In the House of Representatives, U. S., 
September 25, 2007. 
Resolved, That the House agree to the amendments of 
the Senate to the bill (H.R. 976) entitled ‘‘An Act to amend 
the Internal Revenue Code of 1986 to provide tax relief for 
small businesses, and for other purposes’’, with the following 
HOUSE AMENDMENTS TO SENATE AMENDMENTS: 
In lieu of the matter proposed to be inserted by the 
Senate amendment to the text of the bill, insert the fol-
lowing: 
SECTION 1. SHORT TITLE; AMENDMENTS TO SOCIAL SECU-
RITY ACT; REFERENCES; TABLE OF CON-
TENTS. 
(a) SHORT TITLE.—This Act may be cited as ‘‘Chil-
dren’s Health Insurance Program Reauthorization Act of 
2007’’. 
(b) AMENDMENTS TO SOCIAL SECURITY ACT.—Except 
as otherwise specifically provided, whenever in this Act an 
amendment 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 that section or other provision 
of the Social Security Act. 
(c) REFERENCES TO CHIP; MEDICAID; SECRETARY.— 
In this Act:
(1) CHIP.—The term ‘‘CHIP’’ means the State 
Children’s Health Insurance Program established 
under title XXI of the Social Security Act (42 U.S.C. 
1397aa et seq.). 
(2) MEDICAID.—The term ‘‘Medicaid’’ means the 
program for medical assistance established under title 
XIX of the Social Security Act (42 U.S.C. 1396 et 
seq.). 
(3) SECRETARY.—The term ‘‘Secretary’’ means 
the Secretary of Health and Human Services. 
(d) TABLE OF CONTENTS.—The table of contents of 
this Act is as follows: 
Sec. 1. Short title; amendments to Social Security Act; references; table of con-
tents. 
Sec. 2. Purpose. 
Sec. 3. General effective date; exception for State legislation; contingent effective 
date; reliance on law. 
TITLE I—FINANCING 
Subtitle A—Funding 
Sec. 101. Extension of CHIP. 
Sec. 102. Allotments for States and territories for fiscal years 2008 through 2012. 
Sec. 103. Child Enrollment Contingency Fund. 
Sec. 104. CHIP performance bonus payment to offset additional enrollment costs 
resulting from enrollment and retention efforts. 
Sec. 105. 2-year initial availability of CHIP allotments. 
Sec. 106. Redistribution of unused allotments to address State funding shortfalls. 
Sec. 107. Option for qualifying States to receive the enhanced portion of the 
CHIP matching rate for Medicaid coverage of certain children. 
Sec. 108. One-time appropriation. 
Sec. 109. Improving funding for the territories under CHIP and Medicaid. 
Subtitle B—Focus on Low-Income Children and Pregnant Women 
Sec. 111. State option to cover low-income pregnant women under CHIP through 
a State plan amendment. 
Sec. 112. Phase-Out of coverage for nonpregnant childless adults under CHIP; 
conditions for coverage of parents. 
Sec. 113. Elimination of counting Medicaid child presumptive eligibility costs 
against Title XXI allotment.
Sec. 114. Limitation on matching rate for States that propose to cover children 
with effective family income that exceeds 300 percent of the pov-
erty line. 
Sec. 115. State authority under Medicaid. 
Sec. 116. Preventing substitution of CHIP coverage for private coverage. 
TITLE II—OUTREACH AND ENROLLMENT 
Subtitle A—Outreach and Enrollment Activities 
Sec. 201. Grants and enhanced administrative funding for outreach and enroll-
ment. 
Sec. 202. Increased outreach and enrollment of Indians. 
Sec. 203. State option to rely on findings from an Express Lane agency to con-
duct simplified eligibility determinations. 
Subtitle B—Reducing Barriers to Enrollment 
Sec. 211. Verification of declaration of citizenship or nationality for purposes of 
eligibility for Medicaid and CHIP. 
Sec. 212. Reducing administrative barriers to enrollment. 
Sec. 213. Model of Interstate coordinated enrollment and coverage process. 
TITLE III—REDUCING BARRIERS TO PROVIDING PREMIUM 
ASSISTANCE 
Subtitle A—Additional State Option for Providing Premium Assistance 
Sec. 301. Additional State option for providing premium assistance. 
Sec. 302. Outreach, education, and enrollment assistance. 
Subtitle B—Coordinating Premium Assistance With Private Coverage 
Sec. 311. Special enrollment period under group health plans in case of termi-
nation of Medicaid or CHIP coverage or eligibility for assistance 
in purchase of employment-based coverage; coordination of cov-
erage. 
TITLE IV—STRENGTHENING QUALITY OF CARE AND HEALTH 
OUTCOMES 
Sec. 401. Child health quality improvement activities for children enrolled in 
Medicaid or CHIP. 
Sec. 402. Improved availability of public information regarding enrollment of 
children in CHIP and Medicaid. 
Sec. 403. Application of certain managed care quality safeguards to CHIP. 
TITLE V—IMPROVING ACCESS TO BENEFITS 
Sec. 501. Dental benefits. 
Sec. 502. Mental health parity in CHIP plans. 
Sec. 503. Application of prospective payment system for services provided by Fed-
erally-Qualified Health Centers and rural health clinics. 
Sec. 504. Premium grace period. 
Sec. 505. Demonstration projects relating to diabetes prevention. 
Sec. 506. Clarification of coverage of services provided through school-based health 
centers.
TITLE VI—PROGRAM INTEGRITY AND OTHER MISCELLANEOUS 
PROVISIONS 
Subtitle A—Program Integrity and Data Collection 
Sec. 601. Payment error rate measurement (‘‘PERM’’). 
Sec. 602. Improving data collection. 
Sec. 603. Updated Federal evaluation of CHIP. 
Sec. 604. Access to records for IG and GAO audits and evaluations. 
Sec. 605. No Federal funding for illegal aliens. 
Subtitle B—Miscellaneous Health Provisions 
Sec. 611. Deficit Reduction Act technical corrections. 
Sec. 612. References to title XXI. 
Sec. 613. Prohibiting initiation of new health opportunity account demonstration 
programs. 
Sec. 614. County medicaid health insuring organizations; GAO report on Med-
icaid managed care payment rates. 
Sec. 615. Adjustment in computation of Medicaid FMAP to disregard an extraor-
dinary employer pension contribution. 
Sec. 616. Moratorium on certain payment restrictions. 
Sec. 617. Medicaid DSH allotments for Tennessee and Hawaii. 
Sec. 618. Clarification treatment of regional medical center. 
Sec. 619. Extension of SSI web-based asset demonstration project to the Medicaid 
program. 
