‘‘(1) IN
GENERAL.—For provisions providing 
for eligibility determinations, and additional financ-
ing, under the medicaid program, see section 1935. 
‘‘(2) MEDICAID PROVIDING WRAP AROUND BEN-
EFITS.—The coverage provided under this part is 
primary payor to benefits for prescribed drugs pro-
vided under the medicaid program under title XIX. 
‘‘SEC. 
1860H. 
SUBSIDIES 
FOR 
ALL 
MEDICARE 
BENE-
FICIARIES 
THROUGH 
REINSURANCE 
FOR 
QUALIFIED PRESCRIPTION DRUG COVERAGE. 
‘‘(a) REINSURANCE SUBSIDY PAYMENT.—In order to 
reduce premium levels applicable to qualified prescription 
drug coverage for all medicare beneficiaries, to reduce ad-
verse selection among prescription drug plans and 
Medicare+Choice plans that provide qualified prescription 
drug coverage, and to promote the participation of PDP 
sponsors under this part, the Secretary shall provide in 
accordance with this section for payment to a qualifying 
entity (as defined in subsection (b)) of the reinsurance 
payment amount (as defined in subsection (c)) for excess 
costs incurred in providing qualified prescription drug cov-
erage—
‘‘(1) for individuals enrolled with a prescription 
drug plan under this part;
‘‘(2) 
for 
individuals 
enrolled 
with 
a 
Medicare+Choice plan that provides qualified pre-
scription drug coverage under part C; and 
‘‘(3) for medicare primary individuals (de-
scribed in subsection (e)(3)(D)) who are enrolled in 
a qualified retiree prescription drug plan. 
This section constitutes budget authority in advance of ap-
propriations Acts and represents the obligation of the Sec-
retary to provide for the payment of amounts provided 
under this section. 
‘‘(b) QUALIFYING ENTITY DEFINED.—For purposes 
of this section, the term ‘qualifying entity’ means any of 
the following that has entered into an agreement with the 
Secretary to provide the Secretary with such information 
as may be required to carry out this section: 
‘‘(1) A PDP sponsor offering a prescription 
drug plan under this part. 
‘‘(2) A Medicare+Choice organization that pro-
vides qualified prescription drug coverage under a 
Medicare+Choice plan under part C. 
‘‘(3) The sponsor of a qualified retiree prescrip-
tion drug plan (as defined in subsection (e)). 
‘‘(c) REINSURANCE PAYMENT AMOUNT.—
‘‘(1) IN GENERAL.—Subject to paragraph (3), 
the reinsurance payment amount under this sub-
section for a qualifying covered individual (as de-
fined in subsection (f)(1)) for a coverage year (as 
defined in subsection (f)(2)) is equal to such per-
centages, at such attachment points, as the Sec-
retary may specify in order to provide that the total 
of the payments made for the year under this sec-
tion is equal to 65 percent of the total payments de-
scribed in paragraph (2)(B) during the year. The 
Secretary shall adjust such percentages and attach-
ment points each year. 
‘‘(2) PAYMENT COMPUTATIONS.—The Secretary 
shall estimate—
‘‘(A) the total payments to be made (with-
out regard to this subsection) during a year 
under this section; and 
‘‘(B) the total payments to be made by 
qualifying entities for standard coverage under 
plans described in subsection (b) during the 
year. 
‘‘(3) ADJUSTMENT OF PAYMENTS.—In lieu of, 
or in addition to, the adjustment made under para-
graph (1), the Secretary may provide for such pay-
ment adjustments (or direct subsidy payments) to 
PDP sponsors as the Secretary may specify in order 
to assure participation of PDP sponsors under this
part consistent with the limitations on premiums 
under section 1860F(a)(4). 
‘‘(d) PAYMENT METHODS.—
‘‘(1) IN GENERAL.—Payments under this sec-
tion shall be based on such a method as the Sec-
retary determines. The Secretary may establish a 
payment method by which interim payments of 
amounts under this section are made during a year 
based on the Secretary’s best estimate of amounts 
that will be payable after obtaining all of the infor-
mation. 
‘‘(2) SOURCE OF PAYMENTS.—Payments under 
this section shall be made from the Medicare Pre-
scription Drug Account. 
