210 
(3) FINAL
DETERMINATION.—The determina-
tion of the Secretary as to the amount and allocation 
of a surcharge under this subtitle shall be final and 
the manufacturer shall pay such surcharge within 10 
days of the date on which the manufacturer is as-
sessed. Such payment shall be retained by the Sec-
retary pending final judicial review of what, if any, 
change in the surcharge is appropriate. 
(4) COMPLIANCE
BY
CERTAIN
MANUFACTUR-
ERS.—A manufacturer that individually complies 
with the goal under subsection (a) shall not be liable 
for the payment of any portion of the penalty under 
this subsection. 
(5) LIMITATION.—With respect to cigarettes, a 
manufacturer with a market share of 1 percent or 
less of youth cigarette use shall not be liable for the 
payment of a surcharge under this section. 
(c) PENALTIES NONDEDUCTIBLE.—The payment of 
penalties under this subtitle shall not be considered to be 
an ordinary and necessary expense in carrying on a trade 
or business for purposes of the Internal Revenue Code of 
1986 and shall not be deductible. 
(d) JUDICIAL REVIEW.— 
(1) AFTER PAYMENT.—A manufacturer of ciga-
rettes may seek judicial review of any action under 
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this subtitle only after the assessment involved has 
been paid by the manufacturer to the Department of 
the Treasury and only in the United States District 
Court for the District of Columbia. 
(2) REVIEW BY ATTORNEY GENERAL.—Prior to 
the filing of an action by a manufacturer seeking ju-
dicial review of an action under this subtitle, the 
manufacturer shall notify the Attorney General of 
such intent to file and the Attorney General shall 
have 30 days in which to respond to the action. 
(3) REVIEW.—The amount of any surcharge 
paid under this subtitle shall be subject to judicial 
review by the United States Court of Appeals for the 
District of Columbia Circuit, based on the arbitrary 
and capricious standard of section 706 of title 5, 
United States Code. Notwithstanding any other pro-
vision of law, no court shall have the authority to 
stay any surcharge payment due to the Secretary 
under this subtitle pending judicial review until the 
Secretary has made or failed to make a compliance 
determination, as described under this subtitle, that 
has adversely affected the person seeking the review. 
SEC. 313. ENFORCEMENT. 
(a) INITIAL PENALTY.—There is hereby imposed an 
initial penalty on the failure of any manufacturer to make 
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212 
any payment required under this subtitle within 10 days 
after the date on which such payment is due. 
(b) AMOUNT OF PENALTY.—The amount of the pen-
alty imposed by subsection (a) on any failure with respect 
to a manufacturer shall be an amount equal to 2 percent 
of the penalty owed under section 312 for each day during 
the noncompliance period. 
(c) NONCOMPLIANCE PERIOD.—For purposes of this 
section, the term ‘‘noncompliance period’’ means, with re-
spect to any failure to make the surcharge payment re-
quired under this subtitle, the period— 
(1) beginning on the due date for such pay-
ment; and 
(2) ending on the date on which such payment 
is paid in fall. 
(d) LIMITATIONS.—No penalty shall be imposed by 
subsection (a) on— 
(1) any failure to make a surcharge payment 
under this subtitle during any period for which it is 
established to the satisfaction of the Secretary that 
none of the persons responsible for such failure 
knew or, exercising reasonable diligence, would have 
known, that such failure existed; or 
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213 
(2) any manufacturer that produces less than 1 
percent of cigarettes used by youth in that year (as 
determined by the annual survey). 
TITLE 
IV—REIMBURSEMENT 
AND COVERAGE OF PREVEN-
TIVE SERVICES 
SEC. 401. COVERAGE OF SUBSTANCE USE (OTHER THAN TO-
BACCO), DIET, EXERCISE, INJURY PREVEN-
TION, AND DENTAL HEALTH COUNSELING. 
(a) COVERAGE.— 
(1) IN
GENERAL.—Section 1861(s)(2) of the 
Social Security Act (42 U.S.C. 1395x(s)(2)), as 
amended by section 5112(a) of the Deficit Reduction 
Act of 2005, is amended— 
(A) in subparagraph (Z), by striking 
‘‘and’’ after the semicolon at the end; 
(B) in subparagraph (AA), by adding 
‘‘and’’ after the semicolon at the end; and 
(C) by adding at the end the following new 
subparagraph: 
‘‘(BB) substance use (other than tobacco), diet, 
exercise, injury prevention, and dental health coun-
seling (as defined in subsection (ccc)(1));’’. 