Subtitle C—Other Provisions 
Sec. 621. Support for injured servicemembers. 
Sec. 622. Military family job protection. 
Sec. 623. Outreach regarding health insurance options available to children. 
Sec. 624. Sense of Senate regarding access to affordable and meaningful health 
insurance coverage. 
TITLE VII—REVENUE PROVISIONS 
Sec. 701. Increase in excise tax rate on tobacco products. 
Sec. 702. Administrative improvements. 
Sec. 703. Time for payment of corporate estimated taxes. 
SEC. 2. PURPOSE. 
It is the purpose of this Act to provide dependable and 
stable funding for children’s health insurance under titles 
XXI and XIX of the Social Security Act in order to enroll 
all six million uninsured children who are eligible, but not 
enrolled, for coverage today through such titles.
SEC. 3. GENERAL EFFECTIVE DATE; EXCEPTION FOR STATE 
LEGISLATION; 
CONTINGENT 
EFFECTIVE 
DATE; RELIANCE ON LAW. 
(a) GENERAL EFFECTIVE DATE.—Unless otherwise 
provided in this Act, subject to subsections (b) and (c), this 
Act (and the amendments made by this Act) shall take effect 
on October 1, 2007, and shall apply to child health assist-
ance and medical assistance provided on or after that date 
without regard to whether or not final regulations to carry 
out this Act (or such amendments) have been promulgated 
by such date. 
(b) EXCEPTION FOR STATE LEGISLATION.—In the case 
of a State plan under title XIX or State child health plan 
under XXI of the Social Security Act, which the Secretary 
of Health and Human Services determines requires State 
legislation in order for respective plan to meet one or more 
additional requirements imposed by amendments made by 
this Act, the respective 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 such an additional re-
quirement 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. 
(c) CONTINGENT EFFECTIVE DATE FOR CHIP FUND-
ING FOR FISCAL YEAR 2008.—Notwithstanding any other 
provision of law, if funds are appropriated under any law 
(other than this Act) to provide allotments to States under 
CHIP for all (or any portion) of fiscal year 2008— 
(1) any amounts that are so appropriated that 
are not so allotted and obligated before the date of the 
enactment of this Act are rescinded; and 
(2) any amount provided for CHIP allotments to 
a State under this Act (and the amendments made by 
this Act) for such fiscal year shall be reduced by the 
amount of such appropriations so allotted and obli-
gated before such date. 
(d) RELIANCE ON LAW.—With respect to amendments 
made by this Act (other than title VII) that become effective 
as of a date— 
(1) such amendments are effective as of such date 
whether or not regulations implementing such amend-
ments have been issued; and 
(2) Federal financial participation for medical 
assistance or child health assistance furnished under 
title XIX or XXI, respectively, of the Social Security 
Act on or after such date by a State in good faith re-
liance on such amendments before the date of promul-
gation of final regulations, if any, to carry out such 
amendments (or before the date of guidance, if any, 
regarding the implementation of such amendments) 
shall not be denied on the basis of the State’s failure 
to comply with such regulations or guidance. 
TITLE I—FINANCING 
Subtitle A—Funding 
SEC. 101. EXTENSION OF CHIP. 
Section 2104(a) (42 U.S.C. 1397dd(a)) is amended— 
(1) in paragraph (9), by striking ‘‘and’’ at the 
end; 
(2) in paragraph (10), by striking the period at 
the end and inserting a semicolon; and 
(3) by adding at the end the following new para-
graphs: 
‘‘(11) for fiscal year 2008, $9,125,000,000; 
‘‘(12) for fiscal year 2009, $10,675,000,000; 
‘‘(13) for fiscal year 2010, $11,850,000,000; 
‘‘(14) for fiscal year 2011, $13,750,000,000; and 
‘‘(15) for fiscal year 2012, for purposes of mak-
ing 2 semi-annual allotments— 
‘‘(A) $1,750,000,000 for the period begin-
ning on October 1, 2011, and ending on March 
31, 2012, and
‘‘(B) $1,750,000,000 for the period begin-
ning on April 1, 2012, and ending on September 
30, 2012.’’. 
SEC. 102. ALLOTMENTS FOR STATES AND TERRITORIES FOR 
FISCAL YEARS 2008 THROUGH 2012. 
Section 2104 (42 U.S.C. 1397dd) is amended— 
(1) in subsection (b)(1), by striking ‘‘subsection 
(d)’’ and inserting ‘‘subsections (d) and (i)’’; 
(2) in subsection (c)(1), by striking ‘‘subsection 
(d)’’ and inserting ‘‘subsections (d) and (i)(4)’’; and 
(3) by adding at the end the following new sub-
section: 
‘‘(i) ALLOTMENTS FOR FISCAL YEARS 2008 THROUGH 
2012.— 
‘‘(1) FOR FISCAL YEAR 2008.— 
‘‘(A) FOR THE 50 STATES AND THE DIS-
TRICT OF COLUMBIA.—Subject to the succeeding 
provisions of this paragraph and paragraph (4), 
the Secretary shall allot for fiscal year 2008 
from the amount made available under sub-
section (a)(11), to each of the 50 States and the 
District of Columbia 110 percent of the highest 
of the following amounts for such State or Dis-
trict:
‘‘(i) The total Federal payments to the 
State under this title for fiscal year 2007, 
multiplied by the allotment increase factor 
determined under paragraph (5) for fiscal 
year 2008. 
‘‘(ii) The Federal share of the amount 
allotted to the State for fiscal year 2007 
under subsection (b), multiplied by the al-
lotment increase factor determined under 
paragraph (5) for fiscal year 2008. 
‘‘(iii) Only in the case of— 
‘‘(I) a State that received a pay-
ment, 
redistribution, 
or 
allotment 
under any of paragraph (1), (2), or (4) 
of subsection (h), the amount of the 
projected total Federal payments to the 
State under this title for fiscal year 
2007, as determined on the basis of the 
November 2006 estimates certified by 
the State to the Secretary; 
‘‘(II) a State whose projected total 
Federal payments to the State under 
this title for fiscal year 2007, as deter-
mined on the basis of the May 2006 es-
timates certified by the State to the
Secretary, were at least $95,000,000 
but not more than $96,000,000 higher 
than the projected total Federal pay-
ments to the State under this title for 
fiscal year 2007 on the basis of the No-
vember 2006 estimates, the amount of 
the projected total Federal payments to 
the State under this title for fiscal year 
2007 on the basis of the May 2006 esti-
mates; or 
‘‘(III) a State whose projected 
total Federal payments under this title 
for fiscal year 2007, as determined on 
the basis of the November 2006 esti-
mates certified by the State to the Sec-
retary, exceeded all amounts available 
to the State for expenditure for fiscal 
year 2007 (including any amounts 
paid, allotted, or redistributed to the 
State in prior fiscal years), the 
amount of the projected total Federal 
payments to the State under this title 
for fiscal year 2007, as determined on 
the basis of the November 2006 esti-
mates certified by the State to the Sec-
retary, 
multiplied by the allotment increase factor 
determined under paragraph (5) for fiscal 
year 2008. 
