 529(e) of the Internal 
        Revenue Code of 1986.''.
    (e) Designated Assistance.--Section 480(j) (20 U.S.C. 1087vv(j)) is 
amended--
            (1) in the subsection heading, by striking ``; Tuition 
        Prepayment Plans'';
            (2) by striking paragraph (2);
            (3) by redesignating paragraph (3) as paragraph (2); and
            (4) by adding at the end the following new paragraph:
    ``(3) Notwithstanding paragraph (1) and section 472, assistance not 
received under this title may be excluded from both estimated financial 
assistance and cost of attendance, if that assistance is provided by a 
State and is designated by such State to offset a specific component of 
the cost of attendance. If that assistance is excluded from either 
estimated financial assistance or cost of attendance, it shall be 
excluded from both.''.

SEC. 8020. GENERAL PROVISIONS.

    (a) Academic Year.--Paragraph (2) of section 481(a) (20 U.S.C. 
1088(a)) is amended to read as follows:
    ``(2)(A) For the purpose of any program under this title, the term 
`academic year' shall--
            ``(i) require a minimum of 30 weeks of instructional time 
        for a course of study that measures its program length in 
        credit hours; or
            ``(ii) require a minimum of 26 weeks of instructional time 
        for a course of study that measures its program length in clock 
        hours; and
            ``(iii) require an undergraduate course of study to contain 
        an amount of instructional time whereby a full-time student is 
        expected to complete at least--
                    ``(I) 24 semester or trimester hours or 36 quarter 
                credit hours in a course of study that measures its 
                program length in credit hours; or
                    ``(II) 900 clock hours in a course of study that 
                measures its program length in clock hours.
    ``(B) The Secretary may reduce such minimum of 30 weeks to not less 
than 26 weeks for good cause, as determined by the Secretary on a case-
by-case basis, in the case of an institution of higher education that 
provides a 2-year or 4-year program of instruction for which the 
institution awards an associate or baccalaureate degree.''.
    (b) Distance Education: Eligible Program.--Section 481(b) (20 
U.S.C. 1088(b)) is amended by adding at the end the following new 
paragraphs:
    ``(3) An otherwise eligible program that is offered in whole or in 
part through telecommunications is eligible for the purposes of this 
title if the program is offered by an institution, other than a foreign 
institution, that has been evaluated and determined (before or after 
the date of enactment of the Higher Education Reconciliation Act of 
2005) to have the capability to effectively deliver distance education 
programs by an accrediting agency or association that--
            ``(A) is recognized by the Secretary under subpart 2 of 
        part H; and
            ``(B) has evaluation of distance education programs within 
        the scope of its recognition, as described in section 
        496(n)(3).
    ``(4) For purposes of this title, the term `eligible program' 
includes an instructional program that, in lieu of credit hours or 
clock hours as the measure of student learning, utilizes direct 
assessment of student learning, or recognizes the direct assessment of 
student learning by others, if such assessment is consistent with the 
accreditation of the institution or program utilizing the results of 
the assessment. In the case of a program being determined eligible for 
the first time under this paragraph, such determination shall be made 
by the Secretary before such program is considered to be an eligible 
program.''.
    (c) Correspondence Courses.--Section 484(l)(1) (20 U.S.C. 
1091(l)(1)) is amended--
            (1) in subparagraph (A)--
                    (A) by striking ``for a program of study of 1 year 
                or longer''; and
                    (B) by striking ``unless the total'' and all that 
                follows through ``courses at the institution''; and
            (2) by amending subparagraph (B) to read as follows:
                    ``(B) Exception.--Subparagraph (A) shall not apply 
                to an institution or school described in section 
                3(3)(C) of the Carl D. Perkins Vocational and Technical 
                Education Act of 1998.''.

SEC. 8021. STUDENT ELIGIBILITY.

