Each year, the President is required to submit a comprehensive federal budget proposal to Congress no later than the first Monday in February. Once it is submitted, the Congressional Budget Office (CBO) analyzes the proposal using its own economic assumptions and estimation techniques. Then, the House and Senate Budget Committees each develop a budget resolution after reviewing the President's budget, the views of other committees, and information from CBO. Differences between the houses are supposed to be resolved by April 15, but this deadline is rarely met. Although it is not binding, the resolution provides a framework for subsequent legislative action on the budget (e.g., annual appropriations bills). This report provides information on Medicaid and State Children's Health Insurance Program (SCHIP) budget issues for FY2007. It will be updated to reflect relevant activity until the President's FY2008 budget is released. The President's FY2007 budget contains a number of proposals that would affect Medicaid and SCHIP. Some are program expansions, and others are designed to reduce federal spending. For each of the proposals, this report provides: background information; a description of the proposal based on available information; and a list of relevant Congressional Research Service (CRS) reports. The proposals generally are presented in the order in which they appear in the Department of Health and Human Services' (HHS) Fiscal Year 2007 Budget in Brief . The description of each proposal includes HHS and CBO estimates of its cost or savings in FY2007 and over the FY2007-FY2011 period. These estimates are summarized in Table 1 . CRS staff contact information by Medicaid and SCHIP topic area is provided in Table 2 , at the end of the report. As shown in Table 1 , some of the President's proposals would require legislative action, while others would be implemented administratively (e.g., via regulatory changes, issuance of program guidance, etc.). In their analyses of the President's budget, both CBO and executive branch agencies such as HHS and the Office of Management and Budget (OMB) provide baseline (current law) estimates of Medicaid and SCHIP spending along with estimated costs and savings of proposed changes. However, CBO and the executive branch differ in their treatment of legislative and administrative proposals. In executive branch documents describing the President's budget, implementation of proposed administrative changes is assumed in estimates of baseline Medicaid and SCHIP spending, and estimates for legislative proposals are presented separately. In general, CBO only adjusts its baseline estimates to account for administrative changes as they are implemented—rather than as they are proposed—and only provides separate estimates for legislative proposals. For this reason and others, CBO and executive branch estimates of Medicaid and SCHIP spending will differ. Among the administrative proposals in the President's FY2007 budget, two have received widespread attention—limiting the extent to which states may tax certain health care providers to obtain additional federal Medicaid dollars, and a plan to cap Medicaid payments to government providers to no more than the cost of furnishing services. In May and June of 2006, respectively, members of the House and Senate sent separate letters to HHS Secretary Leavitt urging him to not implement changes to Medicaid via administrative action. Both letters cited the importance of review and input from Congress in modifying Medicaid. As described later, before adjourning, the 109 th Congress passed legislation ( H.R. 6111 ) that prevents the President's provider tax proposal from being implemented. The Congress also passed legislation to address transitional medical assistance ( H.R. 6111 ) and FY2007 SCHIP shortfalls ( H.R. 6164 ), two issues for which legislative proposals were included in the President's FY2007 budget. Background. States are required to continue Medicaid benefits for certain low-income families who would otherwise lose coverage because of changes in their income. This continuation of benefits is known as transitional medical assistance (TMA). Federal law permanently requires four months of TMA for families who lose Medicaid eligibility due to increased child or spousal support collections. It also permanently requires four months of TMA for families who lose Medicaid eligibility due to an increase in earned income or hours of employment. However, Congress expanded work-related TMA benefits in 1988, requiring states to provide at least six, and up to 12, months of TMA coverage to families losing Medicaid eligibility due to increased hours of work or income from employment, as well as to families who lose eligibility due to the loss of a time-limited earned income disregard (such disregards allow families to qualify for Medicaid at higher income levels for a set period of time). Congress has acted on numerous occasions to extend these expanded TMA requirements (which are outlined in Section 1925 of the Social Security Act) beyond their original sunset date of September 30, 1998. They are currently set to expire on December 31, 2006. Proposal. The President's budget seeks legislation to extend expanded