(2) CONFORMING AMENDMENTS.—(A) Section 
1862(a)(12) of the Social Security Act (42 U.S.C. 
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214 
1395y(a)(12)) is amended by inserting ‘‘(except as 
otherwise 
allowed 
under 
subsection 
1861(s)(2)(BB))’’ after ‘‘directly supporting teeth’’. 
(B) 
Clauses 
(i) 
and 
(ii) 
of 
section 
1861(s)(2)(K) of the Social Security Act (42 U.S.C. 
1395x(s)(2)(K)) are each amended by striking ‘‘sub-
section (ww)(1)’’ and inserting ‘‘subsections (ww)(1) 
and (ccc)’’. 
(b) SERVICES DESCRIBED.—Section 1861 of the So-
cial Security Act (42 U.S.C. 1395x), as amended by sec-
tion 5112(a) of the Deficit Reduction Act of 2005, is 
amended by adding at the end the following new sub-
section: 
‘‘Substance Use (other Than Tobacco), Diet, Exercise, 
Injury Prevention, and Dental Health Counseling 
‘‘(ccc) The term ‘substance use (other than tobacco), 
diet, exercise, injury prevention, and dental health coun-
seling’ means therapy and counseling relating to substance 
use (other than tobacco), diet, exercise, injury prevention, 
and dental health counseling that is furnished— 
‘‘(1) by or under the supervision of a physician; 
or 
‘‘(2) by any other health care professional 
who— 
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‘‘(A) is legally authorized to furnish such 
services under State law (or the State regu-
latory mechanism provided by State law) of the 
State in which the services are furnished; and 
‘‘(B) is authorized to receive payment for 
other services under this title or is designated 
by the Secretary for this purpose.’’. 
(c) PAYMENT
AND ELIMINATION
OF COST-SHAR-
ING.— 
(1) PAYMENT AND ELIMINATION OF COINSUR-
ANCE.—Section 1833(a)(1) of the Social Security 
Act (42 U.S.C. 1395l(a)(1)) is amended— 
(A) in subparagraph (N), by inserting ‘‘or 
substance use (other than tobacco), diet, exer-
cise, injury prevention, and dental health coun-
seling (as defined in section 1861(ccc))’’ after 
‘‘(as defined in section 1848(j)(3))’’; 
(B) by striking ‘‘and’’ before ‘‘(V)’’; and 
(C) by inserting before the semicolon at 
the end the following: ‘‘and (W) with respect to 
substance use (other than tobacco), diet, exer-
cise, injury prevention, and dental health coun-
seling (as defined in section 1861(ccc) the 
amount paid shall be the lesser of the actual 
charge for the services or the amount deter-
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216 
mined under the payment basis determined 
under section 1848’’. 
(2) PAYMENT UNDER PHYSICIAN FEE SCHED-
ULE.—Section 1848(j)(3) of the Social Security Act 
(42 U.S.C. 1395w–4(j)(3)), as amended by section 
5112(c) of the Deficit Reduction Act of 2005, is 
amended by inserting ‘‘(2)(BB),’’ after ‘‘(2)(AA),’’. 
(3) ELIMINATION
OF
COINSURANCE
IN
OUT-
PATIENT HOSPITAL SETTINGS.— 
(A) EXCLUSION FROM OPD FEE SCHED-
ULE.—Section 1833(t)(1)(B)(iv) of the Social 
Security Act (42 U.S.C. 1395l(t)(1)(B)(iv)) is 
amended by striking ‘‘and diagnostic mammog-
raphy’’ and inserting ‘‘, diagnostic mammog-
raphy, or substance use (other than tobacco), 
diet, exercise, injury prevention, and dental 
health 
counseling 
(as 
defined 
in 
section 
1861(bbb))’’. 
(B) CONFORMING AMENDMENTS.—Section 
1833(a)(2) of the Social Security Act (42 
U.S.C. 1395l(a)(2)) is amended— 
(i) in subparagraph (F), by striking 
‘‘and’’ after the semicolon at the end; 
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217 
(ii) in subparagraph (G)(ii), by strik-
ing the comma at the end and inserting ‘‘; 
and’’; and 
(iii) by inserting after subparagraph 
(G)(ii) the following new subparagraph: 
‘‘(H) with respect to substance use (other 
than tobacco), diet, exercise, injury prevention, 
and dental health counseling (as defined in sec-
tion 1861(ccc)) furnished by an outpatient de-
partment of a hospital, the amount determined 
under paragraph (1)(W),’’. 