‘‘(iv) The projected total Federal pay-
ments to the State under this title for fiscal 
year 2008, as determined on the basis of the 
August 2007 projections certified by the 
State to the Secretary by not later than 
September 30, 2007. 
‘‘(B) FOR THE COMMONWEALTHS AND TER-
RITORIES.—Subject to the succeeding provisions 
of this paragraph and paragraph (4), the Sec-
retary shall allot for fiscal year 2008 from the 
amount made available under subsection (a)(11) 
to each of the commonwealths and territories de-
scribed in subsection (c)(3) an amount equal to 
the highest amount of Federal payments to the 
commonwealth or territory under this title for 
any fiscal year occurring during the period of 
fiscal years 1998 through 2007, multiplied by the 
allotment increase factor determined under para-
graph (5) for fiscal year 2008, except that sub-
paragraph (B) thereof shall be applied by sub-
stituting ‘the United States’ for ‘the State’. 
‘‘(C) DEADLINE
AND
DATA
FOR
DETER-
MINING
FISCAL
YEAR
2008
ALLOTMENTS.—In 
computing the amounts under subparagraphs 
(A) and (B) that determine the allotments to 
States for fiscal year 2008, the Secretary shall 
use the most recent data available to the Sec-
retary before the start of that fiscal year. The 
Secretary may adjust such amounts and allot-
ments, as necessary, on the basis of the expendi-
ture data for the prior year reported by States 
on CMS Form 64 or CMS Form 21 not later 
than November 30, 2007, but in no case shall the 
Secretary adjust the allotments provided under 
subparagraph (A) or (B) for fiscal year 2008 
after December 31, 2007. 
‘‘(D) 
ADJUSTMENT
FOR
QUALIFYING 
STATES.—In the case of a qualifying State de-
scribed in paragraph (2) of section 2105(g), the 
Secretary shall permit the State to submit re-
vised projection described in subparagraph 
(A)(iv) in order to take into account changes in 
such projections attributable to the application of 
paragraph (4) of such section.
‘‘(2) FOR FISCAL YEARS 2009 THROUGH 2011.— 
‘‘(A) IN GENERAL.—Subject to paragraphs 
(4) and (6), from the amount made available 
under paragraphs (12) through (14) of subsection 
(a) for each of fiscal years 2009 through 2011, 
respectively, the Secretary shall compute a State 
allotment for each State (including the District 
of Columbia and each commonwealth and terri-
tory) for each such fiscal year as follows: 
‘‘(i) GROWTH
FACTOR
UPDATE
FOR 
FISCAL YEAR 2009.—For fiscal year 2009, 
the allotment of the State is equal to the 
sum of— 
‘‘(I) the amount of the State allot-
ment under paragraph (1) for fiscal 
year 2008; and 
‘‘(II) the amount of any payments 
made to the State under subsection (j) 
for fiscal year 2008, 
multiplied by the allotment increase factor 
under paragraph (5) for fiscal year 2009. 
‘‘(ii) 
REBASING
IN
FISCAL
YEAR 
2010.—For fiscal year 2010, the allotment of 
a State is equal to the Federal payments to 
the State that are attributable to (and
countable towards) the total amount of al-
lotments available under this section to the 
State in fiscal year 2009 (including pay-
ments made to the State under subsection 
(j) for fiscal year 2009 as well as amounts 
redistributed to the State in fiscal year 
2009) multiplied by the allotment increase 
factor under paragraph (5) for fiscal year 
2010. 
‘‘(iii) GROWTH FACTOR UPDATE FOR 
FISCAL YEAR 2011.—For fiscal year 2011, 
the allotment of the State is equal to the 
sum of— 
‘‘(I) the amount of the State allot-
ment under clause (ii) for fiscal year 
2010; and 
‘‘(II) the amount of any payments 
made to the State under subsection (j) 
for fiscal year 2010, 
multiplied by the allotment increase factor 
under paragraph (5) for fiscal year 2011. 
‘‘(3) FOR FISCAL YEAR 2012.— 
‘‘(A) FIRST HALF.—Subject to paragraphs 
(4) and (6), from the amount made available 
under subparagraph (A) of paragraph (15) of
subsection (a) for the semi-annual period de-
scribed in such paragraph, increased by the 
amount of the appropriation for such period 
under section 108 of the Children’s Health Insur-
ance Program Reauthorization Act of 2007, the 
Secretary shall compute a State allotment for 
each State (including the District of Columbia 
and each commonwealth and territory) for such 
semi-annual period in an amount equal to the 
first half ratio (described in subparagraph (D)) 
of the amount described in subparagraph (C). 
‘‘(B) SECOND
HALF.—Subject to para-
graphs (4) and (6), from the amount made 
available under subparagraph (B) of paragraph 
(15) of subsection (a) for the semi-annual period 
described in such paragraph, the Secretary shall 
compute a State allotment for each State (in-
cluding the District of Columbia and each com-
monwealth and territory) for such semi-annual 
period in an amount equal to the amount made 
available under such subparagraph multiplied 
by the ratio of— 
‘‘(i) the amount of the allotment to 
such State under subparagraph (A); to
‘‘(ii) the total of the amount of all of 
the allotments made available under such 
subparagraph. 
‘‘(C) FULL
YEAR
AMOUNT
BASED
ON 
REBASED
AMOUNT.—The amount described in 
this subparagraph for a State is equal to the 
Federal payments to the State that are attrib-
utable to (and countable towards) the total 
amount of allotments available under this section 
to the State in fiscal year 2011 (including pay-
ments made to the State under subsection (j) for 
fiscal year 2011 as well as amounts redistributed 
to the State in fiscal year 2011) multiplied by 
the allotment increase factor under paragraph 
(5) for fiscal year 2012. 
‘‘(D) FIRST
HALF
RATIO.—The first half 
ratio described in this subparagraph is the ratio 
of— 
‘‘(i) the sum of— 
‘‘(I) the amount made available 
under subsection (a)(15)(A); and 
‘‘(II) the amount of the appro-
priation for such period under section 
108 of the Children’s Health Insurance
Program Reauthorization Act of 2007; 
to 
‘‘(ii) the sum of the— 
‘‘(I) amount described in clause 
(i); and 
‘‘(II) the amount made available 
under subsection (a)(15)(B). 
