[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[S. 2042 Introduced in Senate (IS)]







107th CONGRESS
  2d Session
                                S. 2042

To expand access to affordable health care and to strengthen the health 
 care safety net and make health care services more available in rural 
                         and underserved areas.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             March 21, 2002

  Ms. Collins (for herself and Ms. Landrieu) introduced the following 
  bill; which was read twice and referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
To expand access to affordable health care and to strengthen the health 
 care safety net and make health care services more available in rural 
                         and underserved areas.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Access to 
Affordable Health Care Act''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
   TITLE I--EXPANSION OF ACCESS TO AFFORDABLE HEALTH CARE FOR SMALL 
                               BUSINESSES

                 Subtitle A--Small Business Tax Credit

Sec. 101. Credit for employee health insurance expenses.
   Subtitle B--Grants to States for Small Business Purchasing Groups

Sec. 121. Grants for small employer purchasing groups.
Sec. 122. Qualified small employer purchasing groups.
      Subtitle C--Health Benefits Information for Small Employers

Sec. 131. Grant program to facilitate health benefits information for 
                            small employers.
        Subtitle D--Grant Program to Encourage State Innovation

Sec. 141. Grant program to encourage State innovation.
TITLE II--EXPANSION OF ACCESS TO AFFORDABLE HEALTH CARE FOR INDIVIDUALS 
                              AND FAMILIES

              Subtitle A--Internal Revenue Code Provisions

          Chapter 1--Refundable Credit for Uninsured Families

Sec. 201. Refundable health insurance costs credit.
Sec. 202. Advance payment of credit to issuers of qualified health 
                            insurance.
 Chapter 2--Immediate, Full Deductibility of Health Insurance Costs of 
                       Self-Employed Individuals

Sec. 205. Deduction for 100 percent of health insurance costs of self-
                            employed individuals.
                         Subtitle B--FamilyCare

Sec. 211. Renaming of title XXI program.
Sec. 212. FamilyCare coverage of parents under the medicaid program and 
                            title XXI.
Sec. 213. Optional coverage of children through age 20 under the 
                            medicaid program and title XXI.
Sec. 214. Increase in chip allotment for each of fiscal years 2002 
                            through 2004.
Sec. 215. Additional chip revisions.
Sec. 216. Limitations on conflicts of interest.
Sec. 217. Technical and conforming amendments to authority to pay 
                            medicaid expansion costs from title XXI 
                            appropriation.
                   Subtitle C--Simplified Enrollment

Sec. 221. Automatic enrollment of children born to title XXI parents.
Sec. 222. Application of simplified title XXI procedures under the 
                            medicaid program.
Sec. 223. Elimination of 100 hour rule and other afdc-related 
                            eligibility restrictions.
Subtitle D--State Option to Provide Coverage of Legal Immigrants Under 
                           Medicaid and SCHIP

Sec. 231. Optional coverage of legal immigrants under the medicaid 
                            program and title XXI.
  Subtitle E--State Option to Extend Medicaid Coverage to Certain Low-
                           Income Individuals

Sec. 241. State option to extend medicaid coverage to certain low-
                            income individuals.
    Subtitle F--Improving Welfare-to-Work Transition Under Medicaid

Sec. 251. Improving welfare-to-work transition under medicaid.
   Subtitle G--Demonstration Programs to Improve Medicaid and SCHIP 
             Outreach to Homeless Individuals and Families

Sec. 261. Demonstration programs to improve medicaid and SCHIP outreach 
                            to homeless individuals and families.
                      Subtitle H--High Risk Pools

Sec. 271. Promotion of State high risk pools.
          TITLE III--STRENGTHENING THE HEALTH CARE SAFETY NET

Sec. 301. Increase in funding for the consolidated health centers 
                            program.
 TITLE IV--EXPANSION OF ACCESS TO HEALTH CARE IN RURAL AND UNDERSERVED 
                                 AREAS

               Subtitle A--National Health Service Corps

Sec. 401. Expansion of funding.
Sec. 402. Loan repayment and scholarship programs.
   Subtitle B--Tax Exclusion for National Health Service Corps Loan 
                          Repayment Recipients

Sec. 411. Exclusion for loan payments under National Health Service 
                            Corps loan repayment program.
         TITLE V--EXPANDED ACCESS TO AFFORDABLE LONG TERM CARE

Sec. 501. Treatment of premiums on qualified long-term care insurance 
                            contracts.
Sec. 502. Credit for taxpayers with long-term care needs.
Sec. 503. Additional consumer protections for long-term care insurance.
                TITLE VI--PROMOTING HEALTHIER LIFESTYLES

Sec. 601. Community partnerships to promote healthy lifestyles.
Sec. 602. Worksite wellness grant program.
Sec. 603. Comprehensive school health education.
                      TITLE VII--MEDICARE FAIRNESS

          Subtitle A--Medicare Value and Quality Demonstration

Sec. 701. Findings.
Sec. 702. Demonstration project to encourage the provision of high-
                            quality, cost-effective inpatient hospital 
                            services.
Sec. 703. Demonstration project to encourage the provision of high-
                            quality, cost-effective physicians' 
                            services.
          Subtitle B--Graduate Medical Education Demonstration

Sec. 711. Clinical rotation demonstration project.

   TITLE I--EXPANSION OF ACCESS TO AFFORDABLE HEALTH CARE FOR SMALL 
                               BUSINESSES

                 Subtitle A--Small Business Tax Credit

SEC. 101. CREDIT FOR EMPLOYEE HEALTH INSURANCE EXPENSES.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to business-related 
credits) is amended by adding at the end the following:

``SEC. 45G. EMPLOYEE HEALTH INSURANCE EXPENSES.

    ``(a) General Rule.--For purposes of section 38, in the case of an 
employer, the employee health insurance expenses credit determined 
under this section is an amount equal to the applicable percentage of 
the amount paid by the taxpayer during the taxable year for qualified 
employee health insurance expenses.
    ``(b) Applicable Percentage.--For purposes of subsection (a), the 
applicable percentage is equal to--
            ``(1) 50 percent in the case of an employer with less than 
        10 employees, and
            ``(2) 30 percent in the case of an employer with more than 
        9 but less than 26 employees.
    ``(c) Per Employee Dollar Limitation.--The amount of qualified 
employee health insurance expenses taken into account under subsection 
(a) with respect to any qualified employee for any taxable year shall 
not exceed--
            ``(1) $2,000 in the case of self-only coverage, and
            ``(2) $4,000 in the case of family coverage (as so 
        defined).
    ``(d) Special Rules and Definitions.--For purposes of this 
section--
            ``(1) Eligibility for credit.--No credit shall be allowed 
        under subsection (a) with respect to any employer which, with 
        respect to the number of employees employed during any period, 
        employs more than 20 percent of highly compensated employees 
        (within the meaning of section 414(q)).
            ``(2) Determination of employment.--
                    ``(A) In general.--An employer shall be considered 
                an employer described in paragraph (1) or (2) of 
                subsection (b) if such employer employed an average of 
                the number of employees described in such paragraph on 
                business days during either of the 2 preceding calendar 
                years. For purposes of the preceding sentence, a 
                preceding calendar year may be taken into account only 
                if the employer was in existence throughout such year.
                    ``(B) Employers not in existence in preceding 
                year.--In the case of an employer which was not in 
                existence throughout the 1st preceding calendar year, 
                the determination under subparagraph (A) shall be based 
                on the average number of employees that it is 
                reasonably expected such employer will employ on 
                business days in the current calendar year.
            ``(3) Qualified employee health insurance expenses.--
                    ``(A) In general.--The term `qualified employee 
                health insurance expenses' means any amount paid by an 
                employer for health insurance coverage to the extent 
                such amount--
                            ``(i) is attributable to coverage provided 
                        to any employee while such employee is a 
                        qualified employee; and
                            ``(ii) is at least 50 percent of the 
                        premium for such coverage.
                    ``(B) Exception for amounts paid under salary 
                reduction arrangements.--No amount paid or incurred for 
                health insurance coverage pursuant to a salary 
                reduction arrangement shall be taken into account under 
                subparagraph (A).
                    ``(C) Health insurance coverage.--The term `health 
                insurance coverage' has the meaning given such term by 
                section 9832(b)(1).
            ``(4) Qualified employee.--
                    ``(A) In general.--The term `qualified employee' 
                means, with respect to any period, an employee of an 
                employer if the total amount of wages paid or incurred 
                by such employer to such employee at an annual rate 
                during the taxable year is not less than $5,000.
                    ``(B) Treatment of certain employees.--For purposes 
                of subparagraph (A), the term `employee'--
                            ``(i) shall not include an employee within 
                        the meaning of section 401(c)(1), but
                            ``(ii) shall include a leased employee 
                        within the meaning of section 414(n).
                    ``(C) Wages.--The term `wages' has the meaning 
                given such term by section 3121(a) (determined without 
                regard to any dollar limitation contained in such 
                section).
    ``(e) Certain Rules Made Applicable.--For purposes of this section, 
rules similar to the rules of section 52 shall apply.
    ``(f) Denial of Double Benefit.--No deduction or credit under any 
other provision of this chapter shall be allowed with respect to 
qualified employee health insurance expenses taken into account under 
subsection (a).''.
    (b) Credit To Be Part of General Business Credit.--Section 38(b) of 
the Internal Revenue Code of 1986 (relating to current year business 
credit) is amended by striking ``plus'' at the end of paragraph (14), 
by striking the period at the end of paragraph (15) and inserting ``, 
plus'', and by adding at the end the following:
            ``(16) the employee health insurance expenses credit 
        determined under section 45G.''.
    (c) No Carrybacks.--Subsection (d) of section 39 of the Internal 
Revenue Code of 1986 (relating to carryback and carryforward of unused 
credits) is amended by adding at the end the following:
            ``(11) No carryback of section 45g credit before effective 
        date.--No portion of the unused business credit for any taxable 
        year which is attributable to the employee health insurance 
        expenses credit determined under section 45G may be carried 
        back to a taxable year ending before January 1, 2002.''.
    (d) Clerical Amendment.--The table of sections for subpart D of 
part IV of subchapter A of chapter 1 of the Internal Revenue Code of 
1986 is amended by adding at the end the following:

                              ``Sec. 45G. Employee health insurance 
                                        expenses.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to amounts paid or incurred in taxable years beginning after 
December 31, 2001.

   Subtitle B--Grants to States for Small Business Purchasing Groups

SEC. 121. GRANTS FOR SMALL EMPLOYER PURCHASING GROUPS.

    (a) In General.--The Secretary of Labor (referred to in this 
section as the ``Secretary'') shall award grants to States to assist 
such States in planning, developing, and operating qualified small 
employer purchasing groups.
    (b) Application Requirements.--To be eligible to receive a grant 
under this section, a State shall prepare and submit to the Secretary 
an application in such form, at such time, and containing such 
information, certifications, and assurances as the Secretary shall 
reasonably require.
    (c) Use of Funds.--Amounts awarded under this section may be used 
to finance the costs associated with planning, developing, and 
operating a qualified small employer purchasing group that meets the 
requirements of section 122. Such costs may include the costs 
associated with--
            (1) engaging in education and outreach efforts to inform 
        small employers, insurers, and the public about the small 
        employer purchasing group;
            (2) soliciting bids and negotiating with insurers to make 
        available group health plans;
            (3) preparing the documentation required to receive 
        certification by the Secretary as a qualified small employer 
        purchasing group; and
            (4) such other activities determined appropriate by the 
        Secretary.
    (d) Authorization of Appropriations.--There are authorized to be 
appropriated to carry out this section, such sums as may be necessary 
for each of fiscal years 2003 through 2007.

SEC. 122. QUALIFIED SMALL EMPLOYER PURCHASING GROUPS.

    (a) Qualified Small Employer Purchasing Groups Described.--
            (1) In general.--A qualified small employer purchasing 
        group is an entity that--
                    (A) is a nonprofit entity certified under State 
                law;
                    (B) has a membership consisting solely of small 
                employers;
                    (C) is administered solely under the authority and 
                control of its member employers;
                    (D) with respect to each State in which its members 
                are located, consists of not fewer than the number of 
                small employers established by the State as appropriate 
                for such a group;
                    (E) offers a program under which group health plans 
                are offered to eligible employees and eligible 
                individuals (including the dependents of such employees 
                and individuals) through its member employers; and
                    (F) an insurer, agent, broker, or any other 
                individual or entity engaged in the sale of insurance--
                            (i) does not form or underwrite; and
                            (ii) does not hold or control any right to 
                        vote with respect to.
            (2) Special rule.--Notwithstanding paragraph (1)(B), an 
        employer member of a small employer purchasing group that has 
        been certified by the State as meeting the requirements of 
        paragraph (1) may retain its membership in the group if the 
        number of employees of the employer increases such that the 
        employer is no longer a small employer.
    (b) Board of Directors.--Each qualified small employer purchasing 
group established under this section shall be governed by a board of 
directors or have active input from an advisory board consisting of 
individuals and businesses participating in the group.
    (c) Membership.--
            (1) In general.--A qualified small employer purchasing 
        group shall accept all small employers residing within the area 
        served by the group as members if such employers request such 
        membership.
            (2) Voting.--Members of a qualified small employer 
        purchasing group shall have voting rights consistent with the 
        rules established by the State.
    (d) Duties of Qualified Small Employer Purchasing Groups.--Each 
qualified small employer purchasing group shall--
            (1) enter into agreements with insurers offering qualified 
        group health plans;
            (2) enter into agreements with small employers for the 
        purchase of health insurance;
            (3) enroll only eligible employees, eligible individuals, 
        and the dependents of such employees and individuals in group 
        health plans;
            (4) provide enrollee information to the State.
    (e) Limitation on Activities.--A qualified small employer 
purchasing group shall not--
            (1) perform any activity involving approval or enforcement 
        of payment rates for providers;
            (2) assume financial risk in relation to any such health 
        plan; or
            (3) perform other activities identified by the State as 
        being inconsistent with the performance of its duties.
    (f) Rules of Construction.--
            (1) Establishment not required.--Nothing in this section 
        shall be construed as requiring that a State organize, operate 
        or otherwise establish a qualified small employer purchasing 
        group, or otherwise require the establishment of purchasing 
        groups.
            (2) Voluntary participation.--Nothing in this section shall 
        be construed as requiring any individual or small employer to 
        purchase a group health plan exclusively through a qualified 
        small employer purchasing group.
    (g) Definition.--In this subtitle, the term ``small employer'' 
means an employer that employs at least 1, but not more than 50 
employees. Such term shall include sole proprietorships and self-
employed individuals.