(4) ELIMINATION OF DEDUCTIBLE.—The first 
sentence of section 1833(b) of the Social Security 
Act (42 U.S.C. 1395l(b)), as amended by section 
5112(e) of the Deficit Reduction Act of 2005, is 
amended— 
(A) by striking ‘‘and’’ before ‘‘(7)’’; and 
(B) by inserting before the period at the 
end the following: ‘‘, and (8) such deductible 
shall not apply with respect to substance use 
(other than tobacco), diet, exercise, injury pre-
vention, and dental health counseling (as de-
fined in section 1861(ccc))’’. 
(d) APPLICATION OF LIMITS ON BILLING.—Section 
1842(b)(18)(C) of the Social Security Act (42 U.S.C. 
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218 
1395u(b)(18)(C)) is amended by adding at the end the 
following new clause: 
‘‘(vii) Any health care professional designated 
under section 1861(ccc)(2)(B) to perform substance 
use (other than tobacco), diet, exercise, injury pre-
vention, and dental health counseling that is not oth-
erwise described in this subparagraph.’’. 
(e) EFFECTIVE DATE.—The amendments made by 
this section shall apply to services furnished on and after 
January 1, 2007. 
SEC. 402. ENCOURAGEMENT OF CESSATION OF TOBACCO 
USE. 
(a) MEDICARE COVERAGE
OF COUNSELING
AND 
PHARMACOTHERAPY
FOR
CESSATION
OF
TOBACCO 
USE.— 
(1) COVERAGE.— 
(A) IN GENERAL.—Section 1861(s)(2) of 
the 
Social 
Security 
Act 
(42 
U.S.C. 
1395x(s)(2)), as amended by section 401(a)(1), 
is amended— 
(i) in subparagraph (AA), by striking 
‘‘and’’ after the semicolon at the end; 
(ii) in subparagraph (BB), by adding 
‘‘and’’ after the semicolon at the end; and 
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219 
(iii) by adding at the end the fol-
lowing new subparagraph: 
‘‘(CC) counseling and pharmacotherapy for ces-
sation of tobacco use (as defined in subsection 
(ddd)(1));’’. 
(B) CONFORMING AMENDMENTS.—Clauses 
(i) and (ii) of section 1861(s)(2)(K) of the So-
cial Security Act (42 U.S.C. 1395x(s)(2)(K)), 
as amended by section 401(a)(2)(B), are each 
amended by striking ‘‘and (ccc)’’ and inserting 
‘‘(ccc), and (ddd)’’. 
(2) SERVICES
DESCRIBED.—Section 1861 of 
the Social Security Act (42 U.S.C. 1395x), as 
amended by section 401(b), is amended by adding at 
the end the following new subsection: 
‘‘Counseling and Pharmacotherapy for Cessation of 
Tobacco Use 
‘‘(ddd)(1) Subject to paragraphs (2) and (3), the 
term ‘counseling and pharmacotherapy for cessation of to-
bacco use’ means diagnostic, therapy, and counseling serv-
ices and pharmacotherapy (including the coverage of pre-
scription and nonprescription tobacco cessation agents ap-
proved by the Food and Drug Administration) for ces-
sation of tobacco use for individuals who use tobacco prod-
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220 
ucts or who are being treated for tobacco use which are 
furnished— 
‘‘(A) by or under the supervision of a physician; 
or 
‘‘(B) by any other health care professional 
who— 
‘‘(i) is legally authorized to furnish 
such services under State law (or the State 
regulatory mechanism provided by State 
law) of the State in which the services are 
furnished; and 
‘‘(ii) is authorized to receive payment 
for other services under this title or is des-
ignated by the Secretary for this purpose. 
‘‘(2) Such term is limited to— 
‘‘(A) services recommended in ‘Treating To-
bacco Use and Dependence: A Clinical Practice 
Guideline’, published by the Public Health Service in 
June 2000, or any subsequent modification of such 
Guideline; and 
‘‘(B) such other services that the Secretary rec-
ognizes to be effective. 
‘‘(3) Each individual who is described in paragraph 
(1) and enrolled under part B shall be eligible for the serv-
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221 
ices described in this subsection for up to 3 attempts to 
cease the use of tobacco.’’. 