‘‘(4) PRORATION RULE.—If, after the application 
of this subsection without regard to this paragraph, 
the sum of the allotments determined under para-
graph (1), (2), or (3) for a fiscal year (or, in the case 
of fiscal year 2012, for a semi-annual period in such 
fiscal year) exceeds the amount available under sub-
section (a) for such fiscal year or period, the Sec-
retary shall reduce each allotment for any State 
under such paragraph for such fiscal year or period 
on a proportional basis. 
‘‘(5) ALLOTMENT INCREASE FACTOR.—The allot-
ment increase factor under this paragraph for a fiscal 
year is equal to the product of the following: 
‘‘(A) PER CAPITA HEALTH CARE GROWTH 
FACTOR.—1 plus the percentage increase in the 
projected per capita amount of National Health 
Expenditures from the calendar year in which 
the previous fiscal year ends to the calendar year
in which the fiscal year involved ends, as most 
recently published by the Secretary before the be-
ginning of the fiscal year. 
‘‘(B) CHILD
POPULATION
GROWTH
FAC-
TOR.—1 plus the percentage increase (if any) in 
the population of children in the State from July 
1 in the previous fiscal year to July 1 in the fis-
cal year involved, as determined by the Secretary 
based on the most recent published estimates of 
the Bureau of the Census before the beginning of 
the fiscal year involved, plus 1 percentage point. 
‘‘(6) INCREASE IN ALLOTMENT TO ACCOUNT FOR 
APPROVED PROGRAM EXPANSIONS.—In the case of one 
of the 50 States or the District of Columbia that— 
‘‘(A) has submitted to the Secretary, and 
has approved by the Secretary, a State plan 
amendment or waiver request relating to an ex-
pansion of eligibility for children or benefits 
under this title that becomes effective for a fiscal 
year (beginning with fiscal year 2009 and end-
ing with fiscal year 2012); and 
‘‘(B) has submitted to the Secretary, before 
the August 31 preceding the beginning of the fis-
cal year, a request for an expansion allotment
adjustment under this paragraph for such fiscal 
year that specifies— 
‘‘(i) the additional expenditures that 
are attributable to the eligibility or benefit 
expansion provided under the amendment 
or waiver described in subparagraph (A), as 
certified by the State and submitted to the 
Secretary by not later than August 31 pre-
ceding the beginning of the fiscal year; and 
‘‘(ii) the extent to which such addi-
tional expenditures are projected to exceed 
the allotment of the State or District for the 
year, 
subject to paragraph (4), the amount of the allotment 
of the State or District under this subsection for such 
fiscal year shall be increased by the excess amount de-
scribed in subparagraph (B)(i). A State or District 
may only obtain an increase under this paragraph 
for an allotment for fiscal year 2009 or fiscal year 
2011. 
‘‘(7) AVAILABILITY OF AMOUNTS FOR SEMI-AN-
NUAL PERIODS IN FISCAL YEAR 2012.—Each semi-an-
nual allotment made under paragraph (3) for a pe-
riod in fiscal year 2012 shall remain available for ex-
penditure under this title for periods after the end of
such fiscal year in the same manner as if the allot-
ment had been made available for the entire fiscal 
year.’’. 
SEC. 103. CHILD ENROLLMENT CONTINGENCY FUND. 
Section 2104 (42 U.S.C. 1397dd), as amended by sec-
tion 102, is amended by adding at the end the following 
new subsection: 
‘‘(j) CHILD ENROLLMENT CONTINGENCY FUND.— 
‘‘(1) ESTABLISHMENT.—There is hereby estab-
lished in the Treasury of the United States a fund 
which shall be known as the ‘Child Enrollment Con-
tingency Fund’ (in this subsection referred to as the 
‘Fund’). Amounts in the Fund shall be available 
without further appropriations for payments under 
this subsection. 
‘‘(2) DEPOSITS INTO FUND.— 
‘‘(A) INITIAL AND SUBSEQUENT APPROPRIA-
TIONS.—Subject to subparagraphs (B) and (D), 
out of any money in the Treasury of the United 
States not otherwise appropriated, there are ap-
propriated to the Fund— 
‘‘(i) for fiscal year 2008, an amount 
equal to 20 percent of the amount made 
available under paragraph (11) of sub-
section (a) for the fiscal year; and
‘‘(ii) for each of fiscal years 2009 
through 2011 (and for each of the semi-an-
nual allotment periods for fiscal year 2012) 
, such sums as are necessary for making 
payments to eligible States for such fiscal 
year or period, but not in excess of the ag-
gregate cap described in subparagraph (B). 
‘‘(B) AGGREGATE CAP.—The total amount 
available for payment from the Fund for each of 
fiscal years 2009 through 2011 (and for each of 
the semi-annual allotment periods for fiscal year 
2012), taking into account deposits made under 
subparagraph (C), shall not exceed 20 percent of 
the amount made available under subsection (a) 
for the fiscal year or period. 
‘‘(C) INVESTMENT OF FUND.—The Secretary 
of the Treasury shall invest, in interest bearing 
securities of the United States, such currently 
available portions of the Fund as are not imme-
diately required for payments from the Fund. 
The income derived from these investments con-
stitutes a part of the Fund. 
‘‘(D) AVAILABILITY OF EXCESS FUNDS FOR 
PERFORMANCE BONUSES.—Any amounts in ex-
cess of the aggregate cap described in subpara-
graph (B) for a fiscal year or period shall be 
made available for purposes of carrying out sec-
tion 2105(a)(3) for any succeeding fiscal year 
and the Secretary of the Treasury shall reduce 
the amount in the Fund by the amount so made 
available. 
‘‘(3) CHILD
ENROLLMENT
CONTINGENCY
FUND 
PAYMENTS.— 
‘‘(A) IN GENERAL.—If a State’s expendi-
tures under this title in fiscal year 2008, fiscal 
year 2009, fiscal year 2010, fiscal year 2011, or 
a semi-annual allotment period for fiscal year 
2012, exceed the total amount of allotments 
available under this section to the State in the 
fiscal year or period (determined without regard 
to any redistribution it receives under subsection 
(f) that is available for expenditure during such 
fiscal year or period, but including any carry-
over from a previous fiscal year) and if the aver-
age monthly unduplicated number of children 
enrolled under the State plan under this title 
(including children receiving health care cov-
erage through funds under this title pursuant to 
a waiver under section 1115) during such fiscal 
year or period exceeds its target average number
of such enrollees (as determined under subpara-
graph (B)) for that fiscal year or period, subject 
to subparagraph (D), the Secretary shall pay to 
the State from the Fund an amount equal to the 
product of— 
‘‘(i) the amount by which such average 
monthly caseload exceeds such target num-
ber of enrollees; and 
‘‘(ii) the projected per capita expendi-
tures under the State child health plan (as 
determined under subparagraph (C) for the 
fiscal year), multiplied by the enhanced 
FMAP (as defined in section 2105(b)) for 
the State and fiscal year involved (or in 
which the period occurs). 