TMA requirements through September 30, 2007. HHS estimates that the proposal would cost Medicaid $180 million in FY2007, and $360 million over the FY2007-FY2011 period (the budgetary effects extend beyond FY2007 because families are still entitled to up to 12 months of TMA if they qualify on or before the expiration date). CBO estimates that the proposal would cost Medicaid $129 million in FY2007, and $526 million over the FY2007-FY2011 period. CBO also estimates that the proposal would save SCHIP $3 million in both FY2007 and over the FY2007-FY2011 period. Congressional Action. Before adjourning, the 109 th Congress passed H.R. 6111 , which extends expanded TMA requirements through June 30, 2007. Reports. See CRS Report RL31698, Transitional Medical Assistance (TMA) Under Medicaid , by [author name scrubbed]. Background. The Vaccines for Children (VFC) program is funded by federal Medicaid appropriations and administered by the Centers for Disease Control and Prevention (CDC). Under Section 1928 of the Social Security Act, children who are (1) Medicaid recipients, (2) uninsured, (3) American Indians or Alaska Natives, or (4) "underinsured" because their health insurance does not cover qualified pediatric immunizations are entitled to receive VFC vaccines free of charge. Currently, children in the first three categories may receive VFC vaccines from any program-registered provider (as defined in Section 1928(c) of the Social Security Act), while underinsured children may only receive VFC vaccines at federally qualified health centers (FQHCs) or rural health clinics. In 2002, there were approximately 42,000 active VFC provider sites (30,000 private and 12,000 public). In 2000, an estimated 57% of children receiving VFC vaccines were eligible because they were Medicaid recipients. Another 36% receiving VFC vaccines were uninsured, while 5% were underinsured and 2% were American Indians or Alaska Natives. Proposal. The President's budget seeks legislation to improve vaccine access by allowing underinsured children to receive VFC vaccines at state and local health clinics, rather than only at FQHCs and rural health clinics. HHS estimates that the proposal would cost $140 million in FY2007, and $700 million over the FY2007-FY2011 period. CBO estimates that the proposal would cost $115 million in FY2007, and $715 million over the FY2007-FY2011 period. Reports. For general information on FQHCs and rural health clinics, see CRS Report RL32046, Federal Health Centers Program , by Barbara English. Background. Third-party liability (TPL) refers to the legal obligation of third parties—individuals, entities, or programs—to pay all or part of the expenditures for medical assistance furnished under Medicaid. In general, federal law requires Medicaid to be the payer of last resort, meaning that all other available third parties must meet their legal obligation to pay claims before the Medicaid program pays for the care of an individual. States are required to take all reasonable measures to ascertain the legal liability of third parties to pay for care and services available under the state Medicaid plan. If a state has determined that probable liability exists at the time a claim for reimbursement is filed, it generally must reject the claim and return it to the provider for a determination of the amount of third-party liability (referred to as "cost avoidance"). If probable liability has not been established or the third party is not available to pay the individual's medical expenses, the state must pay the claim and then attempt to recover the amount paid (referred to as "pay and chase"). States are generally required to cost avoid claims unless they have an approved waiver that allows them to use the pay-and-chase method. However, there are two statutory exceptions to this rule. In the case of prenatal and preventive pediatric care, states are required to use pay and chase. In the case of a Medicaid beneficiary whose parent provides medical support (e.g., health insurance coverage via an employer) as part of a child support order being enforced by the state, the state must use pay and chase if a provider has not been paid under the medical support arrangement within 30 days. In some cases, a Medicaid beneficiary may be required to reimburse the state for Medicaid expenses paid on his or her behalf. To facilitate such reimbursement, the state may place a lien on the Medicaid beneficiary's property. With certain exceptions, federal law generally prohibits states from imposing Medicaid liens on the property of living beneficiaries. In contrast, federal law permits Medicaid liens on the estates of deceased beneficiaries in a wider variety of situations. Proposal. The President's budget seeks three legislative changes. The first would require providers to bill third parties for prenatal and preventive pediatric care services and wait at least 90 days before billing Medicaid. The second would require providers to bill third parties in the case of medical support provided via a child support order and wait at least 90 days before billing Medicaid. The third would explicitly permit states to use liens against liability settlements to recover Medicaid amounts paid on behalf of beneficiaries.