‘‘(e) QUALIFIED
RETIREE
PRESCRIPTION
DRUG 
PLAN DEFINED.—
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, the term ‘qualified retiree prescription drug 
plan’ means employment-based retiree health cov-
erage (as defined in paragraph (3)(A)) if, with re-
spect to an individual enrolled (or eligible to be en-
rolled) under this part who is covered under the 
plan, the following requirements are met: 
‘‘(A) ASSURANCE.—The sponsor of the 
plan shall annually attest, and provide such as-
surances as the Secretary may require, that the 
coverage meets the requirements for qualified 
prescription drug coverage. 
‘‘(B) AUDITS.—The sponsor (and the plan) 
shall maintain, and afford the Secretary access 
to, such records as the Secretary may require 
for purposes of audits and other oversight ac-
tivities necessary to ensure the adequacy of pre-
scription drug coverage, the accuracy of pay-
ments made, and such other matters as may be 
appropriate. 
‘‘(C) PROVISION
OF
CERTIFICATION
OF 
PRESCRIPTION DRUG COVERAGE.—The sponsor 
of the plan shall provide for issuance of certifi-
cations of the type described in section 
1860A(c)(2)(D). 
‘‘(D) OTHER REQUIREMENTS.—The spon-
sor of the plan shall comply with such other re-
quirements as the Secretary finds necessary to 
administer the program under this section.
‘‘(2) LIMITATION ON BENEFIT ELIGIBILITY.—
No payment shall be provided under this section 
with respect to an individual who is enrolled under 
a qualified retiree prescription drug plan unless the 
individual is a medicare primary individual who—
‘‘(A) is covered under the plan; and 
‘‘(B) is eligible to obtain qualified prescrip-
tion drug coverage under section 1860A but did 
not elect such coverage under this part (either 
through a prescription drug plan or through a 
Medicare+Choice plan). 
‘‘(3) DEFINITIONS.—As used in this section: 
‘‘(A) 
EMPLOYMENT-BASED
RETIREE 
HEALTH
COVERAGE.—The term ‘employment-
based retiree health coverage’ means health in-
surance or other coverage of health care costs 
for medicare primary individuals (or for such 
individuals and their spouses and dependents) 
based on their status as former employees or 
labor union members. 
‘‘(B) EMPLOYER.—The term ‘employer’ 
has the meaning given such term by section 
3(5) of the Employee Retirement Income Secu-
rity Act of 1974 (except that such term shall 
include only employers of two or more employ-
ees). 
‘‘(C) 
SPONSOR.—The 
term 
‘sponsor’ 
means a plan sponsor, as defined in section 
3(16)(B) of the Employee Retirement Income 
Security Act of 1974.
‘‘(D) MEDICARE PRIMARY INDIVIDUAL.—
The term ‘medicare primary individual’ means, 
with respect to a plan, an individual who is cov-
ered under the plan and with respect to whom 
the plan is not a primary plan (as defined in 
section 1862(b)(2)(A)). 
‘‘(f) GENERAL DEFINITIONS.—For purposes of this 
section: 
‘‘(1) QUALIFYING COVERED INDIVIDUAL.—The 
term ‘qualifying covered individual’ means an indi-
vidual who—
‘‘(A) is enrolled with a prescription drug 
plan under this part; 
‘‘(B) is enrolled with a Medicare+Choice 
plan that provides qualified prescription drug 
coverage under part C; or 
‘‘(C) is covered as a medicare primary in-
dividual under a qualified retiree prescription 
drug plan. 
‘‘(2) COVERAGE
YEAR.—The term ‘coverage 
year’ means a calendar year in which covered out-
patient drugs are dispensed if a claim for payment 
is made under the plan for such drugs, regardless of 
when the claim is paid.
‘‘SEC. 1860I. MEDICARE PRESCRIPTION DRUG ACCOUNT IN 
FEDERAL SUPPLEMENTARY MEDICAL INSUR-
ANCE TRUST FUND. 
‘‘(a) IN GENERAL.—There is created within the Fed-
eral Supplementary Medical Insurance Trust Fund estab-
lished by section 1841 an account to be known as the 
‘Medicare Prescription Drug Account’ (in this section re-
ferred to as the ‘Account’). The Account shall consist of 
such gifts and bequests as may be made as provided in 
section 201(i)(1), and such amounts as may be deposited 
in, or appropriated to, such fund as provided in this part. 
Funds provided under this part to the Account shall be 
kept separate from all other funds within the Federal Sup-
plementary Medical Insurance Trust Fund. 