‘‘(B) TARGET AVERAGE NUMBER OF CHILD 
ENROLLEES.—In this paragraph, the target av-
erage number of child enrollees for a State— 
‘‘(i) for fiscal year 2008 is equal to the 
monthly average unduplicated number of 
children enrolled in the State child health 
plan under this title (including such chil-
dren receiving health care coverage through 
funds under this title pursuant to a waiver 
under section 1115) during fiscal year 2007
increased by the population growth for chil-
dren in that State for the year ending on 
June 30, 2006 (as estimated by the Bureau 
of the Census) plus 1 percentage point; or 
‘‘(ii) for a subsequent fiscal year (or 
semi-annual period occurring in a fiscal 
year) is equal to the target average number 
of child enrollees for the State for the pre-
vious fiscal year increased by the child pop-
ulation growth factor described in sub-
section (i)(5)(B) for the State for the prior 
fiscal year. 
‘‘(C) PROJECTED
PER
CAPITA
EXPENDI-
TURES.—For purposes of subparagraph (A)(ii), 
the projected per capita expenditures under a 
State child health plan— 
‘‘(i) for fiscal year 2008 is equal to the 
average per capita expenditures (including 
both State and Federal financial participa-
tion) under such plan for the targeted low- 
income children counted in the average 
monthly caseload for purposes of this para-
graph during fiscal year 2007, increased by 
the annual percentage increase in the pro-
jected per capita amount of National
Health Expenditures (as estimated by the 
Secretary) for 2008; or 
‘‘(ii) for a subsequent fiscal year (or 
semi-annual period occurring in a fiscal 
year) is equal to the projected per capita ex-
penditures under such plan for the previous 
fiscal year (as determined under clause (i) 
or this clause) increased by the annual per-
centage increase in the projected per capita 
amount of National Health Expenditures 
(as estimated by the Secretary) for the year 
in which such subsequent fiscal year ends. 
‘‘(D) PRORATION
RULE.—If the amounts 
available for payment from the Fund for a fiscal 
year or period are less than the total amount of 
payments determined under subparagraph (A) 
for the fiscal year or period, the amount to be 
paid under such subparagraph to each eligible 
State shall be reduced proportionally. 
‘‘(E) TIMELY PAYMENT; RECONCILIATION.— 
Payment under this paragraph for a fiscal year 
or period shall be made before the end of the fis-
cal year or period based upon the most recent 
data for expenditures and enrollment and the 
provisions of subsection (e) of section 2105 shall
apply to payments under this subsection in the 
same manner as they apply to payments under 
such section. 
‘‘(F) CONTINUED
REPORTING.—For pur-
poses of this paragraph and subsection (f), the 
State shall submit to the Secretary the State’s 
projected Federal expenditures, even if the 
amount of such expenditures exceeds the total 
amount of allotments available to the State in 
such fiscal year or period. 
‘‘(G) APPLICATION
TO
COMMONWEALTHS 
AND TERRITORIES.—No payment shall be made 
under this paragraph to a commonwealth or ter-
ritory described in subsection (c)(3) until such 
time as the Secretary determines that there are 
in effect methods, satisfactory to the Secretary, 
for the collection and reporting of reliable data 
regarding the enrollment of children described in 
subparagraphs (A) and (B) in order to accu-
rately determine the commonwealth’s or terri-
tory’s eligibility for, and amount of payment, 
under this paragraph.’’.
SEC. 104. CHIP PERFORMANCE BONUS PAYMENT TO OFFSET 
ADDITIONAL ENROLLMENT COSTS RESULT-
ING FROM ENROLLMENT AND RETENTION EF-
FORTS. 
Section 2105(a) (42 U.S.C. 1397ee(a)) is amended by 
adding at the end the following new paragraphs: 
‘‘(3) PERFORMANCE BONUS PAYMENT TO OFFSET 
ADDITIONAL MEDICAID AND CHIP CHILD ENROLLMENT 
COSTS RESULTING FROM ENROLLMENT AND RETEN-
TION EFFORTS.— 
‘‘(A) IN GENERAL.—In addition to the pay-
ments made under paragraph (1), for each fiscal 
year (beginning with fiscal year 2008 and end-
ing with fiscal year 2012) the Secretary shall 
pay from amounts made available under sub-
paragraph (E), to each State that meets the con-
dition under paragraph (4) for the fiscal year, 
an amount equal to the amount described in sub-
paragraph (B) for the State and fiscal year. The 
payment under this paragraph shall be made, to 
a State for a fiscal year, as a single payment not 
later than the last day of the first calendar quar-
ter of the following fiscal year. 
‘‘(B) AMOUNT.—Subject to subparagraph 
(E), the amount described in this subparagraph
for a State for a fiscal year is equal to the sum 
of the following amounts: 
‘‘(i) FOR ABOVE BASELINE MEDICAID 
CHILD ENROLLMENT COSTS.— 
‘‘(I) FIRST TIER ABOVE BASELINE 
MEDICAID
ENROLLEES.—An amount 
equal to the number of first tier above 
baseline child enrollees (as determined 
under subparagraph (C)(i)) under title 
XIX for the State and fiscal year mul-
tiplied by 15 percent of the projected 
per capita State Medicaid expenditures 
(as determined under subparagraph 
(D)(i)) for the State and fiscal year 
under title XIX. 
‘‘(II) SECOND TIER ABOVE BASE-
LINE
MEDICAID
ENROLLEES.—An 
amount equal to the number of second 
tier above baseline child enrollees (as 
determined 
under 
subparagraph 
(C)(ii)) under title XIX for the State 
and fiscal year multiplied by 60 per-
cent of the projected per capita State 
Medicaid expenditures (as determined
under subparagraph (D)(i)) for the 
State and fiscal year under title XIX. 
‘‘(ii) FOR ABOVE BASELINE CHIP EN-
ROLLMENT COSTS.— 
‘‘(I) FIRST TIER ABOVE BASELINE 
CHIP ENROLLEES.—An amount equal 
to the number of first tier above base-
line child enrollees under this title (as 
determined under subparagraph (C)(i)) 
for the State and fiscal year multiplied 
by 10 percent of the projected per cap-
ita State CHIP expenditures (as deter-
mined under subparagraph (D)(ii)) for 
the State and fiscal year under this 
title. 