      Subtitle C--Health Benefits Information for Small Employers

SEC. 131. GRANT PROGRAM TO FACILITATE HEALTH BENEFITS INFORMATION FOR 
              SMALL EMPLOYERS.

    (a) In General.--The Small Business Administration shall award 
grants to 1 or more States, local governments, and non-profit 
organizations for the purposes of--
            (1) demonstrating new and effective ways to provide 
        information about the benefits of health insurance to small 
        employers, including tax benefits, increased productivity of 
        employees, and decreased turnover of employees;
            (2) making small employers aware of their current rights in 
        the marketplace under Federal and State health insurance reform 
        laws; and
            (3) making small employers aware of the tax treatment of 
        insurance premiums.
    (b) Authorization.--There is authorized to be appropriated to carry 
out this section, such sums as may be necessary for each of fiscal 
years 2003 through 2007.

        Subtitle D--Grant Program to Encourage State Innovation

SEC. 141. GRANT PROGRAM TO ENCOURAGE STATE INNOVATION.

    (a) In General.--The Secretary of Health and Human Services (in 
this section referred to as the ``Secretary'') shall establish a 
program (in this section referred to as the ``program'') to award 
demonstration grants under this section to States to allow States to 
demonstrate the effectiveness of innovative ways to increase access to 
health insurance through market reforms and other innovative means. 
Such innovative means may include any of the following:
            (1) Alternative group purchasing or pooling arrangements, 
        such as purchasing cooperatives for small businesses, 
        reinsurance pools, or high risk pools.
            (2) Individual or small group market reforms.
            (3) Consumer education and outreach.
            (4) Subsidies to individuals, employers, or both, in 
        obtaining health insurance.
    (b) Scope; Duration.--The program shall be limited to not more than 
10 States and to a total period of 5 years, beginning on the date the 
first demonstration grant is made.
    (c) Conditions for Demonstration Grants.--
            (1) In general.--The Secretary may not provide for a 
        demonstration grant to a State under the program unless the 
        Secretary finds that under the proposed demonstration grant--
                    (A) the State will provide for demonstrated 
                increase of access for some portion of the existing 
                uninsured population through a market innovation (other 
                than merely through a financial expansion of a program 
                initiated before the date of enactment of this Act);
                    (B) the State will comply with applicable Federal 
                laws;
                    (C) the State will not discriminate among 
                participants on the basis of any health status-related 
                factor (as defined in section 2791(d)(9) of the Public 
                Health Service Act (42 U.S.C. 300gg-91(d)(9)), except 
                to the extent a State wishes to focus on populations 
                that otherwise would not obtain health insurance 
                because of such factors; and
                    (D) the State will provide for such evaluation, in 
                coordination with the evaluation required under 
                subsection (d), as the Secretary may specify.
            (2) Application.--The Secretary shall not provide a 
        demonstration grant under the program to a State unless--
                    (A) the State submits to the Secretary such an 
                application, in such a form and manner, as the 
                Secretary specifies;
                    (B) the application includes information regarding 
                how the demonstration grant will address issues such as 
                governance, targeted population, expected cost, and the 
                continuation after the completion of the demonstration 
                grant period; and
                    (C) the Secretary determines that the demonstration 
                grant will be used consistent with this section.
            (3) Focus.--A demonstration grant proposal under this 
        section need not cover all uninsured individuals in a State or 
        all health care benefits with respect to such individuals.
    (d) Evaluation.--The Secretary shall enter into a contract with an 
appropriate entity outside the Department of Health and Human Services 
to conduct an overall evaluation of the program at the end of the 
program period. Such evaluation shall include an analysis of 
improvements in access, costs, quality of care, or choice of coverage, 
under different demonstration grants.
    (e) Option To Provide for Initial Planning Grants.--Notwithstanding 
the previous provisions of this section, under the program the 
Secretary may provide for a portion of the amounts appropriated under 
subsection (f) (not to exceed $5,000,000) to be made available to any 
State for initial planning grants to permit States to develop 
demonstration grant proposals under the previous provisions of this 
section.
    (f) Authorization of Appropriations.--There are authorized to be 
appropriated such sums as may be necessary to carry out this section. 
Amounts appropriated under this subsection shall remain available until 
expended.
    (g) State Defined.--In this section, the term ``State'' has the 
meaning given such term for purposes of title XIX of the Social 
Security Act (42 U.S.C. 1396 et seq.).

TITLE II--EXPANSION OF ACCESS TO AFFORDABLE HEALTH CARE FOR INDIVIDUALS 
                              AND FAMILIES

              Subtitle A--Internal Revenue Code Provisions

           CHAPTER 1--REFUNDABLE CREDIT FOR UNINSURED FAMILIES

SEC. 201. REFUNDABLE HEALTH INSURANCE COSTS CREDIT.

    (a) Allowance of Credit.--
            (1) In general.--Subpart C of part IV of subchapter A of 
        chapter 1 of the Internal Revenue Code of 1986 (relating to 
        refundable personal credits) is amended by redesignating 
        section 35 as section 36 and inserting after section 34 the 
        following:

``SEC. 35. HEALTH INSURANCE COSTS.

    ``(a) Allowance of Credit.--In the case of an eligible individual, 
there shall be allowed as a credit against the tax imposed by this 
subtitle for the taxable year an amount equal to the amount paid by the 
taxpayer during such taxable year for qualified health insurance for 
the taxpayer and the taxpayer's spouse and dependents.
    ``(b) Limitations.--
            ``(1) In general.--The amount allowed as a credit under 
        subsection (a) to the taxpayer for the taxable year shall not 
        exceed the lesser of--
                    ``(A) the sum of the monthly limitations for 
                coverage months during such taxable year for the 
                individuals referred to in subsection (a) for whom the 
                taxpayer paid during the taxable year any amount for 
                coverage under qualified health insurance, or
                    ``(B) 90 percent of the amount paid by the taxpayer 
                during such taxable year for qualified health insurance 
                for such individuals.
            ``(2) Monthly limitation.--
                    ``(A) In general.--The monthly limitation for an 
                individual for each coverage month of such individual 
                during the taxable year is the amount equal to 1/12 
                of--
                            ``(i) $1,000 if such individual is the 
                        taxpayer,
                            ``(ii) $1,000 if--
                                    ``(I) such individual is the spouse 
                                of the taxpayer,
                                    ``(II) the taxpayer and such spouse 
                                are married as of the first day of such 
                                month, and
                                    ``(III) the taxpayer files a joint 
                                return for the taxable year, and
                            ``(iii) $500 if such individual is an 
                        individual for whom a deduction under section 
                        151(c) is allowable to the taxpayer for such 
                        taxable year.
                    ``(B) Limitation to 2 dependents.--Not more than 2 
                individuals may be taken into account by the taxpayer 
                under subparagraph (A)(iii).
                    ``(C) Special rule for married individuals.--In the 
                case of an individual--
                            ``(i) who is married (within the meaning of 
                        section 7703) as of the close of the taxable 
                        year but does not file a joint return for such 
                        year, and
                            ``(ii) who does not live apart from such 
                        individual's spouse at all times during the 
                        taxable year,
                the limitation imposed by subparagraph (B) shall be 
                divided equally between the individual and the 
                individual's spouse unless they agree on a different 
                division.
            ``(3) Phaseout of credit.--
                    ``(A) In general.--The amount which would (but for 
                this paragraph) be taken into account under subsection 
                (a) shall be reduced (but not below zero) by the amount 
                determined under subparagraph (B).
                    ``(B) Amount of reduction.--The amount determined 
                under this subparagraph is the amount which bears the 
                same ratio to the amount which would be so taken into 
                account for the taxable year as--
                            ``(i) the excess of--
                                    ``(I) the taxpayer's modified 
                                adjusted gross income for the preceding 
                                taxable year, over
                                    ``(II) $15,000 ($25,000 in the case 
                                of family coverage), bears to
                            ``(ii) $15,000 ($35,000 in the case of 
                        family coverage).
                    ``(C) Modified adjusted gross income.--The term 
                `modified adjusted gross income' means adjusted gross 
                income determined--
                            ``(i) without regard to this section and 
                        sections 911, 931, and 933, and
                            ``(ii) after application of sections 86, 
                        135, 137, 219, 221, and 469.
            ``(4) Coverage month.--For purposes of this subsection--
                    ``(A) In general.--The term `coverage month' means, 
                with respect to an individual, any month if--
                            ``(i) as of the first day of such month 
                        such individual is covered by qualified health 
                        insurance, and
                            ``(ii) the premium for coverage under such 
                        insurance for such month is paid by the 
                        taxpayer.
                    ``(B) Employer-subsidized coverage.--
                            ``(i) In general.--Such term shall not 
                        include any month for which such individual is 
                        eligible to participate in any subsidized 
                        health plan (within the meaning of section 
                        162(l)(2)) maintained by any employer of the 
                        taxpayer or of the spouse of the taxpayer.
                            ``(ii) Premiums to nonsubsidized plans.--If 
                        an employer of the taxpayer or the spouse of 
                        the taxpayer maintains a health plan which is 
                        not a subsidized health plan (as so defined) 
                        and which constitutes qualified health 
                        insurance, employee contributions to the plan 
                        shall be treated as amounts paid for qualified 
                        health insurance.
                    ``(C) Cafeteria plan and flexible spending account 
                beneficiaries.--Such term shall not include any month 
                during a taxable year if any amount is not includible 
                in the gross income of the taxpayer for such year under 
                section 106 with respect to--
                            ``(i) a benefit chosen under a cafeteria 
                        plan (as defined in section 125(d)), or
                            ``(ii) a benefit provided under a flexible 
                        spending or similar arrangement.
                    ``(D) Medicare and medicaid.--Such term shall not 
                include any month with respect to an individual if, as 
                of the first day of such month, such individual--
                            ``(i) is entitled to any benefits under 
                        title XVIII of the Social Security Act, or
                            ``(ii) is a participant in the program 
                        under title XIX or XXI of such Act.
                    ``(E) Certain other coverage.--Such term shall not 
                include any month during a taxable year with respect to 
                an individual if, at any time during such year, any 
                benefit is provided to such individual under--
                            ``(i) chapter 89 of title 5, United States 
                        Code,
                            ``(ii) chapter 55 of title 10, United 
                        States Code,
                            ``(iii) chapter 17 of title 38, United 
                        States Code, or
                            ``(iv) any medical care program under the 
                        Indian Health Care Improvement Act.
                    ``(F) Prisoners.--Such term shall not include any 
                month with respect to an individual if, as of the first 
                day of such month, such individual is imprisoned under 
                Federal, State, or local authority.
                    ``(G) Insufficient presence in united states.--Such 
                term shall not include any month during a taxable year 
                with respect to an individual if such individual is 
                present in the United States on fewer than 183 days 
                during such year (determined in accordance with section 
                7701(b)(7)).
            ``(5) Coordination with deduction for health insurance 
        costs of self-employed individuals.--In the case of a taxpayer 
        who is eligible to deduct any amount under section 162(l) for 
        the taxable year, this section shall apply only if the taxpayer 
        elects not to claim any amount as a deduction under such 
        section for such year.
    ``(c) Qualified Health Insurance.--For purposes of this section, 
the term `qualified health insurance' means health insurance coverage 
(as defined in section 9832(b)(1)), including coverage under a COBRA 
continuation provision (as defined in section 9832(d)(1)).
    ``(d) Archer MSA Contributions.--If a deduction would be allowed 
under section 220 to the taxpayer for a payment for the taxable year to 
the Archer MSA of an individual, subsection (a) shall not apply to the 
taxpayer for such taxable year.
    ``(e) Special Rules.--
            ``(1) Coordination with medical expense deduction.--The 
        amount which would (but for this paragraph) be taken into 
        account by the taxpayer under section 213 for the taxable year 
        shall be reduced by the credit (if any) allowed by this section 
        to the taxpayer for such year.
            ``(2) Denial of credit to dependents.--No credit shall be 
        allowed under this section to any individual with respect to 
        whom a deduction under section 151 is allowable to another 
        taxpayer for a taxable year beginning in the calendar year in 
        which such individual's taxable year begins.
            ``(3) Coordination with advance payment.--Rules similar to 
        the rules of section 32(g) shall apply to any credit to which 
        this section applies.
    ``(f) Expenses Must Be Substantiated.--A payment for insurance to 
which subsection (a) applies may be taken into account under this 
section only if the taxpayer substantiates such payment in such form as 
the Secretary may prescribe.
    ``(g) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary to carry out the purposes of this section.''.
    (b) Information Reporting.--
            (1) In general.--Subpart B of part III of subchapter A of 
        chapter 61 of the Internal Revenue Code of 1986 (relating to 
        information concerning transactions with other persons) is 
        amended by inserting after section 6050S the following:

``SEC. 6050T. RETURNS RELATING TO PAYMENTS FOR QUALIFIED HEALTH 
              INSURANCE.