    (a) Fraud: Repayment Required.--Section 484(a) (20 U.S.C. 1091(a)) 
is amended--
            (1) by striking the period at the end of paragraph (5) and 
        inserting ``; and''; and
            (2) by adding at the end the following new paragraph:
            ``(6) if the student has been convicted of, or has pled 
        nolo contendere or guilty to, a crime involving fraud in 
        obtaining funds under this title, have completed the repayment 
        of such funds to the Secretary, or to the holder in the case of 
        a loan under this title obtained by fraud.''.
    (b) Verification of Income Date.--Paragraph (1) of section 484(q) 
(20 U.S.C. 1091(q)) is amended to read as follows:
            ``(1) Confirmation with irs.--The Secretary of Education, 
        in cooperation with the Secretary of the Treasury, is 
        authorized to confirm with the Internal Revenue Service the 
        information specified in section 6103(l)(13) of the Internal 
        Revenue Code of 1986 reported by applicants (including parents) 
        under this title on their Federal income tax returns for the 
        purpose of verifying the information reported by applicants on 
        student financial aid applications.''.
    (c) Suspension of Eligibility for Drug Offenses.--Section 484(r)(1) 
(20 U.S.C. 1091(r)(1)) is amended by striking everything preceding the 
table and inserting the following:
            ``(1) In general.--A student who is convicted of any 
        offense under any Federal or State law involving the possession 
        or sale of a controlled substance for conduct that occurred 
        during a period of enrollment for which the student was 
        receiving any grant, loan, or work assistance under this title 
        shall not be eligible to receive any grant, loan, or work 
        assistance under this title from the date of that conviction 
        for the period of time specified in the following table:''.

SEC. 8022. INSTITUTIONAL REFUNDS.

    Section 484B (20 U.S.C. 1091b) is amended--
            (1) in the matter preceding clause (i) of subsection 
        (a)(2)(A), by striking ``a leave of'' and inserting ``1 or more 
        leaves of'';
            (2) in subsection (a)(3)(B)(ii), by inserting ``(as 
        determined in accordance with subsection (d))'' after ``student 
        has completed'';
            (3) in subsection (a)(3)(C)(i), by striking ``grant or loan 
        assistance under this title'' and inserting ``grant assistance 
        under subparts 1 and 3 of part A, or loan assistance under 
        parts B, D, and E,'';
            (4) in subsection (a)(4), by amending subparagraph (A) to 
        read as follows:
                    ``(A) In general.--After determining the 
                eligibility of the student for a late disbursement or 
                post-withdrawal disbursement (as required in 
                regulations prescribed by the Secretary), the 
                institution of higher education shall contact the 
                borrower and obtain confirmation that the loan funds 
                are still required by the borrower. In making such 
                contact, the institution shall explain to the borrower 
                the borrower's obligation to repay the funds following 
                any such disbursement. The institution shall document 
                in the borrower's file the result of such contact and 
                the final determination made concerning such 
                disbursement.'';
            (5) in subsection (b)(1), by inserting ``not later than 45 
        days from the determination of withdrawal'' after ``return'';
            (6) in subsection (b)(2), by amending subparagraph (C) to 
        read as follows:
                    ``(C) Grant overpayment requirements.--
                            ``(i) In general.--Notwithstanding 
                        subparagraphs (A) and (B), a student shall only 
                        be required to return grant assistance in the 
                        amount (if any) by which--
                                    ``(I) the amount to be returned by 
                                the student (as determined under 
                                subparagraphs (A) and (B)), exceeds
                                    ``(II) 50 percent of the total 
                                grant assistance received by the 
                                student under this title for the 
                                payment period or period of enrollment.
                            ``(ii) Minimum.--A student shall not be 
                        required to return amounts of $50 or less.'';
            (7) in subsection (d), by striking ``(a)(3)(B)(i)'' and 
        inserting ``(a)(3)(B)''; and
            (8) in subsection (d)(2), by striking ``clock hours--'' and 
        all that follows through the period and inserting ``clock hours 
        scheduled to be completed by the student in that period as of 
        the day the student withdrew.''.

SEC. 8023. COLLEGE ACCESS INITIATIVE.

    Part G is further amended by inserting after section 485C (20 
U.S.C. 1092c) the following new section:

``SEC. 485D. COLLEGE ACCESS INITIATIVE.