‘‘(II) SECOND TIER ABOVE BASE-
LINE
CHIP
ENROLLEES.—An amount 
equal to the number of second tier 
above baseline child enrollees under 
this title (as determined under sub-
paragraph (C)(ii)) for the State and 
fiscal year multiplied by 40 percent of 
the projected per capita State CHIP 
expenditures (as determined under sub-
paragraph (D)(ii)) for the State and 
fiscal year under this title. 
‘‘(C) NUMBER OF FIRST AND SECOND TIER 
ABOVE BASELINE CHILD ENROLLEES; BASELINE 
NUMBER OF CHILD ENROLLEES.—For purposes 
of this paragraph: 
‘‘(i) FIRST
TIER
ABOVE
BASELINE 
CHILD
ENROLLEES.—The number of first 
tier above baseline child enrollees for a 
State for a fiscal year under this title or 
title XIX is equal to the number (if any, as 
determined by the Secretary) by which— 
‘‘(I) 
the 
monthly 
average 
unduplicated number of qualifying 
children (as defined in subparagraph 
(F)) enrolled during the fiscal year 
under the State child health plan 
under this title or under the State plan 
under title XIX, respectively; exceeds 
‘‘(II) the baseline number of en-
rollees described in clause (iii) for the 
State and fiscal year under this title or 
title XIX, respectively; 
but not to exceed 3 percent (in the case of 
title XIX) or 7.5 percent (in the case of this
title) of the baseline number of enrollees de-
scribed in subclause (II). 
‘‘(ii) SECOND TIER ABOVE BASELINE 
CHILD ENROLLEES.—The number of second 
tier above baseline child enrollees for a 
State for a fiscal year under this title or 
title XIX is equal to the number (if any, as 
determined by the Secretary) by which— 
‘‘(I) 
the 
monthly 
average 
unduplicated number of qualifying 
children (as defined in subparagraph 
(F)) enrolled during the fiscal year 
under this title or under title XIX, re-
spectively, as described in clause (i)(I); 
exceeds 
‘‘(II) the sum of the baseline num-
ber of child enrollees described in 
clause (iii) for the State and fiscal 
year under this title or title XIX, re-
spectively, 
as 
described 
in 
clause 
(i)(II), and the maximum number of 
first tier above baseline child enrollees 
for the State and fiscal year under this 
title or title XIX, respectively, as deter-
mined under clause (i).
‘‘(iii) BASELINE
NUMBER
OF
CHILD 
ENROLLEES.—Subject to subparagraph (H), 
the baseline number of child enrollees for a 
State under this title or title XIX— 
‘‘(I) for fiscal year 2008 is equal 
to the monthly average unduplicated 
number of qualifying children enrolled 
in the State child health plan under 
this title or in the State plan under 
title XIX, respectively, during fiscal 
year 2007 increased by the population 
growth for children in that State for 
the year ending on June 30, 2006 (as 
estimated by the Bureau of the Census) 
plus 1 percentage point; or 
‘‘(II) for a subsequent fiscal year 
is equal to the baseline number of child 
enrollees for the State for the previous 
fiscal year under this title or title XIX, 
respectively, increased by the popu-
lation growth for children in that State 
for the year ending on June 30 before 
the beginning of the fiscal year (as es-
timated by the Bureau of the Census) 
plus 1 percentage point.
‘‘(D) PROJECTED PER CAPITA STATE EX-
PENDITURES.—For purposes of subparagraph 
(B)— 
‘‘(i) PROJECTED
PER
CAPITA
STATE 
MEDICAID
EXPENDITURES.—The projected 
per capita State Medicaid expenditures for 
a State and fiscal year under title XIX is 
equal to the average per capita expenditures 
(including both State and Federal financial 
participation) for children under the State 
plan under such title, including under 
waivers but not including such children eli-
gible for assistance by virtue of the receipt 
of benefits under title XVI, for the most re-
cent fiscal year for which actual data are 
available (as determined by the Secretary), 
increased (for each subsequent fiscal year up 
to and including the fiscal year involved) 
by the annual percentage increase in per 
capita amount of National Health Expendi-
tures (as estimated by the Secretary) for the 
calendar year in which the respective subse-
quent fiscal year ends and multiplied by a 
State matching percentage equal to 100 per-
cent minus the Federal medical assistance
percentage (as defined in section 1905(b)) 
for the fiscal year involved. 
‘‘(ii) PROJECTED PER CAPITA STATE 
CHIP
EXPENDITURES.—The projected per 
capita State CHIP expenditures for a State 
and fiscal year under this title is equal to 
the average per capita expenditures (includ-
ing both State and Federal financial par-
ticipation) for children under the State 
child health plan under this title, including 
under waivers, for the most recent fiscal 
year for which actual data are available (as 
determined by the Secretary), increased (for 
each subsequent fiscal year up to and in-
cluding the fiscal year involved) by the an-
nual percentage increase in per capita 
amount of National Health Expenditures 
(as estimated by the Secretary) for the cal-
endar year in which the respective subse-
quent fiscal year ends and multiplied by a 
State matching percentage equal to 100 per-
cent minus the enhanced FMAP (as defined 
in section 2105(b)) for the fiscal year in-
volved.
‘‘(E) 
AMOUNTS
AVAILABLE
FOR
PAY-
MENTS.— 
‘‘(i) INITIAL APPROPRIATION.—Out of 
any money in the Treasury not otherwise 
appropriated, 
there 
are 
appropriated 
$3,000,000,000 for fiscal year 2008 for mak-
ing payments under this paragraph, to be 
available until expended. 
‘‘(ii) 
TRANSFERS.—Notwithstanding 
any other provision of this title, the fol-
lowing amounts shall also be available, 
without fiscal year limitation, for making 
payments under this paragraph: 
‘‘(I) UNOBLIGATED NATIONAL AL-
LOTMENT.— 
‘‘(aa) FISCAL
YEARS
2008 
THROUGH 2011.—As of December 
31 of fiscal year 2008, and as of 
December 31 of each succeeding 
fiscal year through fiscal year 
2011, the portion, if any, of the 
amount appropriated under sub-
section (a) for such fiscal year 
that is unobligated for allotment 
to a State under subsection (i) for
such fiscal year or set aside under 
subsection (a)(3) or (b)(2) of sec-
tion 2111 for such fiscal year. 