    ``(a) In General.--Any person who, in connection with a trade or 
business conducted by such person, receives payments during any 
calendar year from any individual for coverage of such individual or 
any other individual under creditable health insurance, shall make the 
return described in subsection (b) (at such time as the Secretary may 
by regulations prescribe) with respect to each individual from whom 
such payments were received.
    ``(b) Form and Manner of Returns.--A return is described in this 
subsection if such return--
            ``(1) is in such form as the Secretary may prescribe, and
            ``(2) contains--
                    ``(A) the name, address, and TIN of the individual 
                from whom payments described in subsection (a) were 
                received,
                    ``(B) the name, address, and TIN of each individual 
                who was provided by such person with coverage under 
                creditable health insurance by reason of such payments 
                and the period of such coverage,
                    ``(C) the aggregate amount of payments described in 
                subsection (a),
                    ``(D) the qualified health insurance credit advance 
                amount (as defined in section 7527(e)) received by such 
                person with respect to the individual described in 
                subparagraph (A), and
                    ``(E) such other information as the Secretary may 
                reasonably prescribe.
    ``(c) Creditable Health Insurance.--For purposes of this section, 
the term `creditable health insurance' means qualified health insurance 
(as defined in section 35(c)).
    ``(d) Statements To Be Furnished to Individuals With Respect to 
Whom Information Is Required.--Every person required to make a return 
under subsection (a) shall furnish to each individual whose name is 
required under subsection (b)(2)(A) to be set forth in such return a 
written statement showing--
            ``(1) the name and address of the person required to make 
        such return and the phone number of the information contact for 
        such person,
            ``(2) the aggregate amount of payments described in 
        subsection (a) received by the person required to make such 
        return from the individual to whom the statement is required to 
        be furnished,
            ``(3) the information required under subsection (b)(2)(B) 
        with respect to such payments, and
            ``(4) the qualified health insurance credit advance amount 
        (as defined in section 7527(e)) received by such person with 
        respect to the individual described in paragraph (2).
The written statement required under the preceding sentence shall be 
furnished on or before January 31 of the year following the calendar 
year for which the return under subsection (a) is required to be made.
    ``(e) Returns Which Would Be Required To Be Made by 2 or More 
Persons.--Except to the extent provided in regulations prescribed by 
the Secretary, in the case of any amount received by any person on 
behalf of another person, only the person first receiving such amount 
shall be required to make the return under subsection (a).''.
            (2) Assessable penalties.--
                    (A) Subparagraph (B) of section 6724(d)(1) of such 
                Code (relating to definitions) is amended by 
                redesignating clauses (xi) through (xvii) as clauses 
                (xii) through (xviii), respectively, and by inserting 
                after clause (x) the following:
                            ``(xi) section 6050T (relating to returns 
                        relating to payments for qualified health 
                        insurance),''.
                    (B) Paragraph (2) of section 6724(d) of such Code 
                is amended by striking ``or'' at the end of 
                subparagraph (Z), by striking the period at the end of 
                the subparagraph (AA) and inserting ``, or'', and by 
                adding at the end the following:
                    ``(BB) section 6050T(d) (relating to returns 
                relating to payments for qualified health 
                insurance).''.
            (3) Clerical amendment.--The table of sections for subpart 
        B of part III of subchapter A of chapter 61 of such Code is 
        amended by inserting after the item relating to section 6050S 
        the following:

                              ``Sec. 6050T. Returns relating to 
                                        payments for qualified health 
                                        insurance.''.
    (c) Criminal Penalty for Fraud.--Subchapter B of chapter 75 of the 
Internal Revenue Code of 1986 (relating to other offenses) is amended 
by adding at the end the following:

``SEC. 7276. PENALTIES FOR OFFENSES RELATING TO HEALTH INSURANCE TAX 
              CREDIT.

    ``Any person who knowingly misuses Department of the Treasury 
names, symbols, titles, or initials to convey the false impression of 
association with, or approval or endorsement by, the Department of the 
Treasury of any insurance products or group health coverage in 
connection with the credit for health insurance costs under section 35 
shall on conviction thereof be fined not more than $10,000, or 
imprisoned not more than 1 year, or both.''.
    (d) Conforming Amendments.--
            (1) Section 162(l) of the Internal Revenue Code of 1986 is 
        amended by adding at the end the following:
            ``(6) Election to have subsection apply.--No deduction 
        shall be allowed under paragraph (1) for a taxable year unless 
        the taxpayer elects to have this subsection apply for such 
        year.''.
            (2) Paragraph (2) of section 1324(b) of title 31, United 
        States Code, is amended by inserting before the period ``, or 
        from section 35 of such Code''.
            (3) The table of sections for subpart C of part IV of 
        subchapter A of chapter 1 of the Internal Revenue Code of 1986 
        is amended by striking the last item and inserting the 
        following:

                              ``Sec. 35. Health insurance costs.
                              ``Sec. 36. Overpayments of tax.''.
            (4) The table of sections for subchapter B of chapter 75 of 
        such Code is amended by adding at the end the following:

                              ``Sec. 7276. Penalties for offenses 
                                        relating to health insurance 
                                        tax credit.''.
    (e) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to taxable years 
        beginning after December 31, 2002, without regard to whether 
        final regulations to carry out such amendments have been 
        promulgated by such date.
            (2) Penalties.--The amendments made by subsections (c) and 
        (d)(4) shall take effect on the date of the enactment of this 
        Act.

SEC. 202. ADVANCE PAYMENT OF CREDIT TO ISSUERS OF QUALIFIED HEALTH 
              INSURANCE.

    (a) In General.--Chapter 77 of the Internal Revenue Code of 1986 
(relating to miscellaneous provisions) is amended by adding at the end 
the following:

``SEC. 7527. ADVANCE PAYMENT OF HEALTH INSURANCE CREDIT FOR PURCHASERS 
              OF QUALIFIED HEALTH INSURANCE.

    ``(a) General Rule.--Every plan sponsor of a group health plan 
providing, or qualified health insurance issuer of, qualified health 
insurance to an eligible individual shall--
            ``(1) make qualified premium payments with respect to such 
        individual in an amount equal to the qualified health insurance 
        credit advance amount, and
            ``(2) treat such payments in the manner provided in 
        subsection (g).
    ``(b) Eligible Individual.--For purposes of this section, the term 
`eligible individual' means any individual--
            ``(1) who purchases qualified health insurance (as defined 
        in section 35(c)), and
            ``(2) for whom a qualified health insurance credit 
        eligibility certificate is in effect.
    ``(c) Definitions.--For purposes of this section--
            ``(1) Qualified health insurance issuer.--The term 
        `qualified health insurance issuer' means a health insurance 
        issuer described in section 9832(b)(2) (determined without 
        regard to the last sentence thereof) offering coverage in 
        connection with a group health plan.
            ``(2) Group health plan.--The term `group health plan' has 
        the meaning given such term by section 5000(b)(1) (determined 
        without regard to subsection (d) thereof).
            ``(3) Qualified premium payments.--The term `qualified 
        premium payments' means any amount paid or incurred, cost 
        incurred, or health coverage value provided, with respect to 
        qualified health insurance for an eligible individual and the 
        individual's spouse and dependents. For purposes of the 
        preceding sentence, in the case of a group health plan, the 
        health coverage value is equal to the applicable premium under 
        the plan for the qualified health insurance coverage provided 
        to an eligible individual and the individual's spouse and 
        dependents, as determined under section 4980B.
    ``(d) Qualified Health Insurance Credit Eligibility Certificate.--
For purposes of this section, a qualified health insurance credit 
eligibility certificate is a statement furnished by an individual to a 
plan sponsor of a group health plan or qualified health insurance 
issuer which--
            ``(1) certifies that the individual will be eligible to 
        receive the credit provided by section 35 for the taxable year,
            ``(2) estimates the amount of such credit for such taxable 
        year, and
            ``(3) provides such other information as the Secretary may 
        require for purposes of this section.
    ``(e) Qualified Health Insurance Credit Advance Amount.--For 
purposes of this section, the term `qualified health insurance credit 
advance amount' means, with respect to any plan sponsor of a group 
health plan providing, or qualified health insurance issuer of, 
qualified health insurance, the amount of credit allowable under 
section 35 to the individual for the taxable year which is attributable 
to the insurance provided to the individual by such sponsor or issuer.
    ``(f) Required Documentation for Receipt of Payments of Advance 
Amount.--No payment of a qualified health insurance credit advance 
amount with respect to any eligible individual may be made under 
subsection (a) unless the plan sponsor of the group health plan or 
qualified health insurance issuer provides to the Secretary--
            ``(1) the qualified health insurance credit eligibility 
        certificate of such individual, and
            ``(2) the return relating to such individual under section 
        6050T.
    ``(g) Qualified Premium Payments To Be Treated as Payments of 
Withholding Amounts and Certain Employer Tax.--
            ``(1) In general.--For purposes of this title, qualified 
        premium payments made or costs incurred by the sponsor of a 
        group health plan, or any entity designated by the sponsor to 
        make such payments or incur such costs--
                    ``(A) shall not be treated as compensation, and
                    ``(B) shall be treated, in such manner as provided 
                by the Secretary, as made out of--
                            ``(i) amounts required to be deposited by 
                        the taxpayer as estimated income tax under 
                        section 6654 or 6655,
                            ``(ii) amounts required to be deducted and 
                        withheld under section 3401 (relating to wage 
                        withholding),
                            ``(iii) amounts of the taxes imposed under 
                        section 3111(a) or 50 percent of taxes imposed 
                        under section 1401(a) (relating to FICA 
                        employer taxes), or
                            ``(iv) amounts required to be deducted 
                        under section 3102 with respect to taxes 
                        imposed under section 3101(a) or 50 percent of 
                        taxes imposed under section 1401(a) (relating 
                        to FICA employee taxes),
                as if such sponsor, or such designated entity, had paid 
                to the Secretary an amount equal to such payments.
            ``(2) Qualified premium payments exceed taxes due.--In the 
        case of any entity, if for any time period the aggregate 
        qualified premium payments exceed the amounts described in 
        paragraph (1)(B), the Secretary shall reduce amounts described 
        in such paragraph for any succeeding time period as necessary 
        to reflect such excess.
            ``(3) Failure to make qualified premium payments.--For 
        purposes of this title (including penalties), failure to make a 
        qualified premium payment with respect to an eligible 
        individual at the time provided therefor shall be treated as 
        the failure at such time to deduct and withhold under chapter 
        24 of such Code in an amount equal to the amount of such 
        qualified premium payments.
    ``(h) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary to carry out the purposes of this section.''.
    (b) Clerical Amendment.--The table of sections for chapter 77 of 
the Internal Revenue Code of 1986 is amended by adding at the end the 
following:

                              ``Sec. 7527. Advance payment of health 
                                        insurance credit for purchasers 
                                        of qualified health 
                                        insurance.''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on January 1, 2004, without regard to whether final regulations 
to carry out such amendments have been promulgated by such date.

 CHAPTER 2--IMMEDIATE, FULL DEDUCTIBILITY OF HEALTH INSURANCE COSTS OF 
                       SELF-EMPLOYED INDIVIDUALS

SEC. 205. DEDUCTION FOR 100 PERCENT OF HEALTH INSURANCE COSTS OF SELF-
              EMPLOYED INDIVIDUALS.

    (a) In General.--Paragraph (1) of section 162(l) of the Internal 
Revenue Code of 1986 is amended to read as follows:
            ``(1) Allowance of deduction.--In the case of an individual 
        who is an employee within the meaning of section 401(c)(1), 
        there shall be allowed as a deduction under this section an 
        amount equal to 100 percent of the amount paid during the 
        taxable year for insurance which constitutes medical care for 
        the taxpayer and the taxpayer's spouse and dependents.''.
    (b) Clarification of Limitations on Other Coverage.--The first 
sentence of section 162(l)(2)(B) of the Internal Revenue Code of 1986 
is amended to read as follows: ``Paragraph (1) shall not apply to any 
taxpayer for any calendar month for which the taxpayer participates in 
any subsidized health plan maintained by any employer (other than an 
employer described in section 401(c)(4)) of the taxpayer or the spouse 
of the taxpayer.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2001.

                         Subtitle B--FamilyCare

SEC. 211. RENAMING OF TITLE XXI PROGRAM.

    (a) In General.--The heading of title XXI of the Social Security 
Act (42 U.S.C. 1397aa et seq.) is amended to read as follows:

                   ``TITLE XXI--FAMILYCARE PROGRAM''.

    (b) Program References.--Any reference in any provision of Federal 
law or regulation to ``SCHIP'' or ``State children's health insurance 
program'' under title XXI of the Social Security Act shall be deemed a 
reference to the FamilyCare program under such title.

SEC. 212. FAMILYCARE COVERAGE OF PARENTS UNDER THE MEDICAID PROGRAM AND 
              TITLE XXI.