    ``(a) State-by-State Information.--The Secretary shall direct each 
guaranty agency with which the Secretary has an agreement under section 
428(c) to provide to the Secretary the information necessary for the 
development of Internet web links and access for students and families 
to a comprehensive listing of the postsecondary education 
opportunities, programs, publications, Internet web sites, and other 
services available in the States for which such agency serves as the 
designated guarantor.
    ``(b) Guaranty Agency Activities.--
            ``(1) Plan and activity required.--Each guaranty agency 
        with which the Secretary has an agreement under section 428(c) 
        shall develop a plan, and undertake the activity necessary, to 
        gather the information required under subsection (a) and to 
        make such information available to the public and to the 
        Secretary in a form and manner as prescribed by the Secretary.
            ``(2) Activities.--Each guaranty agency shall undertake 
        such activities as are necessary to promote access to 
        postsecondary education for students through providing 
        information on college planning, career preparation, and paying 
        for college. The guaranty agency shall publicize such 
        information and coordinate such activities with other entities 
        that either provide or distribute such information in the 
        States for which such guaranty agency serves as the designated 
        guarantor.
            ``(3) Funding.--The activities required by this section may 
        be funded from the guaranty agency's Operating Fund established 
        pursuant to section 422B and, to the extent funds remain, from 
        earnings on the restricted account established pursuant to 
        section 422(h)(4).
            ``(4) Rule of construction.--Nothing in this subsection 
        shall be construed to require a guaranty agency to duplicate 
        any efforts under way on the date of enactment of the Higher 
        Education Reconciliation Act of 2005 that meet the requirements 
        of this section.
    ``(c) Access to Information.--
            ``(1) Secretary's responsibility.--The Secretary shall 
        ensure the availability of the information provided, by the 
        guaranty agencies in accordance with this section, to students, 
        parents, and other interested individuals, through Internet web 
        links or other methods prescribed by the Secretary.
            ``(2) Guaranty agency responsibility.--The guaranty 
        agencies shall ensure that the information required by this 
        section is available without charge in printed format for 
        students and parents requesting such information.
            ``(3) Publicity.--Not later than 270 days after the date of 
        enactment of the Higher Education Reconciliation Act of 2005, 
        the Secretary and guaranty agencies shall publicize the 
        availability of the information required by this section, with 
        special emphasis on ensuring that populations that are 
        traditionally underrepresented in postsecondary education are 
        made aware of the availability of such information.''.

SEC. 8024. WAGE GARNISHMENT REQUIREMENT.

    Section 488A(a)(1) (20 U.S.C. 1095a(a)(1)) is amended by striking 
``10 percent'' and inserting ``15 percent''.

                          Subtitle B--Pensions

SEC. 8201. INCREASES IN PBGC PREMIUMS.