‘‘(b) PAYMENTS FROM ACCOUNT.—
‘‘(1) IN
GENERAL.—The Managing Trustee 
shall pay from time to time from the Account such 
amounts as the Secretary certifies are necessary to 
make—
‘‘(A) payments under section 1860G (relat-
ing to low-income subsidy payments); 
‘‘(B) payments under section 1860H (re-
lating to reinsurance subsidy payments); and 
‘‘(C) payments with respect to administra-
tive expenses under this part in accordance with 
section 201(g).
‘‘(2) TRANSFERS TO MEDICAID ACCOUNT FOR 
INCREASED
ADMINISTRATIVE
COSTS.—The Man-
aging Trustee shall transfer from time to time from 
the Account to the Grants to States for Medicaid ac-
count amounts the Secretary certifies are attrib-
utable to increases in payment resulting from the 
application of a higher Federal matching percentage 
under section 1935(b). 
‘‘(3) TREATMENT IN RELATION TO PART B PRE-
MIUM.—Amounts payable from the Account shall not 
be taken into account in computing actuarial rates 
or premium amounts under section 1839. 
‘‘(c) DEPOSITS INTO ACCOUNT.—
‘‘(1) MEDICAID
TRANSFER.—There is hereby 
transferred to the Account, from amounts appro-
priated for Grants to States for Medicaid, amounts 
equivalent to the aggregate amount of the reductions 
in payments under section 1903(a)(1) attributable to 
the application of section 1935(c). 
‘‘(2) APPROPRIATIONS TO COVER GOVERNMENT 
CONTRIBUTIONS.—There are authorized to be appro-
priated from time to time, out of any moneys in the 
Treasury not otherwise appropriated, to the Ac-
count, an amount equivalent to the amount of pay-
ments made from the Account under subsection (b),
reduced by the amount transferred to the Account 
under paragraph (1). 
‘‘SEC. 1860J. DEFINITIONS; TREATMENT OF REFERENCES 
TO PROVISIONS IN PART C. 
‘‘(a) DEFINITIONS.—For purposes of this part: 
‘‘(1) COVERED OUTPATIENT DRUGS.—The term 
‘covered outpatient drugs’ is defined in section 
1860B(f). 
‘‘(2) INITIAL COVERAGE LIMIT.—The term ‘ini-
tial coverage limit’ means the such limit as estab-
lished under section 1860B(b)(3), or, in the case of 
coverage that is not standard coverage, the com-
parable limit (if any) established under the coverage. 
‘‘(3) MEDICARE
PRESCRIPTION
DRUG
AC-
COUNT.—The term ‘Medicare Prescription Drug Ac-
count’ means the Account in the Federal Supple-
mentary Medical Insurance Trust Fund created 
under section 1860I(a).
‘‘(4) PDP SPONSOR.—The term ‘PDP sponsor’ 
means an entity that is certified under this part as 
meeting the requirements and standards of this part 
for such a sponsor. 
‘‘(5) PRESCRIPTION
DRUG
PLAN.—The term 
‘prescription drug plan’ means health benefits cov-
erage that—
‘‘(A) is offered under a policy, contract, or 
plan by a PDP sponsor pursuant to, and in ac-
cordance with, a contract between the Secretary 
and the sponsor under section 1860D(b); 
‘‘(B) provides qualified prescription drug 
coverage; and 
‘‘(C) meets the applicable requirements of 
the section 1860C for a prescription drug plan. 
‘‘(6) QUALIFIED
PRESCRIPTION
DRUG
COV-
ERAGE.—The term ‘qualified prescription drug cov-
erage’ is defined in section 1860B(a). 
‘‘(7) STANDARD COVERAGE.—The term ‘stand-
ard coverage’ is defined in section 1860B(b). 
‘‘(b) APPLICATION OF MEDICARE+CHOICE PROVI-
SIONS UNDER THIS PART.—For purposes of applying pro-
visions of part C under this part with respect to a pre-
scription drug plan and a PDP sponsor, unless otherwise 
provided in this part such provisions shall be applied as 
if—
‘‘(1) any reference to a Medicare+Choice plan 
included a reference to a prescription drug plan; 
‘‘(2) any reference to a provider-sponsored or-
ganization included a reference to a PDP sponsor;
‘‘(3) any reference to a contract under section 
1857 included a reference to a contract under sec-
tion 1860D(b); and 
‘‘(4) any reference to part C included a ref-
erence to this part. 
‘‘MEDICARE PRESCRIPTION DRUG ADVISORY COMMITTEE 
‘‘SEC. 1860K. (a) ESTABLISHMENT
OF
COM-
MITTEE.—There is established a Medicare Prescription 
Drug Advisory Committee (in this section referred to as 
the ‘Committee’). 