    (a) Incentives To Implement FamilyCare Coverage.--
            (1) Under medicaid.--
                    (A) Establishment of new optional eligibility 
                category.--Section 1902(a)(10)(A)(ii) of the Social 
                Security Act (42 U.S.C. 1396a(a)(10)(A)(ii)) is 
                amended--
                            (i) by striking ``or'' at the end of 
                        subclause (XVII);
                            (ii) by adding ``or'' at the end of 
                        subclause (XVIII); and
                            (iii) by adding at the end the following:
                                    ``(XIX) who are individuals 
                                described in subsection (k)(1) 
                                (relating to parents of categorically 
                                eligible children);''.
                    (B) Parents described.--Section 1902 of the Social 
                Security Act is further amended by inserting after 
                subsection (j) the following:
    ``(k)(1)(A) Individuals described in this paragraph are 
individuals--
            ``(i) who are the parents of an individual who is under 19 
        years of age (or such higher age as the State may have elected 
        under section 1902(l)(1)(D)) and who is eligible for medical 
        assistance under subsection (a)(10)(A);
            ``(ii) who are not otherwise eligible for medical 
        assistance under such subsection, under section 1931, or under 
        a waiver approved under section 1115 or otherwise (except under 
        subsection (a)(10)(A)(ii)(XIX)); and
            ``(iii) whose family income exceeds the income level 
        applicable under the State plan under part A of title IV as in 
        effect as of July 16, 1996, but does not exceed the highest 
        income level applicable to a child in the family under this 
        title.
    ``(B) In establishing an income eligibility level for individuals 
described in this paragraph, a State may vary such level consistent 
with the various income levels established under subsection (l)(2) 
based on the ages of children described in subsection (l)(1) in order 
to ensure, to the maximum extent possible, that such individuals shall 
be enrolled in the same program as their children.
    ``(C) An individual may not be treated as being described in this 
paragraph unless, at the time of the individual's enrollment under this 
title, the child referred to in subparagraph (A)(i) of the individual 
is also enrolled under this title.
    ``(D) In this subsection, the term `parent' includes an individual 
treated as a caregiver for purposes of carrying out section 1931.
    ``(2) In the case of a parent described in paragraph (1) who is 
also the parent of a child who is eligible for child health assistance 
under title XXI, the State may elect (on a uniform basis) to cover all 
such parents under section 2111 or under this title.''.
                    (C) Enhanced matching funds available if certain 
                conditions met.--Section 1905 of the Social Security 
                Act (42 U.S.C. 1396d) is amended--
                            (i) in the fourth sentence of subsection 
                        (b), by striking ``or subsection (u)(3)'' and 
                        inserting ``, (u)(3), or (u)(4)''; and
                            (ii) in subsection (u)--
                                    (I) by redesignating paragraph (4) 
                                as paragraph (6), and
                                    (II) by inserting after paragraph 
                                (3) the following:
    ``(4) For purposes of subsection (b) and section 2105(a)(1):
            ``(A) FamilyCare parents.--The expenditures described in 
        this subparagraph are the expenditures described in the 
        following clauses (i) and (ii):
                    ``(i) Parents.--If the conditions described in 
                clause (iii) are met, expenditures for medical 
                assistance for parents described in section 1902(k)(1) 
                and for parents who would be described in such section 
                but for the fact that they are eligible for medical 
                assistance under section 1931 or under a waiver 
                approved under section 1115.
                    ``(ii) Certain pregnant women.--Expenditures for 
                medical assistance for pregnant women under section 
                1902(l)(1)(A) in a family the income of which exceeds 
                the income level applicable under section 1902(l)(2)(A) 
                to a family of the size involved as of January 1, 2002.
                    ``(iii) Conditions.--The conditions described in 
                this clause are the following:
                            ``(I) The State has a State child health 
                        plan under title XXI which (whether implemented 
                        under such title or under this title) has an 
                        effective income level for children that is at 
                        least 200 percent of the poverty line.
                            ``(II) Such State child health plan does 
                        not limit the acceptance of applications, does 
                        not use a waiting list for children who meet 
                        eligibility standards to qualify for 
                        assistance, and provides benefits to all 
                        children in the State who apply for and meet 
                        eligibility standards.
                            ``(III) The State plans under this title 
                        and title XXI do not provide coverage for 
                        parents with higher family income without 
                        covering parents with a lower family income.
                            ``(IV) The State does not apply an income 
                        level for parents that is lower than the 
                        effective income level (expressed as a percent 
                        of the poverty line) that has been specified 
                        under the State plan under title XIX (including 
                        under a waiver authorized by the Secretary or 
                        under section 1902(r)(2)), as of January 1, 
                        2002, to be eligible for medical assistance as 
                        a parent under this title.
                    ``(iv) Definitions.--For purposes of this 
                subsection:
                            ``(I) The term `parent' has the meaning 
                        given such term for purposes of section 
                        1902(k)(1).
                            ``(II) The term `poverty line' has the 
                        meaning given such term in section 
                        2110(c)(5).''.
                    (D) Appropriation from title xxi allotment for 
                certain medicaid expansion costs.--Subparagraph (B) of 
                section 2105(a)(1) of the Social Security Act, as 
                amended by section 217(a), is amended to read as 
                follows:
                    ``(B) FamilyCare parents.--Expenditures for medical 
                assistance that is attributable to expenditures 
                described in section 1905(u)(4)(A).''.
                    (E) Only counting enhanced portion for coverage of 
                additional pregnant women.--Section 1905 of the Social 
                Security Act (42 U.S.C. 1396d) is amended--
                            (i) in the fourth sentence of subsection 
                        (b), by inserting ``(except in the case of 
                        expenditures described in subsection (u)(5))'' 
                        after ``do not exceed'';
                            (ii) in subsection (u), by inserting after 
                        paragraph (4) (as inserted by subparagraph 
                        (C)), the following:
    ``(5) For purposes of the fourth sentence of subsection (b) and 
section 2105(a), the following payments under this title do not count 
against a State's allotment under section 2104:
            ``(A) Regular fmap for expenditures for pregnant women with 
        income above january 1, 2002 income level and below 185 percent 
        of poverty.--The portion of the payments made for expenditures 
        described in paragraph (4)(A)(ii) that represents the amount 
        that would have been paid if the enhanced FMAP had not been 
        substituted for the Federal medical assistance percentage.''.
            (2) Under title xxi.--
                    (A) FamilyCare coverage.--Title XXI of the Social 
                Security Act (42 U.S.C. 1397aa et seq.) is amended by 
                adding at the end the following:

``SEC. 2111. OPTIONAL FAMILYCARE COVERAGE OF PARENTS OF TARGETED LOW-
              INCOME CHILDREN.

    ``(a) Optional Coverage.--Notwithstanding any other provision of 
this title, a State child health plan may provide for coverage, through 
an amendment to its State child health plan under section 2102, of 
FamilyCare assistance for individuals who are targeted low-income 
parents in accordance with this section, but only if--
            ``(1) the State meets the conditions described in section 
        1905(u)(4)(A)(iii); and
            ``(2) the State elects to provide medical assistance under 
        section 1902(a)(10)(A)(ii)(XIX), under section 1931, or under a 
        waiver under section 1115 to individuals described in section 
        1902(k)(1)(A)(i) and elects an applicable income level for such 
        individuals that consistent with paragraphs (1)(B) and (2) of 
        section 1902(k), ensures to the maximum extent possible, that 
        those individuals shall be enrolled in the same program as 
        their children if their children are eligible for coverage 
        under title XIX (including under a waiver authorized by the 
        Secretary or under section 1902(r)(2)).''.
    ``(b) Definitions.--For purposes of this title:
            ``(1) FamilyCare assistance.--The term `FamilyCare 
        assistance' has the meaning given the term child health 
        assistance in section 2110(a) as if any reference to targeted 
        low-income children were a reference to targeted low-income 
        parents.
            ``(2) Targeted low-income parent.--The term `targeted low-
        income parent' has the meaning given the term targeted low-
        income child in section 2110(b) as if the reference to a child 
        were deemed a reference to a parent (as defined in paragraph 
        (3)) of the child; except that in applying such section--
                    ``(A) there shall be substituted for the income 
                level described in paragraph (1)(B)(ii)(I) the 
                applicable income level in effect for a targeted low-
                income child;
                    ``(B) in paragraph (3), January 1, 2002, shall be 
                substituted for July 1, 1997; and
                    ``(C) in paragraph (4), January 1, 2002, shall be 
                substituted for March 31, 1997.
            ``(3) Parent.--The term `parent' includes an individual 
        treated as a caregiver for purposes of carrying out section 
        1931.
            ``(4) Optional treatment of pregnant women as parents.--A 
        State child health plan may treat a pregnant woman who is not 
        otherwise a parent as a targeted low-income parent for purposes 
        of this section but only if the State has established an income 
        level under section 1902(l)(2)(A)(i) for pregnant women that is 
        at least 185 percent of the income official poverty line 
        described in such section.
    ``(c) References to Terms and Special Rules.--In the case of, and 
with respect to, a State providing for coverage of FamilyCare 
assistance to targeted low-income parents under subsection (a), the 
following special rules apply:
            ``(1) Any reference in this title (other than subsection 
        (b)) to a targeted low-income child is deemed to include a 
        reference to a targeted low-income parent.
            ``(2) Any such reference to child health assistance with 
        respect to such parents is deemed a reference to FamilyCare 
        assistance.
            ``(3) In applying section 2103(e)(3)(B) in the case of a 
        family provided coverage under this section, the limitation on 
        total annual aggregate cost-sharing shall be applied to the 
        entire family.
            ``(4) In applying section 2110(b)(4), any reference to 
        `section 1902(l)(2) or 1905(n)(2) (as selected by a State)' is 
        deemed a reference to the income level applicable to parents 
        under section 1931 or under a waiver approved under section 
        1115, or, in the case of a pregnant woman described in 
        subsection (b)(4), the income level established under section 
        1902(l)(2)(A).
            ``(5) In applying section 2102(b)(3)(B), any reference to 
        children is deemed a reference to parents.''.
                    (B) Additional allotment for states providing 
                familycare.--
                            (i) In general.--Section 2104 of the Social 
                        Security Act (42 U.S.C. 1397dd) is amended by 
                        inserting after subsection (c) the following:
    ``(d) Additional Allotments for State Providing FamilyCare.--
            ``(1) Appropriation; total allotment.--For the purpose of 
        providing additional allotments to States to provide FamilyCare 
        coverage under section 2111, there is appropriated, out of any 
        money in the Treasury not otherwise appropriated--
                    ``(A) for fiscal year 2003, $2,000,000,000;
                    ``(B) for fiscal year 2004, $3,000,000,000;
                    ``(C) for fiscal year 2005, $3,000,000,000;
                    ``(D) for fiscal year 2006, $6,000,000,000;
                    ``(E) for fiscal year 2007, $7,000,000,000;
                    ``(F) for fiscal year 2008, $8,000,000,000;
                    ``(G) for fiscal year 2009, $9,000,000,000;
                    ``(H) for fiscal year 2010, $10,000,000,000; and
                    ``(I) for fiscal year 2011 and each fiscal year 
                thereafter, the amount of the allotment provided under 
                this paragraph for the preceding fiscal year increased 
                by the percentage increase (if any) in the medical care 
                expenditure category of the Consumer Price Index for 
                All Urban Consumers (United States city average).
            ``(2) State and territorial allotments.--
                    ``(A) In general.--In addition to the allotments 
                provided under subsections (b) and (c), subject to 
                paragraphs (3) and (4), of the amount available for the 
                additional allotments under paragraph (1) for a fiscal 
                year, the Secretary shall allot to each State with a 
                State child health plan approved under this title--
                            ``(i) in the case of such a State other 
                        than a commonwealth or territory described in 
                        clause (ii), the same proportion as the 
                        proportion of the State's allotment under 
                        subsection (b) (determined without regard to 
                        subsection (f)) to 98.95 percent of the total 
                        amount of the allotments under such section for 
                        such States eligible for an allotment under 
                        this subparagraph for such fiscal year; and
                            ``(ii) in the case of a commonwealth or 
                        territory described in subsection (c)(3), the 
                        same proportion as the proportion of the 
                        commonwealth's or territory's allotment under 
                        subsection (c) (determined without regard to 
                        subsection (f)) to 1.05 percent of the total 
                        amount of the allotments under such section for 
                        commonwealths and territories eligible for an 
                        allotment under this subparagraph for such 
                        fiscal year.
                    ``(B) Availability and redistribution of unused 
                allotments.--In applying subsections (e) and (f) with 
                respect to additional allotments made available under 
                this subsection, the procedures established under such 
                subsections shall ensure such additional allotments are 
                only made available to States which have elected to 
                provide coverage under section 2111.
            ``(3) Use of additional allotment.--Additional allotments 
        provided under this subsection are not available for amounts 
        expended before October 1, 2002. Such amounts are available for 
        amounts expended on or after such date for child health 
        assistance for targeted low-income children, as well as for 
        FamilyCare assistance.
            ``(4) Requiring election to provide familycare coverage.--
        No payments may be made to a State under this title from an 
        allotment provided under this subsection unless the State has 
        made an election to provide FamilyCare assistance.''.
                            (ii) Conforming amendments.--Section 2104 
                        of the Social Security Act (42 U.S.C. 1397dd) 
                        is amended--
                                    (I) in subsection (a), by inserting 
                                ``subject to subsection (d),'' after 
                                ``under this section,'';
                                    (II) in subsection (b)(1), by 
                                inserting ``and subsection (d)'' after 
                                ``Subject to paragraph (4)''; and
                                    (III) in subsection (c)(1), by 
                                inserting ``subject to subsection 
                                (d),'' after ``for a fiscal year,''.
                    (C) No cost-sharing for pregnancy-related 
                benefits.--Section 2103(e)(2) of the Social Security 
                Act (42 U.S.C. 1397cc(e)(2)) is amended--
                            (i) in the heading, by inserting ``and 
                        pregnancy-related services'' after ``preventive 
                        services''; and
                            (ii) by inserting before the period at the 
                        end the following: ``and for pregnancy-related 
                        services''.
            (3) Effective date.--The amendments made by this subsection 
        apply to items and services furnished on or after October 1, 
        2002, whether or not regulations implementing such amendments 
        have been issued.
    (b) Rules for Implementation Beginning With Fiscal Year 2005.--
            (1) Required coverage of familycare parents.--Section 
        1902(a)(10)(A)(i) of the Social Security Act (42 U.S.C. 
        1396a(a)(10)(A)(i)) is amended--
                    (A) by striking ``or'' at the end of subclause 
                (VI);
                    (B) by striking the semicolon at the end of 
                subclause (VII) and insert ``, or''; and
                    (C) by adding at the end the following:
                                    ``(VIII) who are described in 
                                subsection (k)(1) (or would be 
                                described if subparagraph (A)(ii) of 
                                such subsection did not apply) and who 
                                are in families with incomes that do 
                                not exceed 100 percent of the poverty 
                                line applicable to a family of the size 
                                involved;''.
            (2) Expansion of availability of enhanced match under 
        medicaid for pre-chip expansions.--Paragraph (4) of section 
        1905(u) of the Social Security Act (42 U.S.C. 1396d(u)), as 
inserted by subsection (a)(1)(C), is amended--
                    (A) by amending clause (ii) of subparagraph (A) to 
                read as follows:
                    ``(ii) Certain pregnant women.--Expenditures for 
                medical assistance for pregnant women under section 
                1902(l)(1)(A) in a family the income of which exceeds 
                the 133 percent of the income official poverty line.''; 
                and
                    (B) by adding at the end the following:
            ``(B) Children in families with income above medicaid 
        mandatory level not previously described.--The expenditures 
        described in this subparagraph are expenditures (other than 
        expenditures described in paragraph (2) or (3)) for medical 
        assistance made available to any child who is eligible for 
        assistance under section 1902(a)(10)(A) (other than under 
        clause (i)) and the income of whose family exceeds the minimum 
        income level required under subsection 1902(l)(2) (or, if 
        higher, the minimum level required under section 1931 for that 
        State) for a child of the age involved (treating any child who 
        is 19 or 20 years of age as being 18 years of age).''.
            (3) Offset of additional expenditures for enhanced match 
        for pre-chip expansion; elimination of offset for required 
        coverage of familycare parents.--
                    (A) In general.--Section 1905(u)(5) of the Social 
                Security Act (42 U.S.C. 1396d(u)(5)), as added by 
                subsection (a)(1)(E), is amended--
                            (i) by amending subparagraph (A) to read as 
                        follows:
            ``(A) Regular fmap for expenditures for pregnant women with 
        income above 133 percent of poverty.--The portion of the 
        payments made for expenditures described in paragraph 
        (4)(A)(ii) that represents the amount that would have been paid 
        if the enhanced FMAP had not been substituted for the Federal 
        medical assistance percentage.''; and
                            (ii) by adding at the end the following:
            ``(B) FamilyCare parents under 100 percent of poverty.--
        Payments for expenditures described in paragraph (4)(A)(i) in 
        the case of parents whose income does not exceed 100 percent of 
        the income official poverty line applicable to a family of the 
        size involved.
            ``(C) Regular fmap for expenditures for certain children in 
        families with income above medicaid mandatory level.--The 
        portion of the payments made for expenditures described in 
        paragraph (4)(B) that represents the amount that would have 
        been paid if the enhanced FMAP had not been substituted for the 
        Federal medical assistance percentage.''.
                    (B) Conforming amendments.--Subparagraph (B) of 
                section 2105(a)(1) of the Social Security Act, as 
                amended by section 217(a) and subsection (a)(1)(D), is 
                amended to read as follows:
                    ``(B) Certain familycare parents and others.--
                Expenditures for medical assistance that is 
                attributable to expenditures described in section 
                1905(u)(4), except as provided in section 
                1905(u)(5).''.
            (4) Effective date.--The amendments made by this subsection 
        apply as of October 1, 2004, to fiscal years beginning on or 
        after such date and to expenditures under the State plan on and 
        after such date, whether or not regulations implementing such 
        amendments have been issued.
    (c) Making Title XXI Base Allotments Permanent.--Section 2104(a) of 
the Social Security Act (42 U.S.C. 1397dd(a)) is amended--
            (1) by striking ``and'' at the end of paragraph (9);
            (2) by striking the period at the end of paragraph (10) and 
        inserting ``; and''; and
            (3) by adding at the end the following:
            ``(11) for fiscal year 2008 and each fiscal year 
        thereafter, the amount of the allotment provided under this 
        subsection for the preceding fiscal year increased by the 
        percentage increase (if any) in the medical care expenditure 
        category of the Consumer Price Index for All Urban Consumers 
        (United States city average).''.
    (d) Optional Application of Presumptive Eligibility Provisions to 
Parents.--Section 1920A of the Social Security Act (42 U.S.C. 1396r-1a) 
is amended by adding at the end the following:
    ``(e) A State may elect to apply the previous provisions of this 
section to provide for a period of presumptive eligibility for medical 
assistance for a parent (as defined for purposes of section 1902(k)(1)) 
of a child with respect to whom such a period is provided under this 
section.''.
    (e) Conforming Amendments.--
            (1) Eligibility categories.--Section 1905(a) of the Social 
        Security Act (42 U.S.C. 1396d(a)) is amended, in the matter 
        before paragraph (1)--
                    (A) by striking ``or'' at the end of clause (xii);
                    (B) by inserting ``or'' at the end of clause 
                (xiii); and
                    (C) by inserting after clause (xiii) the following:
            ``(xiv) who are parents described (or treated as if 
        described) in section 1902(k)(1),''.
            (2) Income limitations.--Section 1903(f)(4) of the Social 
        Security Act (42 U.S.C. 1396b(f)(4)) is amended--
                    (A) effective October 1, 2004, by inserting 
                ``1902(a)(10)(A)(i)(VIII),'' after 
                ``1902(a)(10)(A)(i)(VII),''; and
                    (B) by inserting ``1902(a)(10)(A)(ii)(XIX),'' after 
                ``1902(a)(10)(A)(ii)(XVIII),''.
            (3) Conforming amendment relating to no waiting period for 
        pregnant women.--Section 2102(b)(1)(B) of the Social Security 
        Act (42 U.S.C. 1397bb(b)(1)(B)) is amended--
                    (A) by striking ``, and'' at the end of clause (i) 
                and inserting a semicolon;
                    (B) by striking the period at the end of clause 
                (ii) and inserting ``; and''; and
                    (C) by adding at the end the following:
                            ``(iii) may not apply a waiting period 
                        (including a waiting period to carry out 
                        paragraph (3)(C)) in the case of a targeted 
                        low-income parent who is pregnant.''.