    (a) Flat-Rate Premiums.--
            (1) Single-employer plans.--
                    (A) In general.--Clause (i) of section 
                4006(a)(3)(A) of the Employee Retirement Income 
                Security Act of 1974 (29 U.S.C. 1306(a)(3)(A)) is 
                amended by striking ``$19'' and inserting ``$30''.
                    (B) Adjustment for inflation.--Section 4006(a)(3) 
                of such Act (29 U.S.C. 1306(a)(3)) is amended by adding 
                at the end the following new subparagraph:
    ``(F) For each plan year beginning in a calendar year after 2006, 
there shall be substituted for the premium rate specified in clause (i) 
of subparagraph (A) an amount equal to the greater of--
            ``(i) the product derived by multiplying the premium rate 
        specified in clause (i) of subparagraph (A) by the ratio of--
                    ``(I) the national average wage index (as defined 
                in section 209(k)(1) of the Social Security Act) for 
                the first of the 2 calendar years preceding the 
                calendar year in which such plan year begins, to
                    ``(II) the national average wage index (as so 
                defined) for 2004; and
            ``(ii) the premium rate in effect under clause (i) of 
        subparagraph (A) for plan years beginning in the preceding 
        calendar year.
If the amount determined under this subparagraph is not a multiple of 
$1, such product shall be rounded to the nearest multiple of $1.''.
            (2) Multiemployer plans.--
                    (A) In general.--Section 4006(a)(3)(A) of such Act 
                (29 U.S.C. 1306(a)(3)(A)) is amended--
                            (i) in clause (iii)--
                                    (I) by inserting ``and before 
                                January 1, 2006,'' after ``Act of 
                                1980,''; and
                                    (II) by striking the period at the 
                                end and inserting ``, or''; and
                            (ii) by adding at the end the following:
            ``(iv) in the case of a multiemployer plan, for plan years 
        beginning after December 31, 2005, $8.00 for each individual 
        who is a participant in such plan during the applicable plan 
        year.''.
                    (B) Adjustment for inflation.--Section 4006(a)(3) 
                of such Act (29 U.S.C. 1306(a)(3)), as amended by this 
                subsection, is amended by adding at the end the 
                following new subparagraph:
    ``(G) For each plan year beginning in a calendar year after 2006, 
there shall be substituted for the premium rate specified in clause 
(iv) of subparagraph (A) an amount equal to the greater of--
            ``(i) the product derived by multiplying the premium rate 
        specified in clause (iv) of subparagraph (A) by the ratio of--
                    ``(I) the national average wage index (as defined 
                in section 209(k)(1) of the Social Security Act) for 
                the first of the 2 calendar years preceding the 
                calendar year in which such plan year begins, to
                    ``(II) the national average wage index (as so 
                defined) for 2004; and
            ``(ii) the premium rate in effect under clause (iv) of 
        subparagraph (A) for plan years beginning in the preceding 
        calendar year.
If the amount determined under this subparagraph is not a multiple of 
$1, such product shall be rounded to the nearest multiple of $1.''.
    (b) Premium Rate for Certain Terminated Single-Employer Plans.--
Subsection (a) of section 4006 of such Act (29 U.S.C. 1306) is amended 
by adding at the end the following:
    ``(7) Premium Rate for Certain Terminated Single-Employer Plans.--
            ``(A) In general.--If there is a termination of a single-
        employer plan under clause (ii) or (iii) of section 
        4041(c)(2)(B) or section 4042, there shall be payable to the 
        corporation, with respect to each applicable 12-month period, a 
        premium at a rate equal to $1,250 multiplied by the number of 
        individuals who were participants in the plan immediately 
        before the termination date. Such premium shall be in addition 
        to any other premium under this section.
            ``(B) Special rule for plans terminated in bankruptcy 
        reorganization.--In the case of a single-employer plan 
        terminated under section 4041(c)(2)(B)(ii) or under section 
        4042 during pendency of any bankruptcy reorganization 
        proceeding under chapter 11 of title 11, United States Code, or 
        under any similar law of a State or a political subdivision of 
        a State (or a case described in section 4041(c)(2)(B)(i) filed 
        by or against such person has been converted, as of such date, 
        to such a case in which reorganization is sought), subparagraph 
        (A) shall not apply to such plan until the date of the 
        discharge or dismissal of such person in such case.
            ``(C) Applicable 12-month period.--For purposes of 
        subparagraph (A)--
                    ``(i) In general.--The term `applicable 12-month 
                period' means--
                            ``(I) the 12-month period beginning with 
                        the first month following the month in which 
                        the termination date occurs, and
                            ``(II) each of the first two 12-month 
                        periods immediately following the period 
                        described in subclause (I).
                    ``(ii) Plans terminated in bankruptcy 
                reorganization.--In any case in which the requirements 
                of subparagraph (B)(i)(I) are met in connection with 
                the termination of the plan with respect to 1 or more 
                persons described in such subparagraph, the 12-month 
                period described in clause (i)(I) shall be the 12-month 
                period beginning with the first month following the 
                month which includes the earliest date as of which each 
                such person is discharged or dismissed in the case 
                described in such clause in connection with such 
                person.
            ``(D) Coordination with section 4007.--
                    ``(i) Notwithstanding section 4007--
                            ``(I) premiums under this paragraph shall 
                        be due within 30 days after the beginning of 
                        any applicable 12-month period, and
                            ``(II) the designated payor shall be the 
                        person who is the contributing sponsor as of 
                        immediately before the termination date.
                    ``(ii) The fifth sentence of section 4007(a) shall 
                not apply in connection with premiums determined under 
                this paragraph.
            ``(E) Termination.--Subparagraph (A) shall not apply with 
        respect to any plan terminated after December 31, 2010.''.
    (c) Conforming Amendment.--Section 4006(a)(3)(B) of such Act (29 
U.S.C. 1306(a)(3)(B)) is amended by striking ``subparagraph (A)(iii)'' 
and inserting ``clause (iii) or (iv) of subparagraph (A)''.
    (d) Effective Dates.--
            (1) In general.--Except as otherwise provided in this 
        subsection, the amendments made by this section shall apply to 
        plan years beginning after December 31, 2005.
            (2) Premium rate for certain terminated single-employer 
        plans.--
                    (A) In general.--Except as provided in subparagraph 
                (B), the amendment made by subsection (b) shall apply 
                to plans terminated after December 31, 2005.
                    (B) Special rule for plans terminated in 
                bankruptcy.--The amendment made by subsection (b) shall 
                not apply to a termination of a single-employer plan 
                that is terminated during the pendency of any 
                bankruptcy reorganization proceeding under chapter 11 
                of title 11, United States Code (or under any similar 
                law of a State or political subdivision of a State), if 
                the proceeding is pursuant to a bankruptcy filing 
                occurring before October 18, 2005.