(3) PAYMENT
AND
ELIMINATION
OF
COST- 
SHARING.— 
(A) PAYMENT AND ELIMINATION OF COIN-
SURANCE.—Section 1833(a)(1) of the Social 
Security Act (42 U.S.C. 1395l(a)(1)), as 
amended by section 401(c)(1), is amended— 
(i) in subparagraph (N), by striking 
‘‘or’’ before ‘‘substance abuse’’ and by in-
serting after ‘‘(ccc))’’ the following: ‘‘or 
counseling and pharmacotherapy for ces-
sation of tobacco use (as defined in section 
1861(ddd))’’; and 
(ii) in subparagraph (W), by inserting 
‘‘and counseling and pharmacotherapy for 
cessation of tobacco use (as defined in sec-
tion 1861(ddd))’’ after ‘‘1861(ccc))’’. 
(B) PAYMENT
UNDER
PHYSICIAN
FEE 
SCHEDULE.—Section 1848(j)(3) of the Social 
Security Act (42 U.S.C. 1395w–4(j)(3)), as 
amended by section 401(c)(2), is amended by 
inserting ‘‘(2)(CC) (with separate payment 
amounts for pharmacotherapy, including pre-
scription and nonprescription tobacco cessation 
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222 
agents approved by the Food and Drug Admin-
istration),’’ after ‘‘(2)(BB),’’. 
(C) ELIMINATION
OF
COINSURANCE
IN 
OUTPATIENT HOSPITAL SETTINGS.— 
(i) 
EXCLUSION
FROM
OPD
FEE 
SCHEDULE.—Section 1833(t)(1)(B)(iv) of 
the 
Social 
Security 
Act 
(42 
U.S.C. 
1395l(t)(1)(B)(iv)), as amended by section 
401(c)(3)(A), is amended by striking ‘‘or’’ 
before ‘‘screenings’’ and inserting after 
‘‘1861(ccc))’’ the following: ‘‘or counseling 
and pharmacotherapy for cessation of to-
bacco 
use 
(as 
defined 
in 
section 
1861(ddd))’’. 
(ii) CONFORMING AMENDMENT.—Sec-
tion 1833(a)(2)(H) of the Social Security 
Act (42 U.S.C. 1395l(a)(2)(H)), as added 
by section 401(c)(4), is amended by insert-
ing ‘‘and counseling and pharmacotherapy 
for cessation of tobacco use (as defined in 
section 1861(ddd))’’ after ‘‘1861(ccc))’’. 
(D) ELIMINATION OF DEDUCTIBLE.—Sec-
tion 1833(b)(8) of the Social Security Act (42 
U.S.C. 1395l(b)(7)), as added by section 
401(c)(4), is amended by inserting ‘‘or coun-
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seling and pharmacotherapy for cessation of to-
bacco use (as defined in section 1861(ddd))’’ 
before the period at the end. 
(4) APPLICATION OF LIMITS ON BILLING.—Sec-
tion 1842(b)(18)(C) of the Social Security Act (42 
U.S.C. 1395u(b)(18)(C)), as amended by section 
401(d), is amended by adding at the end the fol-
lowing new clause: 
‘‘(viii) Any individual designated by the Sec-
retary under section 1861(ddd)(1)(B)(ii).’’. 
(5) FREQUENCY.—Section 1862(a)(1) of the 
Social Security Act (42 U.S.C. 1395y(a)(1)), as 
amended by section 5112(d) of the Deficit Reduction 
Act of 2005, is amended— 
(A) in subparagraph (M), by striking 
‘‘and’’ after the comma at the end; 
(B) in subparagraph (N), by striking the 
semicolon at the end and inserting ‘‘, and’’; and 
(C) by adding at the end the following new 
subparagraph: 
‘‘(O) 
in 
the 
case 
of 
counseling 
and 
pharmacotherapy for cessation of tobacco use (as de-
fined in section 1861(ddd)), which is performed with 
respect to more attempts to cease tobacco use than 
is covered under such section;’’. 
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224 
(b) PROMOTING
CESSATION
OF
TOBACCO
USE 
UNDER THE MEDICAID PROGRAM.— 
(1) DROPPING
EXCEPTION
FROM
MEDICAID 
PRESCRIPTION DRUG COVERAGE FOR TOBACCO CES-
SATION
MEDICATIONS.—Section 1927(d)(2) of the 
Social Security Act (42 U.S.C. 1396r–8(d)(2)) is 
amended— 
(A) by striking subparagraph (E); 
(B) by redesignating subparagraphs (F) 
through (J) as subparagraphs (E) through (I), 
respectively; and 
(C) in subparagraph (F) (as redesignated 
by paragraph (2)), by inserting before the pe-
riod at the end the following: ‘‘, except agents 
approved by the Food and Drug Administration 
for purposes of promoting, and when used to 
promote, tobacco cessation’’. 