SEC. 213. OPTIONAL COVERAGE OF CHILDREN THROUGH AGE 20 UNDER THE 
              MEDICAID PROGRAM AND TITLE XXI.

    (a) Medicaid.--
            (1) In general.--Section 1902(l)(1)(D) of the Social 
        Security Act (42 U.S.C. 1396a(l)(1)(D)) is amended by inserting 
        ``(or, at the election of a State, 20 or 21 years of age)'' 
        after ``19 years of age''.
            (2) Conforming amendments.--
                    (A) Section 1902(e)(3)(A) of the Social Security 
                Act (42 U.S.C. 1396a(e)(3)(A)) is amended by inserting 
                ``(or 1 year less than the age the State has elected 
                under subsection (l)(1)(D))'' after ``18 years of 
                age''.
                    (B) Section 1902(e)(12) of the Social Security Act 
                (42 U.S.C. 1396a(e)(12)) is amended by inserting ``or 
                such higher age as the State has elected under 
                subsection (l)(1)(D)'' after ``19 years of age''.
                    (C) Section 1920A(b)(1) of the Social Security Act 
                (42 U.S.C. 1396r-1a(b)(1)) is amended by inserting ``or 
                such higher age as the State has elected under section 
                1902(l)(1)(D)'' after ``19 years of age''.
                    (D) Section 1928(h)(1) of the Social Security Act 
                (42 U.S.C. 1396s(h)(1)) is amended by inserting ``or 1 
                year less than the age the State has elected under 
                section 1902(l)(1)(D)'' before the period at the end.
                    (E) Section 1932(a)(2)(A) of the Social Security 
                Act (42 U.S.C. 1396u-2(a)(2)(A)) is amended by 
                inserting ``(or such higher age as the State has 
                elected under section 1902(l)(1)(D))'' after ``19 years 
                of age''.
    (b) Title XXI.--Section 2110(c)(1) of the Social Security Act (42 
U.S.C. 1397jj(c)(1)) is amended by inserting ``(or such higher age as 
the State has elected under section 1902(l)(1)(D))''.
    (c) Effective Date.--The amendments made by this section take 
effect on October 1, 2002, and apply to medical assistance and child 
health assistance provided on or after such date, whether or not 
regulations implementing such amendments have been issued.

SEC. 214. INCREASE IN CHIP ALLOTMENT FOR EACH OF FISCAL YEARS 2002 
              THROUGH 2004.

    Paragraphs (5), (6), and (7) of section 2104(a) of the Social 
Security Act (42 U.S.C. 1397dd(a)) are amended by striking 
``$3,150,000,000'' each place it appears and inserting 
``$4,150,000,000''.

SEC. 215. ADDITIONAL CHIP REVISIONS.

    (a) Limiting Cost-Sharing to 2.5 Percent for Families With Income 
Below 150 Percent of Poverty.--Section 2103(e)(3)(A) of the Social 
Security Act (42 U.S.C. 1397cc(e)(3)(A)) is amended--
            (1) by striking ``and'' at the end of clause (i);
            (2) by striking the period at the end of clause (ii) and 
        inserting ``; and''; and
            (3) by adding at the end the following new clause:
                            ``(iii) total annual aggregate cost-sharing 
                        described in clauses (i) and (ii) with respect 
                        to all such targeted low-income children in a 
                        family under this title that exceeds 2.5 
                        percent of such family's income for the year 
                        involved.''.
    (b) Reporting of Enrollment Data.--
            (1) Quarterly reports.--Section 2107(b)(1) of such Act (42 
        U.S.C. 1397gg(b)(1)) is amended by adding at the end the 
        following: ``In quarterly reports on enrollment required under 
        this paragraph, a State shall include information on the age, 
        gender, race, ethnicity, service delivery system, and family 
        income of individuals enrolled.''.
            (2) Annual reports.--Section 2108(b)(1)(B)(i) of such Act 
        (42 U.S.C. 1397hh(b)(1)(B)(i)) is amended by inserting 
        ``primary language of enrollees,'' after ``family income,''.
    (c) Employer Coverage Waiver Changes.--Section 2105(c)(3) of such 
Act (42 U.S.C. 1397ee(c)(3)) is amended--
            (1) by redesignating subparagraphs (A) and (B) as clauses 
        (i) and (ii) and indenting appropriately;
            (2) by designating the matter beginning with ``Payment may 
        be made'' as a subparagraph (A) with the heading ``In general'' 
        and indenting appropriately;
            (3) in subparagraph (A) (as so designated)--
                    (A) in the matter preceding clause (i) (as 
                redesignated by paragraph (1)), by striking ``targeted 
                low-income children'' and inserting ``a targeted low-
                income child, a targeted low-income parent, or a 
                pregnant woman who is treated as a targeted low-income 
                parent under section 2111(b)(4)'';
                    (B) in clause (i) (as so redesignated), by striking 
                ``children'' and inserting ``child, targeted low-income 
                parent, or pregnant woman treated as such a parent''; 
                and
                    (C) in clause (ii) (as so redesignated), by 
                striking ``children'' and inserting ``child, parent, or 
                pregnant women''; and
            (4) by adding at the end the following new subparagraphs:
                    ``(B) Application of requirements.--In carrying out 
                subparagraph (A)--
                            ``(i) the Secretary shall not require a 
                        minimum employer contribution level that is 
                        separate from the requirement of cost-
                        effectiveness under subparagraph (A)(i), but a 
State shall identify a reasonable minimum employer contribution level 
that is based on data demonstrating that such a level is representative 
to the employer-sponsored insurance market in the State and shall 
monitor employer contribution levels over time to determine whether 
substitution is occurring and report the findings in annual reports 
under section 2108(a);
                            ``(ii) the State shall establish a waiting 
                        period of at least 6 months without group 
                        health coverage, but may establish reasonable 
                        exceptions to such period and shall not apply 
                        such a waiting period to a child who is 
                        provided coverage under a group health plan 
                        under section 1906;
                            ``(iii) subject to clause (iv), the State 
                        shall provide satisfactory assurances that the 
                        minimum benefits and cost-sharing protections 
                        established under this title are provided, 
                        either through the coverage under subparagraph 
                        (A) or as a supplement to such coverage; and
                            ``(iv) coverage under such subparagraph 
                        shall not be considered to violate clause (iii) 
                        because it does not comply with requirements 
                        relating to reviews of health service decisions 
                        if the enrollee involved is provided the option 
                        of being provided benefits directly under this 
                        title.
                    ``(C) Access to external review process.--In 
                carrying out subparagraph (A), if a State provides 
                coverage under a group health plan that does not meet 
                the following external review requirements, the State 
                must give applicants and enrollees (at initial 
                enrollment and at each redetermination of eligibility) 
                the option to obtain health benefits coverage other 
                than through that group health plan:
                            ``(i) The enrollee has an opportunity for 
                        external review of a--
                                    ``(I) delay, denial, reduction, 
                                suspension, or termination of health 
                                services, in whole or in part, 
                                including a determination about the 
                                type or level of services; and
                                    ``(II) failure to approve, furnish, 
                                or provide payment for health services 
                                in a timely manner.
                            ``(ii) The external review is conducted by 
                        the State or a impartial contractor other than 
                        the contractor responsible for the matter 
                        subject to external review.
                            ``(iii) The external review decision is 
                        made on a timely basis in accordance with the 
                        medical needs of the patient. If the medical 
                        needs of the patient do not dictate a shorter 
                        time frame, the review must be completed--
                                    ``(I) within 90 calendar days of 
                                the date of the request for internal or 
                                external review; or
                                    ``(II) within 72 hours if the 
                                enrollee's physician or plan determines 
                                that the deadline under subclause (I) 
                                could seriously jeopardize the 
                                enrollee's life or health or ability to 
                                attain, maintain, or regain maximum 
                                function (except that a State may 
                                extend the 72-hour deadline by up to 14 
                                days if the enrollee requests an 
                                extension).
                            ``(iv) The external review decision shall 
                        be in writing.
                            ``(v) Applicants and enrollees have an 
                        opportunity--
                                    ``(I) to represent themselves or 
                                have representatives of their choosing 
                                in the review process;
                                    ``(II) timely review their files 
                                and other applicable information 
                                relevant to the review of the decision; 
                                and
                                    ``(III) fully participate in the 
                                review process, whether the review is 
                                conducted in person or in writing, 
                                including by presenting supplemental 
                                information during the review 
                                process.''.
    (d) Sense of the Senate Regarding Authority To Use SCHIP Funds To 
Purchase Family Coverage.--It is the sense of the Senate that section 
2105(c)(3) of the Social Security Act (42 U.S.C. 1397ee(c)(3)) permits 
States to use funds provided under the State children's health 
insurance program established under title XXI of that Act (42 U.S.C. 
1397aa et seq.) to help low-income working families and pregnant women 
eligible for assistance under that program pay their share of employer-
sponsored health insurance coverage.
    (e) Effective Date.--The amendments made by this section apply as 
of October 1, 2002, whether or not regulations implementing such 
amendments have been issued.