                      TITLE IX--LIHEAP PROVISIONS

SEC. 9001. FUNDING AVAILABILITY.

    (a) In General.--In addition to amounts otherwise made available, 
there are appropriated, out of any money in the Treasury not otherwise 
appropriated, to the Secretary of Health and Human Services for a 1-
time only obligation and expenditure--
            (1) $250,000,000 for fiscal year 2007 for allocation under 
        section 2604(a) through (d) of the Low-Income Home Energy 
        Assistance Act of 1981 (42 U.S.C. 8623(a) through (d)); and
            (2) $750,000,000 for fiscal year 2007 for allocation under 
        section 2604(e) of the Low-Income Home Energy Assistance Act of 
        1981 (42 U.S.C. 8623(e)).
    (b) Sunset.--The provisions of this section shall terminate, be 
null and void, and have no force and effect whatsoever after September 
30, 2007. No monies provided for under this section shall be available 
after such date.

                 TITLE X--JUDICIARY RELATED PROVISIONS

                  Subtitle A--Civil Filing Adjustments

SEC. 10001. CIVIL CASE FILING FEE INCREASES.

    (a) Civil Actions Filed in District Courts.--Section 1914(a) of 
title 28, United States Code, is amended by striking ``$250'' and 
inserting ``$350''.
    (b) Appeals Filed in Courts of Appeals.--The $250 fee for docketing 
a case on appeal or review, or docketing any other proceeding, in a 
court of appeals, as prescribed by the Judicial Conference, effective 
as of January 1, 2005, under section 1913 of title 28, United States 
Code, shall be increased to $450.
    (c) Expenditure Limitation.--Incremental amounts collected by 
reason of the enactment of this section shall be deposited in a special 
fund in the Treasury to be established after the enactment of this Act. 
Such amounts shall be available for the purposes specified in section 
1931(a) of title 28, United States Code, but only to the extent 
specifically appropriated by an Act of Congress enacted after the 
enactment of this Act.
    (d) Effective Date.--This section and the amendment made by this 
section shall take effect 60 days after the date of the enactment of 
this Act.

                      Subtitle B--Bankruptcy Fees

SEC. 11101. BANKRUPTCY FEES.

    (a) Bankruptcy Filing Fees.--Section 1930(a) of title 28, United 
States Code, is amended--
            (1) in paragraph (1)--
                    (A) in subparagraph (A) by striking ``$220'' and 
                inserting ``$245''; and
                    (B) in subparagraph (B) by striking ``$150'' and 
                inserting ``$235''; and
            (2) in paragraph (2) by striking ``$1,000'' and inserting 
        ``$2,750''.
    (b) Expenditure Limitation.--Incremental amounts collected by 
reason of the amendments made by subsection (a) shall be deposited in a 
special fund in the Treasury to be established after the enactment of 
this Act. Such amounts shall be available for the purposes specified in 
section 1931(a) of title 28, United States Code, but only to the extent 
specifically appropriated by an Act of Congress enacted after the 
enactment of this Act.
    (c) Effective Date.--This section and the amendments made by this 
section shall take effect 60 days after the date of the enactment of 
this Act.

            Attest:

                                                             Secretary.
109th CONGRESS

  1st Session

                                S. 1932

_______________________________________________________________________

                  SENATE AMENDMENT TO HOUSE AMENDMENT
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