‘‘(b) FUNCTIONS OF COMMITTEE.—The Committee 
shall advise the Secretary on policies related to the devel-
opment of standards and guidelines for the implementa-
tion and administration of the outpatient prescription 
drug benefit program under this part. 
‘‘(c) STRUCTURE AND MEMBERSHIP OF THE COM-
MITTEE.—
‘‘(1) STRUCTURE.—The Committee shall be 
composed of 19 members, of whom—
‘‘(A) 12 shall be appointed by the Sec-
retary; 
‘‘(B) 3 shall be appointed by the President; 
‘‘(C) 2 shall be appointed by the Speaker 
of the House of Representatives; and 
‘‘(D) 2 shall be appointed by the Majority 
Leader of the Senate.
‘‘(2) MEMBERSHIP.—
‘‘(A) IN GENERAL.—The members of the 
Committee shall be chosen on the basis of their 
integrity, impartiality, and good judgment, and 
shall be individuals who are, by reason of their 
education, experience, and attainments, excep-
tionally qualified to perform the duties of mem-
bers of the Committee. 
‘‘(B) SPECIFIC MEMBERS.—Of the mem-
bers appointed under paragraph (1)(A)—
‘‘(i) 4 shall be chosen to represent 
physicians; 
‘‘(ii) 3 shall be chosen to represent 
pharmacists; 
‘‘(iii) 1 shall be chosen to represent 
the Centers for Medicare & Medicaid Serv-
ices; 
‘‘(iv) 3 shall be chosen to represent 
actuaries, pharmacoeconomists, research-
ers, and other appropriate experts; and 
‘‘(v) 1 shall be chosen to represent 
emerging drug technologies. 
‘‘(d) TERMS OF APPOINTMENT.—Each member of 
the Committee shall serve for a term determined appro-
priate by the Secretary. The terms of service of the mem-
bers initially appointed shall begin on January 1, 2004. 
‘‘(e) CHAIRPERSON.—The Secretary shall designate 
a member of the Committee as Chairperson. The term as 
Chairperson shall be for a 1-year period. 
‘‘(f) COMMITTEE PERSONNEL MATTERS.—
‘‘(1) MEMBERS.—
‘‘(A) COMPENSATION.—Each member of 
the Committee who is not an officer or em-
ployee of the Federal Government shall be com-
pensated at a rate equal to the daily equivalent 
of the annual rate of basic pay prescribed for 
level IV of the Executive Schedule under section 
5315 of title 5, United States Code, for each 
day (including travel time) during which such 
member is engaged in the performance of the 
duties of the Committee. All members of the 
Committee who are officers or employees of the 
United States shall serve without compensation 
in addition to that received for their services as 
officers or employees of the United States. 
‘‘(B) TRAVEL
EXPENSES.—The members 
of the Committee shall be allowed travel ex-
penses, including per diem in lieu of subsist-
ence, at rates authorized for employees of agen-
cies under subchapter I of chapter 57 of title 5, 
United States Code, while away from their 
homes or regular places of business in the per-
formance of services for the Committee. 
‘‘(2) STAFF.—The Committee may appoint 
such personnel as the Committee considers appro-
priate. 
‘‘(g) OPERATION OF THE COMMITTEE.—
‘‘(1) MEETINGS.—The Committee shall meet at 
the call of the Chairperson (after consultation with 
the other members of the Committee) not less often 
than quarterly to consider a specific agenda of 
issues, as determined by the Chairperson after such 
consultation. 
‘‘(2) QUORUM.—Ten members of the Com-
mittee shall constitute a quorum for purposes of 
conducting business.
‘‘(h) FEDERAL ADVISORY COMMITTEE ACT.—Section 
14 of the Federal Advisory Committee Act (5 U.S.C. 
App.) shall not apply to the Committee. 
‘‘(i) TRANSFER OF PERSONNEL, RESOURCES, AND 
ASSETS.—For purposes of carrying out its duties, the Sec-
retary and the Committee may provide for the transfer 
to the Committee of such civil service personnel in the em-
ploy of the Department of Health and Human Services
(including the Centers for Medicare & Medicaid Services), 
and such resources and assets of the Department used in 
carrying out this title, as the Committee requires. 
‘‘(j) AUTHORIZATION OF APPROPRIATIONS.—There 
are authorized to be appropriated such sums as may be 
necessary to carry out the purposes of this section.’’. 