SEC. 216. LIMITATIONS ON CONFLICTS OF INTEREST.

    (a) Limitation on Conflicts of Interest in Marketing Activities.--
            (1) Title xxi.--Section 2105(c) of the Social Security Act 
        (42 U.S.C. 300aa-5(c)) is amended by adding at the end the 
        following:
            ``(8) Limitation on expenditures for marketing 
        activities.--Amounts expended by a State for the use of an 
        administrative vendor in marketing health benefits coverage to 
        low-income children under this title shall not be considered, 
        for purposes of subsection (a)(2)(D), to be reasonable costs to 
        administer the plan unless the following conditions are met 
        with respect to the vendor:
                    ``(A) The vendor is independent of any entity 
                offering the coverage in the same area of the State in 
                which the vendor is conducting marketing activities.
                    ``(B) No person who is an owner, employee, 
                consultant, or has a contract with the vendor either 
                has any direct or indirect financial interest with such 
                an entity or has been excluded from participation in 
                the program under this title or title XVIII or XIX or 
                debarred by any Federal agency, or subject to a civil 
                money penalty under this Act.''.
    (b) Prohibition of Affiliation With Debarred Individuals.--
            (1) Medicaid.--Section 1903(i) of the Social Security Act 
        (42 U.S.C. 1396b(i))is amended--
                    (A) by striking the period at the end of paragraph 
                (20) and inserting ``; or''; and
                    (B) by inserting after paragraph (20) the 
                following:
            ``(21) with respect to any amounts expended for an entity 
        that receives payments under the plan unless--
                    ``(A) no person with an ownership or control 
                interest (as defined in section 1124(a)(3)) in the 
                entity is a person that is debarred, suspended, or 
                otherwise excluded from participating in procurement or 
                non-procurement activities under the Federal 
                Acquisition Regulation; and
                    ``(B) such entity has not entered into an 
                employment, consulting, or other agreement for the 
                provision of items or services that are material to 
                such entity's obligations under the plan with a person 
                described in subparagraph (A).''.
            (2) Title xxi.--Section 2107(e)(1) of the Social Security 
        Act (42 U.S.C. 1397gg(e)(1)) is amended--
                    (A) in subparagraph (B), by striking ``and (17)'' 
                and inserting ``(17), and (21)''; and
                    (B) by adding at the end the following:
                    ``(E) Section 1902(a)(67) (relating to prohibition 
                of affiliation with debarred individuals).''.
    (c) Effective Date.--The amendments made by this section shall 
apply to expenditures made on or after October 1, 2002, whether or not 
regulations implementing such amendments have been issued.

SEC. 217. TECHNICAL AND CONFORMING AMENDMENTS TO AUTHORITY TO PAY 
              MEDICAID EXPANSION COSTS FROM TITLE XXI APPROPRIATION.

    (a) Authority To Pay Medicaid Expansion Costs From Title XXI 
Appropriation.--Section 2105(a) of the Social Security Act (42 U.S.C. 
1397ee(a)) is amended to read as follows:
    ``(a) Allowable Expenditures.--
            ``(1) In general.--Subject to the succeeding provisions of 
        this section, the Secretary shall pay to each State with a plan 
        approved under this title, from its allotment under section 
        2104, an amount for each quarter equal to the enhanced FMAP of 
        the following expenditures in the quarter:
                    ``(A) Child health assistance under medicaid.--
                Expenditures for child health assistance under the plan 
                for targeted low-income children in the form of 
                providing medical assistance for expenditures described 
                in the fourth sentence of section 1905(b).
                    ``(B) Reserved.--[reserved].
                    ``(C) Child health assistance under this title.--
                Expenditures for child health assistance under the plan 
                for targeted low-income children in the form of 
                providing health benefits coverage that meets the 
                requirements of section 2103.
                    ``(D) Assistance and administrative expenditures 
                subject to limit.--Expenditures only to the extent 
                permitted consistent with subsection (c)--
                            ``(i) for other child health assistance for 
                        targeted low-income children;
                            ``(ii) for expenditures for health services 
                        initiatives under the plan for improving the 
                        health of children (including targeted low-
                        income children and other low-income children);
                            ``(iii) for expenditures for outreach 
                        activities as provided in section 2102(c)(1) 
                        under the plan; and
                            ``(iv) for other reasonable costs incurred 
                        by the State to administer the plan.
            ``(2) Order of payments.--Payments under a subparagraph of 
        paragraph (1) from a State's allotment for expenditures 
        described in each such subparagraph shall be made on a 
        quarterly basis in the order of such subparagraph in such 
        paragraph.
            ``(3) No duplicative payment.--In the case of expenditures 
        for which payment is made under paragraph (1), no payment shall 
        be made under title XIX.''.
    (b) Conforming Amendments.--
            (1) Section 1905(u).--Section 1905(u)(1)(B) of the Social 
        Security Act (42 U.S.C. 1396d(u)(1)(B)) is amended by inserting 
        ``and section 2105(a)(1)'' after ``subsection (b)''.
            (2) Section 2105(c).--Section 2105(c)(2)(A) of the Social 
        Security Act (42 U.S.C. 1397ee(c)(2)(A)) is amended by striking 
        ``subparagraphs (A), (C), and (D) of''.
    (c) Effective Date.--The amendments made by this section shall be 
effective as if included in the enactment of the Balanced Budget Act of 
1997 (Public Law 105-33; 111 Stat. 251), whether or not regulations 
implementing such amendments have been issued.

                   Subtitle C--Simplified Enrollment

SEC. 221. AUTOMATIC ENROLLMENT OF CHILDREN BORN TO TITLE XXI PARENTS.

    Section 2102(b)(1) of the Social Security Act (42 U.S.C. 
1397bb(b)(1)) is amended by adding at the end the following:
                    ``(C) Automatic eligibility of children born to a 
                parent being provided familycare.--Such eligibility 
                standards shall provide for automatic coverage of a 
                child born to an individual who is provided assistance 
                under this title in the same manner as 
medical assistance would be provided under section 1902(e)(4) to a 
child described in such section.''.

SEC. 222. APPLICATION OF SIMPLIFIED TITLE XXI PROCEDURES UNDER THE 
              MEDICAID PROGRAM.

    (a) Application Under Medicaid.--
            (1) In general.--Section 1902(l) of the Social Security Act 
        (42 U.S.C. 1396a(l)) is amended--
                    (A) in paragraph (3), by inserting ``subject to 
                paragraph (5)'', after ``Notwithstanding subsection 
                (a)(17),''; and
                    (B) by adding at the end the following:
    ``(5) With respect to determining the eligibility of individuals 
under 19 years of age (or such higher age as the State has elected 
under paragraph (1)(D)) for medical assistance under subsection 
(a)(10)(A) and, separately, with respect to determining the eligibility 
of individuals for medical assistance under subsection 
(a)(10)(A)(i)(VIII) or (a)(10)(A)(ii)(XIX), notwithstanding any other 
provision of this title, if the State has established a State child 
health plan under title XXI--
            ``(A) the State may not apply a resource standard;
            ``(B) the State shall use the same simplified eligibility 
        form (including, if applicable, permitting application other 
        than in person) as the State uses under such State child health 
        plan with respect to such individuals;
            ``(C) the State shall provide for initial eligibility 
        determinations and redeterminations of eligibility using 
        verification policies, forms, and frequency that are no less 
        restrictive than the policies, forms, and frequency the State 
        uses for such purposes under such State child health plan with 
        respect to such individuals; and
            ``(D) the State shall not require a face-to-face interview 
        for purposes of initial eligibility determinations and 
        redeterminations unless the State requires such an interview 
        for such purposes under such child health plan with respect to 
        such individuals.''.
            (2) Effective date.--The amendments made by paragraph (1) 
        apply to determinations of eligibility made on or after the 
        date that is 1 year after the date of enactment of this Act, 
        whether or not regulations implementing such amendments have 
        been issued.
    (b) Presumptive Eligibility.--
            (1) In general.--Section 1920A(b)(3)(A)(i) of the Social 
        Security Act (42 U.S.C. 1396r-1a(b)(3)(A)(i)) is amended by 
        inserting ``a child care resource and referral agency,'' after 
        ``a State or tribal child support enforcement agency,''.
            (2) Application to presumptive eligibility for pregnant 
        women under medicaid.--Section 1920(b) of the Social Security 
        Act (42 U.S.C. 1396r-1(b)) is amended by adding at the end 
        after and below paragraph (2) the following flush sentence:
``The term `qualified provider' includes a qualified entity as defined 
in section 1920A(b)(3).''.
            (3) Application under title xxi.--
                    (A) In general.--Section 2107(e)(1)(D) of the 
                Social Security Act (42 U.S.C. 1397gg(e)(1)) is amended 
                to read as follows:
                    ``(D) Sections 1920 and 1920A (relating to 
                presumptive eligibility).''.
                    (B) Conforming elimination of resource test.--
                Section 2102(b)(1)(A) of such Act (42 U.S.C. 
                1397bb(b)(1)(A)) is amended--
                            (i) by striking `` and resources (including 
                        any standards relating to spenddowns and 
                        disposition of resources)''; and
                            (ii) by adding at the end the following: 
                        ``Effective 1 year after the date of enactment 
                        of the Access to Affordable Health Care Act, 
                        such standards may not include the application 
                        of a resource standard or test.''.
    (c) Automatic Reassessment of Eligibility for Title XXI and 
Medicaid Benefits for Children Losing Medicaid or Title XXI 
Eligibility.--
            (1) Loss of medicaid eligibility.--Section 1902(a) of the 
        Social Security Act (42 U.S.C. 1396a(a)) is amended--
                    (A) by striking the period at the end of paragraph 
                (65) and inserting ``; and'', and
                    (B) by inserting after paragraph (65) the 
                following:
            ``(66) provide, in the case of a State with a State child 
        health plan under title XXI, that before medical assistance to 
        a child (or a parent of a child) is discontinued under this 
        title, a determination of whether the child (or parent) is 
        eligible for benefits under title XXI shall be made and, if 
        determined to be so eligible, the child (or parent) shall be 
        automatically enrolled in the program under such title without 
        the need for a new application.''.
            (2) Loss of title xxi eligibility and coordination with 
        medicaid.--Section 2102(b) (42 U.S.C. 1397bb(b)) is amended--
                    (A) in paragraph (3), by redesignating 
                subparagraphs (D) and (E) as subparagraphs (E) and (F), 
                respectively, and by inserting after subparagraph (C) 
                the following:
                    ``(D) that before health assistance to a child (or 
                a parent of a child) is discontinued under this title, 
                a determination of whether the child (or parent) is 
                eligible for benefits under title XIX is made and, if 
                determined to be so eligible, the child (or parent) is 
                automatically enrolled in the program under such title 
                without the need for a new application;'';
                    (B) by redesignating paragraph (4) as paragraph 
                (5); and
                    (C) by inserting after paragraph (3) the following 
                new paragraph:
            ``(4) Coordination with medicaid.--The State shall 
        coordinate the screening and enrollment of individuals under 
        this title and under title XIX consistent with the following:
                    ``(A) Information that is collected under this 
                title or under title XIX which is needed to make an 
eligibility determination under the other title shall be transmitted to 
the appropriate administering entity under such other title in a timely 
manner so that coverage is not delayed and families do not have to 
submit the same information twice. Families shall be provided the 
information they need to complete the application process for coverage 
under both titles and be given appropriate notice of any determinations 
made on their applications for such coverage.
                    ``(B) If a State does not use a joint application 
                under this title and such title, the State shall--
                            ``(i) promptly inform a child's parent or 
                        caretaker in writing and, if appropriate, 
                        orally, that a child has been found likely to 
                        be eligible under title XIX;
                            ``(ii) provide the family with an 
                        application for medical assistance under such 
                        title and offer information about what (if any) 
                        further information, documentation, or other 
                        steps are needed to complete such application 
                        process;
                            ``(iii) offer assistance in completing such 
                        application process; and
                            ``(iv) promptly transmit the separate 
                        application under this title or the information 
                        obtained through such application, and all 
                        other relevant information and documentation, 
                        including the results of the screening process, 
                        to the State agency under title XIX for a final 
                        determination on eligibility under such title.
                    ``(C) Applicants are notified in writing of--
                            ``(i) benefits (including restrictions on 
                        cost-sharing) under title XIX; and
                            ``(ii) eligibility rules that prohibit 
                        children who have been screened eligible for 
                        medical assistance under such title from being 
                        enrolled under this title, other than 
                        provisional temporary enrollment while a final 
                        eligibility determination is being made under 
                        such title.
                    ``(D) If the agency administering this title is 
                different from the agency administering a State plan 
                under title XIX, such agencies shall coordinate the 
                screening and enrollment of applicants for such 
                coverage under both titles.
                    ``(E) The coordination procedures established 
                between the program under this title and under title 
                XIX shall apply not only to the initial eligibility 
                determination of a family but also to any renewals or 
                redeterminations of such eligibility.''.
            (3) Effective date.--The amendments made by paragraphs (1) 
        and (2) apply to individuals who lose eligibility under the 
        medicaid program under title XIX, or under a State child health 
        insurance plan under title XXI, respectively, of the Social 
        Security Act on or after October 1, 2002 (or, if later, 60 days 
        after the date of enactment of this Act), whether or not 
        regulations implementing such amendments have been issued.
    (d) Provision of Medicaid and CHIP Applications and Information 
Under the School Lunch Program.--Section 9(b)(2)(B) of the Richard B. 
Russell National School Lunch Act (42 U.S.C. 1758(b)(2)(B)) is 
amended--
            (1) by striking ``(B) Applications'' and inserting ``(B)(i) 
        Applications''; and
            (2) by adding at the end the following:
    ``(ii)(I) Applications for free and reduced price lunches that are 
distributed pursuant to clause (i) to parents or guardians of children 
in attendance at schools participating in the school lunch program 
under this Act shall also contain information on the availability of 
medical assistance under title XIX of the Social Security Act (42 
U.S.C. 1396 et seq.) and of child health and FamilyCare assistance 
under title XXI of such Act, including information on how to obtain an 
application for assistance under such programs.
    ``(II) Information on the programs referred to in subclause (I) 
shall be provided on a form separate from the application form for free 
and reduced price lunches under clause (i).''.
    (e) 12-Months Continuous Eligibility.--
            (1) Medicaid.--Section 1902(e)(12) of the Social Security 
        Act (42 U.S.C. 1396a(e)(12)) is amended--
                    (A) by striking ``At the option of the State, the 
                plan may'' and inserting ``The plan shall'';
                    (B) by striking ``an age specified by the State 
                (not to exceed 19 years of age)'' and inserting ``19 
                years of age (or such higher age as the State has 
                elected under subsection (l)(1)(D)) or, at the option 
                of the State, who is eligible for medical assistance as 
                the parent of such a child''; and
                    (C) in subparagraph (A), by striking ``a period 
                (not to exceed 12 months)'' and inserting ``the 12-
                month period beginning on the date''.
            (2) Title xxi.--Section 2102(b)(2) of such Act (42 U.S.C. 
        1397bb(b)(2)) is amended by adding at the end the following: 
        ``Such methods shall provide 12-months continuous eligibility 
        for children under this title in the same manner that section 
        1902(e)(12) provides 12-months continuous eligibility for 
        children described in such section under title XIX. If a State 
        has elected to apply section 1902(e)(12) to parents, such 
        methods may provide 12-months continuous eligibility for 
        parents under this title in the same manner that such section 
        provides 12-months continuous eligibility for parents described 
        in such section under title XIX.''.
            (3) Effective date.--
                    (A) In general.--The amendments made by this 
                subsection take effect on October 1, 2002 (or, if 
                later, 60 days after the date of enactment of this 
                Act), whether or not regulations implementing such 
amendments have been issued.