(2) REQUIRING COVERAGE OF TOBACCO CES-
SATION
COUNSELING
AND
PHARMACOTHERAPY 
SERVICES
FOR
PREGNANT
WOMEN.—Section 
1905(a)(4) of the Social Security Act (42 U.S.C. 
1396d(a)(4)) is amended— 
(A) by striking ‘‘and’’ before ‘‘(C)’’; and 
(B) by inserting before the semicolon at 
the end the following: ‘‘; and (D) counseling 
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225 
and pharmacotherapy for cessation of tobacco 
use (as defined in section 1861(ddd)) for preg-
nant women’’. 
(3) REMOVAL OF COST-SHARING FOR TOBACCO 
CESSATION
COUNSELING
AND
PHARMACOTHERAPY 
SERVICES FOR PREGNANT WOMEN.—Section 1916 of 
the Social Security Act (42 U.S.C. 1396o) is amend-
ed in each of subsections (a)(2)(B) and (b)(2)(B), 
by inserting ‘‘, and counseling for cessation of to-
bacco use (as defined in section 1861(ddd))’’ after 
‘‘complicate the pregnancy’’. 
(c) COVERAGE UNDER FEHBP.—The last sentence 
of section 8904(a) of title 5, United States Code, is 
amended by striking ‘‘both for costs associated with care 
in a general hospital and for other health services of a 
catastrophic nature’’ and inserting ‘‘for costs associated 
with care in a general hospital, for other health services 
of a catastrophic nature, and for counseling and 
pharmacotherapy for cessation of tobacco use (as defined 
in section 1861(ddd)(1) of the Social Security Act)’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to services furnished on and after 
January 1, 2007. 
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226 
SEC. 403. RECOGNITION OF SCHOOL-BASED HEALTH CEN-
TERS AS MODEL FOR DELIVERY OF PRIMARY 
CARE FOR CHILDREN UNDER MEDICAID AND 
THE STATE CHILDREN’S HEALTH INSURANCE 
PROGRAM. 
(a) IN GENERAL.—Title XIX of the Social Security 
Act (42 U.S.C. 1396 et seq.) is amended by inserting after 
section 1911 the following: 
‘‘SCHOOL-BASED HEALTH CENTERS 
‘‘SEC. 1911A. Not later than 12 months after the 
date of enactment of this section, the Secretary shall es-
tablish procedures to encourage a State program estab-
lished under this title, title XXI, or both, to recognize 
school-based health centers as a model of delivery for pri-
mary care for children who are eligible for medical assist-
ance under this title or child health assistance under title 
XXI. Such procedures shall include the following: 
‘‘(1) RECOGNITION OF, AND REIMBURSEMENT 
FOR, SERVICES PROVIDED THROUGH SCHOOL-BASED 
HEALTH
CENTERS.—Procedures that encourage a 
State to recognize as primary care providers under 
this title and title XXI, providers who furnish phys-
ical or mental health services that are available as 
medical assistance under this title or child health as-
sistance under title XXI to children who are eligible 
for such assistance through school-based health cen-
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ters, and to reimburse such providers or centers (as 
appropriate) for furnishing such services to such 
children. 
‘‘(2) EXCEPTIONS
TO
THE
‘FREE
CARE’ 
RULE.—Procedures that allow a State the option to 
permit school-based health centers to bill the State 
for physical or mental health services that are avail-
able as medical assistance under this title or child 
health assistance under title XXI and that are fur-
nished to children who are eligible for such assist-
ance through such centers without billing all chil-
dren who are provided such services. 
‘‘(3) EXCEPTIONS TO THE ‘THIRD PARTY LI-
ABILITY’ 
COST
AVOIDANCE
POLICY.—Procedures 
that encourage a State to include physical or mental 
health services that are available as medical assist-
ance under this title and that are provided through 
school-based health centers in the list of diagnosis 
billing codes for preventive pediatric care services 
that the State will pay for under this title and then 
seek reimbursement from any liable third party in 
accordance 
with 
the 
requirements 
of 
section 
1902(a)(25). 
‘‘(4) ASSURANCE OF PAYMENT FOR SERVICES 
COVERED BY A CONTRACT WITH A MANAGED CARE 
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