(b) CONFORMING AMENDMENTS TO FEDERAL SUP-
PLEMENTARY MEDICAL INSURANCE TRUST FUND.—Sec-
tion 1841 of the Social Security Act (42 U.S.C. 1395t) 
is amended—
(1) in the last sentence of subsection (a)—
(A) by striking ‘‘and’’ before ‘‘such 
amounts’’; and 
(B) by inserting before the period the fol-
lowing: ‘‘and such amounts as may be deposited 
in, or appropriated to, the Medicare Prescrip-
tion Drug Account established by section 
1860I’’; and 
(2) in subsection (g), by inserting after ‘‘by this 
part,’’ the following: ‘‘the payments provided for 
under part D (in which case the payments shall 
come from the Medicare Prescription Drug Account 
in the Trust Fund),’’. 
(c) ADDITIONAL CONFORMING CHANGES.—
(1) CONFORMING
REFERENCES
TO
PREVIOUS 
PART D.—Any reference in law (in effect before the 
date of the enactment of this Act) to part D of title 
XVIII of the Social Security Act is deemed a ref-
erence to part E of such title (as in effect after such 
date). 
(2) SECRETARIAL SUBMISSION OF LEGISLATIVE 
PROPOSAL.—Not later than 6 months after the date 
of the enactment of this Act, the Secretary of 
Health and Human Services shall submit to the ap-
propriate committees of Congress a legislative pro-
posal providing for such technical and conforming 
amendments in the law as are required by the provi-
sions of this subtitle. 
SEC. 3. OFFERING OF QUALIFIED PRESCRIPTION DRUG 
COVERAGE UNDER THE MEDICARE+CHOICE 
PROGRAM. 
(a) IN GENERAL.—Section 1851 of the Social Secu-
rity Act (42 U.S.C. 1395w–21) is amended by adding at 
the end the following new subsection: 
‘‘(j) AVAILABILITY OF PRESCRIPTION DRUG BENE-
FITS.—
‘‘(1) IN GENERAL.—A Medicare+Choice orga-
nization may not offer prescription drug coverage 
(other than that required under parts A and B) to
an enrollee under a Medicare+Choice plan unless 
such drug coverage is at least qualified prescription 
drug coverage and unless the requirements of this 
subsection with respect to such coverage are met. 
‘‘(2) COMPLIANCE
WITH
ADDITIONAL
BENE-
FICIARY PROTECTIONS.—With respect to the offer-
ing of qualified prescription drug coverage by a 
Medicare+Choice 
organization 
under 
a 
Medicare+Choice plan, the organization and plan 
shall meet the requirements of section 1860C, in-
cluding requirements relating to information dis-
semination and grievance and appeals, in the same 
manner as they apply to a PDP sponsor and a pre-
scription drug plan under part D. The Secretary 
shall waive such requirements to the extent the Sec-
retary determines that such requirements duplicate 
requirements otherwise applicable to the organiza-
tion or plan under this part. 
‘‘(3) TREATMENT
OF
COVERAGE.—Except as 
provided in this subsection, qualified prescription 
drug coverage offered under this subsection shall be 
treated under this part in the same manner as sup-
plemental health care benefits described in section 
1852(a)(3)(A).
premium shall be established consistent 
with the limitations described in section 
1860F(a)(4). 
‘‘(ii) PORTION OF COVERAGE ATTRIB-
UTABLE
TO
STANDARD
BENEFITS.—The 
ratio of the actuarial value of standard 
coverage to the actuarial value of the 
qualified prescription drug coverage offered 
under the plan. 
‘‘(iii) PORTION OF PREMIUM ATTRIB-
UTABLE
TO
STANDARD
BENEFITS.—A 
standard premium equal to the product of 
the premium described in clause (i) and 
the ratio under clause (ii). 
The premium under clause (i) shall be compute 
without regard to any reduction in the premium 
permitted under subparagraph (B).
‘‘(B) 
REDUCTION
OF
PREMIUMS
AL-
LOWED.—Nothing in this subsection shall be 
construed as preventing a Medicare+Choice or-
ganization from reducing the amount of a pre-
mium charged for prescription drug coverage 
because 
of 
the 
application 
of 
section 
1854(f)(1)(A) to other coverage.