SEC. 223. ELIMINATION OF 100 HOUR RULE AND OTHER AFDC-RELATED 
              ELIGIBILITY RESTRICTIONS.

    (a) In General.--Section 1931(b)(1)(A)(ii) of the Social Security 
Act (42 U.S.C. 1396u-1(b)(1)(A)(ii)) is amended by inserting ``other 
than the requirement that the child be deprived of parental support or 
care by reason of the death, continued absence from the home, 
incapacity, or unemployment of a parent,'' after ``section 407(a),''.
    (b) Conforming Amendment.--Section 1905(a) of the Social Security 
Act (42 U.S.C. 1396d(a)) is amended, in the matter before paragraph 
(1), in clause (ii), by striking ``if such child is (or would, if 
needy, be) a dependent child under part A of title IV''.
    (c) Effective Date.--The amendments made by this section apply to 
eligibility determinations made on or after October 1, 2002, whether or 
not regulations implementing such amendments have been issued.

Subtitle D--State Option to Provide Coverage of Legal Immigrants Under 
                           Medicaid and SCHIP

SEC. 231. OPTIONAL COVERAGE OF LEGAL IMMIGRANTS UNDER THE MEDICAID 
              PROGRAM AND TITLE XXI.

    (a) Medicaid Program.--Section 1903(v) of the Social Security Act 
(42 U.S.C. 1396b(v)) is amended--
            (1) in paragraph (1), by striking ``paragraph (2)'' and 
        inserting ``paragraphs (2) and (4)''; and
            (2) by adding at the end the following:
    ``(4)(A) A State may elect (in a plan amendment under this title) 
to provide medical assistance under this title, notwithstanding 
sections 401(a), 402(b), 403, and 421 of the Personal Responsibility 
and Work Opportunity Reconciliation Act of 1996, for aliens who are 
lawfully residing in the United States (including battered aliens 
described in section 431(c) of such Act) and who are otherwise eligible 
for such assistance, within any of the following eligibility 
categories:
            ``(i) Pregnant women.--Women during pregnancy (and during 
        the 60-day period beginning on the last day of the pregnancy).
            ``(ii) Children.--Children (as defined under such plan), 
        including optional targeted low-income children described in 
        section 1905(u)(2)(B).
            ``(iii) Parents.--If the State has elected the eligibility 
        category described in clause (ii), caretaker relatives who are 
        parents (including individuals treated as a caregiver for 
        purposes of carrying out section 1931) of children (described 
        in such clause or otherwise) who are eligible for medical 
        assistance under the plan.
    ``(B) In the case of a State that has elected to provide medical 
assistance to a category of aliens under subparagraph (A), no debt 
shall accrue under an affidavit of support against any sponsor of such 
an alien on the basis of provision of assistance to such category and 
the cost of such assistance shall not be considered as an unreimbursed 
cost.''.
    (b) Title XXI.--Section 2107(e)(1) of the Social Security Act (42 
U.S.C. 1397gg(e)(1)), as amended by section 216(b)(2), is amended by 
adding at the end the following:
                    ``(F) Section 1903(v)(4) (relating to optional 
                coverage of categories of lawful resident alien 
                children and parents), but only with respect to an 
                eligibility category under this title, if the same 
                eligibility category has been elected under such 
                section for purposes of title XIX.''.
    (c) Effective Date.--The amendments made by this section take 
effect on October 1, 2002, and apply to medical assistance and child 
health assistance furnished on or after such date, whether or not 
regulations implementing such amendments have been issued.

  Subtitle E--State Option to Extend Medicaid Coverage to Certain Low-
                           Income Individuals

SEC. 241. STATE OPTION TO EXTEND MEDICAID COVERAGE TO CERTAIN LOW-
              INCOME INDIVIDUALS.

    (a) State Option.--Section 1902(a)(10)(A)(ii) of the Social 
Security Act (42 U.S.C. 1396a(a)(10)(A)(ii)), as amended by section 
212(a)(1)(A), is amended--
            (1) by striking ``or'' at the end of subclause (XVIII);
            (2) by adding ``or'' at the end of subclause (XIX); and
            (3) by adding at the end the following:
                                    ``(XX) who are individuals who are 
                                not otherwise eligible for medical 
                                assistance under this subparagraph, or 
                                under a waiver approved under section 
                                1115, or otherwise, as of the date of 
                                enactment of this subclause and whose 
                                family income does not exceed 125 
                                percent of the income official poverty 
                                line (as defined by the Office of 
                                Management and Budget and revised 
                                annually in accordance with section 
                                673(2) of the Omnibus Budget 
                                Reconciliation Act of 1981) applicable 
                                to a family of the size involved;''.
    (b) Conforming Amendments.--
            (1) Medical assistance eligibility categories.--Section 
        1905(a) of such Act (42 U.S.C. 1396d(a)), as amended by section 
        212(e)(1), is amended in the matter preceding paragraph (1)--
                            (i) by striking ``or'' at the end of clause 
                        (xiii);
                            (ii) by adding ``or'' at the end of clause 
                        (xiv); and
                            (iii) by inserting after clause (xiv) the 
                        following:
            ``(xv) who are individuals described in section 
        1902(a)(10)(A)(ii)(XIX),''.
            (2) Exemption from upper income limitation.--Section 
        1903(f)(4) of such Act (42 U.S.C. 1396b(f)(4)), as amended by 
        section 212(e)(2)(B), is amended by inserting 
``1902(a)(10)(A)(ii)(XX),'' after ``1902(a)(10)(A)(ii)(XIX),''.
    (c) Effective Dates.--The amendments made by this subsection take 
effect on October 1, 2002.

    Subtitle F--Improving Welfare-to-Work Transition Under Medicaid

SEC. 251. IMPROVING WELFARE-TO-WORK TRANSITION UNDER MEDICAID.

    (a) Making Provision Permanent.--
            (1) In general.--Subsection (f) of section 1925 of the 
        Social Security Act (42 U.S.C. 1396r-6) is repealed.
            (2) Conforming amendment.--Section 1902(e)(1) of the Social 
        Security Act (42 U.S.C. 1396a(e)(1)) is repealed.
    (b) State Option of Initial 12-Month Eligibility.--Section 1925 of 
the Social Security Act (42 U.S.C. 1396r-6) is amended--
            (1) in subsection (a), by adding at the end the following:
            ``(5) Option of 12-month initial eligibility period.--A 
        State may elect to treat any reference in this subsection to a 
        6-month period (or 6 months) as a reference to a 12-month 
        period (or 12 months). In the case of such an election, 
        subsection (b) shall not apply.''; and
            (2) in subsection (b)(1), by inserting ``and subsection 
        (a)(5)'' after ``paragraph (3)''.
    (c) Simplification.--
            (1) Removal of administrative reporting requirements for 
        additional 6-month extension.--Section 1925(b)(2) of the Social 
        Security Act (42 U.S.C. 1396r-6(b)(2)) is amended--
                    (A) by striking subparagraph (B);
                    (B) in subparagraph (A)(i)--
                            (i) in the heading, by striking ``and 
                        requirements'';
                            (ii) by striking ``(I)'' and all that 
                        follows through ``(II)'' and inserting ``(i)'';
                            (iii) by striking ``, and (III)'' and 
                        inserting ``and (ii)'';
                            (iv) by redesignating such subparagraph as 
                        subparagraph (A) (with appropriate 
                        indentation); and
                    (C) in subparagraph (A)(ii)--
                            (i) in the heading, by striking ``reporting 
                        requirements and'';
                            (ii) by striking ``notify the family of the 
                        reporting requirement under subparagraph 
                        (B)(ii) and'' and inserting ``provide the 
                        family with notification of''; and
                            (iii) by redesignating such subparagraph as 
                        subparagraph (B) (with appropriate 
                        indentation).
            (2) Removal of requirement for previous receipt of medical 
        assistance.--Section 1925(a)(1) of the Social Security Act (42 
        U.S.C. 1396r-6(a)(1)) is amended--
                    (A) by inserting ``but subject to subparagraph 
                (B)'' after ``any other provision of this title'';
                    (B) by redesignating the matter after 
                ``Requirement.--'' as a subparagraph (A) with the 
                heading ``In general.--'' and with the same indentation 
                as subparagraph (B) (as added by subparagraph (C)); and
                    (C) by adding at the end the following:
                    ``(B) State option to waive requirement for 3 
                months previous receipt of medical assistance.--A State 
                may, at its option, elect also to apply subparagraph 
                (A) in the case of a family that had applied for and 
                was eligible for such aid for fewer than 3 months 
                during the 6 immediately preceding months described in 
                such subparagraph.''.
            (3) Permitting increase or waiver of 185 percent of poverty 
        earning limit.--Section 1925(b)(3)(A)(iii)(III) of the Social 
        Security Act (42 U.S.C. 1396r-6(b)(3)(A)(iii)(III)) is 
        amended--
                    (A) by inserting ``(at its option)'' after ``the 
                State''; and
                    (B) by inserting ``(or such higher percent as the 
                State may specify)'' after ``185 percent''.
            (4) Exemption for states covering needy families up to 185 
        percent of poverty.--Section 1925 of the Social Security Act 
        (42 U.S.C. 1396r-6), as amended by subsection (a), is amended--
                    (A) in each of subsections (a)(1) and (b)(1), by 
                inserting ``but subject to subsection (f),'' after 
                ``Notwithstanding any other provision of this title,''; 
                and
                    (B) by adding at the end the following:
    ``(f) Exemption for State Covering Needy Families up to 185 Percent 
of Poverty.--
            ``(1) In general.--At State option, the provisions of this 
        section shall not apply to a State that uses the authority 
        under section 1902(a)(10)(A)(ii)(XIX), section 1931(b)(2)(C), 
        or otherwise to make medical assistance available under the 
        State plan under this title to eligible individuals described 
        in section 1902(k)(1), or all individuals described in section 
        1931(b)(1), and who are in families with gross incomes 
        (determined without regard to work-related child care expenses 
        of such individuals) at or below 185 percent of the income 
        official poverty line (as defined by the Office of Management 
        and Budget, and revised annually in accordance with section 
        673(2) of the Omnibus Budget Reconciliation Act of 1981) 
        applicable to a family of the size involved.
            ``(2) Application to other provisions of this title.--The 
        State plan of a State described in paragraph (1) shall be 
        deemed to meet the requirements of section 
        1902(a)(10)(A)(i)(I).''.
    (d) Effective Date.--The amendments made by this section take 
effect on October 1, 2002, whether or not regulations implementing such 
amendments have been issued.

   Subtitle G--Demonstration Programs to Improve Medicaid and SCHIP 
             Outreach to Homeless Individuals and Families

SEC. 261. DEMONSTRATION PROGRAMS TO IMPROVE MEDICAID AND SCHIP OUTREACH 
              TO HOMELESS INDIVIDUALS AND FAMILIES.