‘‘(bb) FIRST HALF OF FISCAL 
YEAR 2012.—As of December 31 of 
fiscal year 2012, the portion, if 
any, of the sum of the amounts 
appropriated 
under 
subsection 
(a)(15)(A) and under section 108 
of the Children’s Health Insurance 
Reauthorization Act of 2007 for 
the period beginning on October 1, 
2011, and ending on March 31, 
2012, that is unobligated for allot-
ment to a State under subsection 
(i) for such fiscal year or set aside 
under subsection (b)(2) of section 
2111 for such fiscal year. 
‘‘(cc) SECOND HALF OF FIS-
CAL YEAR 2012.—As of June 30 of 
fiscal year 2012, the portion, if 
any, of the amount appropriated 
under subsection (a)(15)(B) for 
the period beginning on April 1, 
2012, and ending on September
30, 2012, that is unobligated for 
allotment to a State under sub-
section (i) for such fiscal year or 
set aside under subsection (b)(2) 
of section 2111 for such fiscal 
year. 
‘‘(II) UNEXPENDED
ALLOTMENTS 
NOT USED FOR REDISTRIBUTION.—As 
of November 15 of each of fiscal years 
2009 through 2012, the total amount of 
allotments made to States under sec-
tion 2104 for the second preceding fis-
cal year (third preceding fiscal year in 
the case of the fiscal year 2006 and 
2007 allotments) that is not expended 
or redistributed under section 2104(f) 
during the period in which such allot-
ments are available for obligation. 
‘‘(III) EXCESS
CHILD
ENROLL-
MENT CONTINGENCY FUNDS.—As of Oc-
tober 1 of each of fiscal years 2009 
through 2012, any amount in excess of 
the aggregate cap applicable to the 
Child Enrollment Contingency Fund
for the fiscal year under section 
2104(j). 
‘‘(IV) 
UNEXPENDED
TRANSI-
TIONAL COVERAGE BLOCK GRANT FOR 
NONPREGNANT
CHILDLESS
ADULTS.— 
As of October 1, 2009, any amounts set 
aside under section 2111(a)(3) that are 
not expended by September 30, 2009. 
‘‘(iii) PROPORTIONAL REDUCTION.—If 
the sum of the amounts otherwise payable 
under this paragraph for a fiscal year ex-
ceeds the amount available for the fiscal 
year under this subparagraph, the amount 
to be paid under this paragraph to each 
State shall be reduced proportionally. 
‘‘(F) QUALIFYING
CHILDREN
DEFINED.— 
For purposes of this subsection, the term ‘quali-
fying children’ means, with respect to this title 
or title XIX, children who meet the eligibility 
criteria (including income, categorical eligibility, 
age, and immigration status criteria) in effect as 
of July 1, 2007, for enrollment under this title 
or title XIX, respectively, taking into account 
criteria applied as of such date under this title
or title XIX, respectively, pursuant to a waiver 
under section 1115. 
‘‘(G) APPLICATION
TO
COMMONWEALTHS 
AND TERRITORIES.—The provisions of subpara-
graph (H) of section 2104(j)(3) shall apply with 
respect to payments under this paragraph in the 
same manner as such provisions apply to pay-
ment under such section. 
‘‘(H) APPLICATION TO STATES THAT IMPLE-
MENT
A
MEDICAID
EXPANSION
FOR
CHILDREN 
AFTER FISCAL YEAR 2007.—In the case of a State 
that provides coverage under paragraph (1) or 
(2) of section 115(b) of the Children’s Health In-
surance Program Reauthorization Act of 2007 
for any fiscal year after fiscal year 2007— 
‘‘(i) any child enrolled in the State 
plan under title XIX through the applica-
tion of such an election shall be disregarded 
from the determination for the State of the 
monthly average unduplicated number of 
qualifying children enrolled in such plan 
during the first 3 fiscal years in which such 
an election is in effect; and 
‘‘(ii) in determining the baseline num-
ber of child enrollees for the State for any
fiscal year subsequent to such first 3 fiscal 
years, the baseline number of child enrollees 
for the State under this title or title XIX for 
the third of such fiscal years shall be the 
monthly average unduplicated number of 
qualifying children enrolled in the State 
child health plan under this title or in the 
State plan under title XIX, respectively, for 
such third fiscal year. 
‘‘(4) ENROLLMENT AND RETENTION PROVISIONS 
FOR CHILDREN.—For purposes of paragraph (3)(A), 
a State meets the condition of this paragraph for a 
fiscal year if it is implementing at least 4 of the fol-
lowing enrollment and retention provisions (treating 
each subparagraph as a separate enrollment and re-
tention provision) throughout the entire fiscal year: 
‘‘(A) CONTINUOUS ELIGIBILITY.—The State 
has elected the option of continuous eligibility for 
a full 12 months for all children described in sec-
tion 1902(e)(12) under title XIX under 19 years 
of age, as well as applying such policy under its 
State child health plan under this title. 
‘‘(B) LIBERALIZATION OF ASSET REQUIRE-
MENTS.—The State meets the requirement speci-
fied in either of the following clauses:
‘‘(i) ELIMINATION OF ASSET TEST.— 
The State does not apply any asset or re-
source test for eligibility for children under 
title XIX or this title. 
‘‘(ii) ADMINISTRATIVE
VERIFICATION 
OF ASSETS.—The State— 
‘‘(I) permits a parent or caretaker 
relative who is applying on behalf of a 
child for medical assistance under title 
XIX or child health assistance under 
this title to declare and certify by sig-
nature under penalty of perjury infor-
mation relating to family assets for 
purposes of determining and redeter-
mining financial eligibility; and 
‘‘(II) takes steps to verify assets 
through means other than by requiring 
documentation from parents and ap-
plicants except in individual cases of 
discrepancies or where otherwise justi-
fied. 
‘‘(C) ELIMINATION
OF
IN-PERSON
INTER-
VIEW REQUIREMENT.—The State does not require 
an application of a child for medical assistance 
under title XIX (or for child health assistance
under this title), including an application for re-
newal of such assistance, to be made in person 
nor does the State require a face-to-face inter-
view, unless there are discrepancies or individual 
circumstances justifying an in-person applica-
tion or face-to-face interview. 
‘‘(D) USE OF JOINT APPLICATION FOR MED-
ICAID
AND
CHIP.—The application form and 
supplemental forms (if any) and information 
verification process is the same for purposes of 
establishing and renewing eligibility for children 
for medical assistance under title XIX and child 
health assistance under this title. 
‘‘(E) AUTOMATIC RENEWAL (USE OF ADMIN-
ISTRATIVE RENEWAL).— 
‘‘(i) IN GENERAL.—The State provides, 
in the case of renewal of a child’s eligibility 
for medical assistance under title XIX or 
child health assistance under this title, a 
pre-printed form completed by the State 
based on the information available to the 
State and notice to the parent or caretaker 
relative of the child that eligibility of the 
child will be renewed and continued based 
on such information unless the State is pro-
vided other information. Nothing in this 
clause shall be construed as preventing a 
State from verifying, through electronic and 
other means, the information so provided. 