‘‘(C) ACCEPTANCE
OF
REFERENCE
PRE-
MIUM AS FULL PREMIUM IF NO STANDARD (OR 
EQUIVALENT) COVERAGE IN AN AREA.—For re-
quirement to accept reference premium as full 
premium if there is no standard (or equivalent) 
coverage in the area of a Medicare+Choice 
plan, see section 1860F(d). 
‘‘(6) TRANSITION IN INITIAL ENROLLMENT PE-
RIOD.—Notwithstanding any other provision of this 
part, the annual, coordinated election period under 
subsection (e)(3)(B) for 2004 shall be the 6-month 
period beginning with November 2003. 
‘‘(7) QUALIFIED
PRESCRIPTION
DRUG
COV-
ERAGE; STANDARD
COVERAGE.—For purposes of 
this part, the terms ‘qualified prescription drug cov-
erage’ and ‘standard coverage’ have the meanings 
given such terms in section 1860B.’’. 
(b) CONFORMING AMENDMENTS.—Section 1851 of 
such Act (42 U.S.C. 1395w–21) is amended—
(1) in subsection (a)(1)—
(A) by inserting ‘‘(other than qualified pre-
scription drug benefits)’’ after ‘‘benefits’’; 
(B) by striking the period at the end of 
subparagraph (B) and inserting a comma; and
(C) by adding after and below subpara-
graph (B) the following: 
‘‘and may elect qualified prescription drug coverage 
in accordance with section 1860A.’’; and 
(2) in subsection (g)(1), by inserting ‘‘and sec-
tion 1860A(c)(2)(B)’’ after ‘‘in this subsection’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section apply to coverage provided on or after January 
1, 2006. 
SEC. 4. MEDICAID AMENDMENTS. 
(a) DETERMINATIONS OF ELIGIBILITY FOR LOW-IN-
COME SUBSIDIES.—
(1) REQUIREMENT.—Section 1902 of the Social 
Security Act (42 U.S.C. 1396a) is amended—
(A) in subsection (a)—
(i) by striking ‘‘and’’ at the end of 
paragraph (64); 
(ii) by striking the period at the end 
of paragraph (65) and inserting ‘‘; and’’; 
and 
(iii) by inserting after paragraph (65) 
the following new paragraph: 
‘‘(66) provide for making eligibility determina-
tions under section 1935(a).’’.
(2) NEW SECTION.—Title XIX of such Act is 
further amended—
(A) by redesignating section 1935 as sec-
tion 1936; and 
(B) by inserting after section 1934 the fol-
lowing new section: 
‘‘SPECIAL PROVISIONS RELATING TO MEDICARE 
PRESCRIPTION DRUG BENEFIT 
‘‘SEC. 1935. (a) REQUIREMENT FOR MAKING ELIGI-
BILITY
DETERMINATIONS
FOR
LOW-INCOME
SUB-
SIDIES.—As a condition of its State plan under this title 
under section 1902(a)(66) and receipt of any Federal fi-
nancial assistance under section 1903(a), a State shall—
‘‘(1) make determinations of eligibility for pre-
mium and cost-sharing subsidies under (and in ac-
cordance with) section 1860G; 
‘‘(2) inform the Secretary of such determina-
tions in cases in which such eligibility is established; 
and 
‘‘(3) otherwise provide such Secretary with such 
information as may be required to carry out part D 
of title XVIII (including section 1860G). 
‘‘(b) PAYMENTS FOR ADDITIONAL ADMINISTRATIVE 
COSTS.—
‘‘(1) IN GENERAL.—The amounts expended by 
a State in carrying out subsection (a) are, subject to
paragraph (2), expenditures reimbursable under the 
appropriate paragraph of section 1903(a); except 
that, notwithstanding any other provision of such 
section, the applicable Federal matching rates with 
respect to such expenditures under such section shall 
be increased as follows: 
‘‘(A) For expenditures attributable to costs 
incurred during 2006, the otherwise applicable 
Federal matching rate shall be increased by 20 
percent of the percentage otherwise payable 
(but for this subsection) by the State. 
‘‘(B) For expenditures attributable to costs 
incurred during 2007, the otherwise applicable 
Federal matching rate shall be increased by 40 
percent of the percentage otherwise payable 
(but for this subsection) by the State. 
‘‘(C) For expenditures attributable to costs 
incurred during 2008, the otherwise applicable 
Federal matching rate shall be increased by 60 
percent of the percentage otherwise payable 
(but for this subsection) by the State. 
‘‘(D) For expenditures attributable to costs 
incurred during 2009, the otherwise applicable 
Federal matching rate shall be increased by 80