‘‘(ii) SATISFACTION
THROUGH
DEM-
ONSTRATED USE OF EX PARTE PROCESS.— 
A State shall be treated as satisfying the re-
quirement of clause (i) if renewal of eligi-
bility of children under title XIX or this 
title is determined without any requirement 
for an in-person interview, unless sufficient 
information is not in the State’s possession 
and cannot be acquired from other sources 
(including other State agencies) without the 
participation of the applicant or the appli-
cant’s parent or caretaker relative. 
‘‘(F) PRESUMPTIVE ELIGIBILITY FOR CHIL-
DREN.—The State is implementing section 
1920A under title XIX as well as, pursuant to 
section 2107(e)(1), under this title. 
‘‘(G) EXPRESS LANE.—The State is imple-
menting 
the 
option 
described 
in 
section 
1902(e)(13) under title XIX as well as, pursuant 
to section 2107(e)(1), under this title.’’.
SEC. 105. 2-YEAR INITIAL AVAILABILITY OF CHIP ALLOT-
MENTS. 
Section 2104(e) (42 U.S.C. 1397dd(e)) is amended to 
read as follows: 
‘‘(e) AVAILABILITY OF AMOUNTS ALLOTTED.— 
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), amounts allotted to a State pursuant to 
this section— 
‘‘(A) for each of fiscal years 1998 through 
2007, shall remain available for expenditure by 
the State through the end of the second suc-
ceeding fiscal year; and 
‘‘(B) for fiscal year 2008 and each fiscal 
year thereafter, shall remain available for ex-
penditure by the State through the end of the 
succeeding fiscal year. 
‘‘(2) AVAILABILITY
OF
AMOUNTS
REDISTRIB-
UTED.—Amounts redistributed to a State under sub-
section (f) shall be available for expenditure by the 
State through the end of the fiscal year in which they 
are redistributed.’’. 
SEC. 106. REDISTRIBUTION OF UNUSED ALLOTMENTS TO 
ADDRESS STATE FUNDING SHORTFALLS. 
(a) FISCAL YEAR 2005 ALLOTMENTS.— 
(1) 
IN
GENERAL.—Notwithstanding 
section 
2104(f) of the Social Security Act (42 U.S.C.
1397dd(f)), subject to paragraph (2), with respect to 
fiscal year 2008, the Secretary shall provide for a re-
distribution under such section from the allotments 
for fiscal year 2005 under subsections (b) and (c) of 
such section that are not expended by the end of fiscal 
year 2007, to each State described in clause (iii) of 
section 2104(i)(1)(A) of the Social Security Act, as 
added by section 102, of an amount that bears the 
same ratio to such unexpended fiscal year 2005 allot-
ments as the ratio of the fiscal year 2007 allotment 
determined for each such State under subsection (b) 
of section 2104 of such Act for fiscal year 2007 (with-
out regard to any amounts paid, allotted, or redis-
tributed to the State under section 2104 for any pre-
ceding fiscal year) bears to the total amount of the 
fiscal year 2007 allotments for all such States (as so 
determined). 
(2) CONTINGENCY.—Paragraph (1) shall not 
apply if the redistribution described in such para-
graph has occurred as of the date of the enactment of 
this Act. 
(b) ALLOTMENTS FOR SUBSEQUENT FISCAL YEARS.— 
Section 2104(f) (42 U.S.C. 1397dd(f)) is amended— 
(1) by striking ‘‘The Secretary’’ and inserting 
the following:
‘‘(1) IN GENERAL.—The Secretary’’; 
(2) by striking ‘‘States that have fully expended 
the amount of their allotments under this section.’’ 
and inserting ‘‘States that the Secretary determines 
with respect to the fiscal year for which unused allot-
ments are available for redistribution under this sub-
section, are shortfall States described in paragraph 
(2) for such fiscal year, but not to exceed the amount 
of the shortfall described in paragraph (2)(A) for each 
such State (as may be adjusted under paragraph 
(2)(C)).’’; and 
(3) by adding at the end the following new para-
graph: 
‘‘(2) SHORTFALL STATES DESCRIBED.— 
‘‘(A) IN GENERAL.—For purposes of para-
graph (1), with respect to a fiscal year, a short-
fall State described in this subparagraph 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, that the projected expenditures 
under such plan for the State for the fiscal year 
will exceed the sum of— 
‘‘(i) the amount of the State’s allot-
ments for any preceding fiscal years that
remains available for expenditure and that 
will not be expended by the end of the im-
mediately preceding fiscal year; 
‘‘(ii) the amount (if any) of the child 
enrollment contingency fund payment under 
subsection (j); and 
‘‘(iii) the amount of the State’s allot-
ment for the fiscal year. 
‘‘(B) PRORATION
RULE.—If the amounts 
available for redistribution under paragraph (1) 
for a fiscal year are less than the total amounts 
of the estimated shortfalls determined for the 
year under subparagraph (A), the amount to be 
redistributed under such paragraph for each 
shortfall State shall be reduced proportionally. 
‘‘(C) RETROSPECTIVE
ADJUSTMENT.—The 
Secretary may adjust the estimates and deter-
minations made under paragraph (1) and this 
paragraph with respect to a fiscal year as nec-
essary on the basis of the amounts reported by 
States not later than November 30 of the suc-
ceeding fiscal year, as approved by the Sec-
retary.’’.
138 
‘‘(B) If, for any fiscal year, the average monthly per-
centage determined under subparagraph (A) is greater than 
3 percent— 
‘‘(i) the State shall develop and adopt a correc-
tive plan to review its procedures for verifying the 
identities of individuals seeking to enroll in the State 
plan under this title and to identify and implement 
changes in such procedures to improve their accuracy; 
and 
‘‘(ii) pay to the Secretary an amount equal to 
the amount which bears the same ratio to the total 
payments under the State plan for the fiscal year for 
providing medical assistance to individuals who pro-
vided invalid information as the number of individ-
uals with invalid information in excess of 3 percent 
of such total submitted bears to the total number of 
individuals with invalid information. 
‘‘(C) The Secretary may waive, in certain limited 
cases, all or part of the payment under subparagraph 
(B)(ii) if the State is unable to reach the allowable error 
rate despite a good faith effort by such State. 
‘‘(D) This paragraph shall not apply to a State for 
a fiscal year if there is an agreement described in para-
graph (2)(B) in effect as of the close of the fiscal year.