    (a) Authority.--The Secretary of Health and Human Services may 
award demonstration grants to not more than 7 States (or other 
qualified entities) to conduct innovative programs that are designed to 
improve outreach to homeless individuals and families under the 
programs described in subsection (b) with respect to enrollment of such 
individuals and families under such programs and the provision of 
services (and coordinating the provision of such services) under such 
programs.
    (b) Programs for Homeless Described.--The programs described in 
this subsection are as follows:
            (1) Medicaid.--The program under title XIX of the Social 
        Security Act (42 U.S.C. 1396 et seq.).
            (2) CHIP.--The program under title XXI of the Social 
        Security Act (42 U.S.C. 1397aa et seq.).
            (3) TANF.--The program under part of A of title IV of the 
        Social Security Act (42 U.S.C. 601 et seq.).
            (4) SAMHSA block grants.--The program of grants under part 
        B of title XIX of the Public Health Service Act (42 U.S.C. 
        300x-1 et seq.).
            (5) Food stamp program.--The program under the Food Stamp 
        Act of 1977 (7 U.S.C. 2011 et seq.).
            (6) Workforce investment act.--The program under the 
        Workforce Investment Act of 1999 (29 U.S.C. 2801 et seq.).
            (7) Welfare-to-work.--The welfare-to-work program under 
        section 403(a)(5) of the Social Security Act (42 U.S.C. 
        603(a)(5)).
            (8) Other programs.--Other public and private benefit 
        programs that serve low-income individuals.
    (c) Appropriations.--For the purposes of carrying out this section, 
there is appropriated for fiscal year 2003, out of any funds in the 
Treasury not otherwise appropriated, $10,000,000, to remain available 
until expended.

                      Subtitle H--High Risk Pools

SEC. 271. PROMOTION OF STATE HIGH RISK POOLS.

    Title XXVII of the Public Health Service Act is amended by 
inserting after section 2744 (42 U.S.C. 300gg-44) the following:

``SEC. 2745. PROMOTION OF QUALIFIED HIGH RISK POOLS.

    ``(a) Seed Grants to States.--From amounts appropriate under 
subsection (c)(1), the Secretary shall award a grant of up to 
$1,000,000 to each State that has not created a qualified high risk 
pool as of the date of the enactment of this section for the State's 
costs of the creation and initial operation of such a pool.
    ``(b) Matching Funds for Operation of Pools.--
            ``(1) In general.--In the case of a State that has 
        established a qualified high risk pool that restricts premiums 
        charged under the pool to no more than 150 percent of the 
        premium for applicable standard risk rates and that offers a 
        choice of two or more coverage options through the pool, from 
        the amounts appropriated under subsection (c)(2) and allotted 
        to the State under paragraph (2), the Secretary shall provide a 
        grant to such State in an amount that does not exceed 50 
        percent of the losses incurred by the State in connection with 
        the operation of the pool.
            ``(2) Allotment.--The amount appropriated under subsection 
        (c)(2) for a fiscal year shall be made available to the States 
        in accordance with a formula that is developed by the Secretary 
        based upon the number of uninsured individuals in the States.
            ``(3) Construction.--Nothing in this subsection shall be 
        construed as preventing a State from supplementing the funds 
        made available under this subsection for the support and 
        operation of a qualified high risk pool.
    ``(c) Authorization of Appropriations.--There is authorized to be 
appropriated to carry out this section--
            ``(1) $20,000,000 for fiscal year 2002 to carry out 
        subsection (a); and
            ``(2) $40,000,000 for each of fiscal years 2002 and 2003.
Amounts appropriated under this subsection for a fiscal year shall 
remain available for obligation through the end of the following fiscal 
year.
    ``(d) Limitation.--Nothing in this section shall be construed as 
providing a State with an entitlement to a grant under this section.
    ``(e) Definitions.--In this section:
            ``(1) Qualified high risk pool.--The term `qualified high 
        risk pool' has the meaning given such term in section 
        2744(c)(2);
            ``(2) State.--The term `State' means any of the 50 States 
        and the District of Columbia.''.

          TITLE III--STRENGTHENING THE HEALTH CARE SAFETY NET

SEC. 301. INCREASE IN FUNDING FOR THE CONSOLIDATED HEALTH CENTERS 
              PROGRAM.

    It is the sense of the Senate that the amounts appropriated for 
consolidated health centers under section 330 of the Public Health 
Service Act (42 U.S.C. 254b) should be doubled over the 5-fiscal year 
period beginning with fiscal year 2003.

 TITLE IV--EXPANSION OF ACCESS TO HEALTH CARE IN RURAL AND UNDERSERVED 
                                 AREAS

               Subtitle A--National Health Service Corps

SEC. 401. EXPANSION OF FUNDING.

    It is the sense of the Senate that the amounts appropriated for 
National Health Service Corps under subpart II of part D of title III 
of the Public Health Service Act (42 U.S.C. 254d et seq.) should be 
doubled over the 5-fiscal year period beginning with fiscal year 2003 
to assist in provide support for physicians, dentists, and other health 
care clinicians who serve in rural and inner city areas.

SEC. 402. LOAN REPAYMENT AND SCHOLARSHIP PROGRAMS.

    Section 338C of the Public Health Service Act (42 U.S.C. 254m) is 
amended by adding at the end the following:
    ``(f) Notwithstanding any other provision of this title, periods of 
obligated service may be served and fulfilled on a part time basis if--
            ``(1) such part time service is agreed to by both the 
        placement site or sites and the recipient of the scholarship or 
        loan repayment; and
            ``(2) the recipient's total obligation is fulfilled.''.

   Subtitle B--Tax Exclusion for National Health Service Corps Loan 
                          Repayment Recipients

SEC. 411. EXCLUSION FOR LOAN PAYMENTS UNDER NATIONAL HEALTH SERVICE 
              CORPS LOAN REPAYMENT PROGRAM.

    (a) In General.--Section 117 of the Internal Revenue Code of 1986 
is amended by adding at the end the following new subsection:
    ``(e) Loan Payments Under National Health Service Corps Loan 
Repayment Program.--Gross income shall not include any amount received 
under section 338B(g) of the Public Health Service Act.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to amounts received by an individual in taxable years beginning 
after December 31, 2001.

         TITLE V--EXPANDED ACCESS TO AFFORDABLE LONG TERM CARE

SEC. 501. TREATMENT OF PREMIUMS ON QUALIFIED LONG-TERM CARE INSURANCE 
              CONTRACTS.

    (a) In General.--Part VII of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 (relating to additional itemized 
deductions) is amended by redesignating section 223 as section 224 and 
by inserting after section 221 the following new section:

``SEC. 223. PREMIUMS ON QUALIFIED LONG-TERM CARE INSURANCE CONTRACTS.

    ``(a) In General.--In the case of an individual, there shall be 
allowed as a deduction an amount equal to the applicable percentage of 
the amount of eligible long-term care premiums (as defined in section 
213(d)(10)) paid during the taxable year for coverage for the taxpayer, 
his spouse, and dependents under a qualified long-term care insurance 
contract (as defined in section 7702B(b)).
    ``(b) Applicable Percentage.--For purposes of subsection (a)--
            ``(1) In general.--Except as otherwise provided in this 
        subsection, the applicable percentage shall be determined in 
        accordance with the following table based on the number of 
        years of continuous coverage (as of the close of the taxable 
        year) of the individual under any qualified long-term care 
        insurance contracts (as defined in section 7702B(b)):

                ``If the number of years of
                                               The applicable long-term
                  continuous coverage is--
                                                 care percentage is--  
                    Less than 1............................      60    
                    At least 1 but less than 2.............      70    
                    At least 2 but less than 3.............      80    
                    At least 3 but less than 4.............      90    
                    At least 4.............................    100.    
            ``(2) Special rules for individuals who have attained age 
        55.--In the case of an individual who has attained age 55 as of 
        the close of the taxable year, the following table shall be 
        substituted for the table in paragraph (1).

                ``If the number of years of
                                               The applicable long-term
                  continuous coverage is--
                                                 care percentage is--  
                    Less than 1............................      70    
                    At least 1 but less than 2.............      85    
                    At least 2.............................    100.    
            ``(3) Only coverage after 2001 taken into account.--Only 
        coverage for periods after December 31, 2001, shall be taken 
        into account under this subsection.
            ``(4) Continuous coverage.--An individual shall not fail to 
        be treated as having continuous coverage if the aggregate 
        breaks in coverage during any 1-year period are less than 60 
        days.
    ``(c) Coordination With Other Deductions.--Any amount paid by a 
taxpayer for any qualified long-term care insurance contract to which 
subsection (a) applies shall not be taken into account in computing the 
amount allowable to the taxpayer as a deduction under section 162(l) or 
213(a).''.
    (b) Long-Term Care Insurance Permitted To Be Offered Under 
Cafeteria Plans and Flexible Spending Arrangements.--
            (1) Cafeteria plans.--Section 125(f) of the Internal 
        Revenue Code of 1986 (defining qualified benefits) is amended 
        by inserting before the period at the end ``; except that such 
        term shall include the payment of premiums for any qualified 
        long-term care insurance contract (as defined in section 7702B) 
        to the extent the amount of such payment does not exceed the 
        eligible long-term care premiums (as defined in section 
        213(d)(10)) for such contract''.
            (2) Flexible spending arrangements.--Section 106 of such 
        Code (relating to contributions by an employer to accident and 
        health plans) is amended by striking subsection (c).
    (c) Conforming Amendments.--
            (1) Section 62(a) of the Internal Revenue Code of 1986 is 
        amended by inserting after paragraph (18) the following new 
        item:
            ``(19) Premiums on qualified long-term care insurance 
        contracts.--The deduction allowed by section 223.''.
            (2) The table of sections for part VII of subchapter B of 
        chapter 1 of such Code is amended by striking the last item and 
        inserting the following new items:

                              ``Sec. 223. Premiums on qualified long-
                                        term care insurance contracts.
                              ``Sec. 224. Cross reference.''.
    (d) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to taxable years 
        beginning after December 31, 2001.
            (2) Cafeteria plans and flexible spending arrangements.--
        The amendments made by subsection (b) shall apply to taxable 
        years beginning after December 31, 2002.

SEC. 502. CREDIT FOR TAXPAYERS WITH LONG-TERM CARE NEEDS.

    (a) In General.--Subpart A of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to nonrefundable 
personal credits) is amended by inserting after section 25B the 
following new section:

``SEC. 25C. CREDIT FOR TAXPAYERS WITH LONG-TERM CARE NEEDS.

    ``(a) Allowance of Credit.--
            ``(1) In general.--There shall be allowed as a credit 
        against the tax imposed by this chapter for the taxable year an 
        amount equal to the applicable credit amount multiplied by the 
        number of applicable individuals with respect to whom the 
        taxpayer is an eligible caregiver for the taxable year.
            ``(2) Applicable credit amount.--For purposes of paragraph 
        (1), the applicable credit amount shall be determined in 
        accordance with the following table:

        ``For taxable years beginning
                                                         The applicable
          in calendar year--
                                                     credit amount is--
            2002...........................................  $1,000    
            2003...........................................   1,500    
            2004...........................................   2,000    
            2005...........................................   2,500    
            2006 or thereafter.............................  3,000.    
    ``(b) Limitation Based on Adjusted Gross Income.--
            ``(1) In general.--The amount of the credit allowable under 
        subsection (a) shall be reduced (but not below zero) by $100 
        for each $1,000 (or fraction thereof) by which the taxpayer's 
        modified adjusted gross income exceeds the threshold amount. 
        For purposes of the preceding sentence, the term `modified 
        adjusted gross income' means adjusted gross income increased by 
        any amount excluded from gross income under section 911, 931, 
        or 933.
            ``(2) Threshold amount.--For purposes of paragraph (1), the 
        term `threshold amount' means--
                    ``(A) $150,000 in the case of a joint return, and
                    ``(B) $75,000 in any other case.
            ``(3) Indexing.--In the case of any taxable year beginning 
        in a calendar year after 2002, each dollar amount contained in 
        paragraph (2) shall be increased by an amount equal to the 
        product of--
                    ``(A) such dollar amount, and
                    ``(B) the medical care cost adjustment determined 
                under section 213(d)(10)(B)(ii) for the calendar year 
                in which the taxable year begins, determined by 
                substituting `August 2001' for `August 1996' in 
                subclause (II) thereof.
        If any increase determined under the preceding sentence is not 
        a multiple of $50, such increase shall be rounded to the next 
        lowest multiple of $50.
    ``(c) Definitions.--For purposes of this section--
            ``(1) Applicable individual.--
                    ``(A) In general.--The term `applicable individual' 
                means, with respect to any taxable year, any individual 
                who has been certified, before the due date for filing 
                the return of tax for the taxable year (without 
                extensions), by a physician (as defined in section 
                1861(r)(1) of the Social Security Act) as being an 
                individual with long-term care needs described in 
                subparagraph (B) for a period--
                            ``(i) which is at least 180 consecutive 
                        days, and
                            ``(ii) a portion of which occurs within the 
                        taxable year.
                Such term shall not include any individual otherwise 
                meeting the requirements of the preceding sentence 
                unless within the 39\1/2\ month period ending on such 
                due date (or such other period as the Secretary 
                prescribes) a physician (as so defined) has certified 
                that such individual meets such requirements.
                    ``(B) Individuals with long-term care needs.--An 
                individual is described in this subparagraph if the 
                individual meets any of the following requirements:
                            ``(i) The individual is at least 6 years of 
                        age and--
                                    ``(I) is unable to perform (without 
                                substantial assistance from another 
                                individual) at least 3 activities of 
                                daily living (as defined in section 
                                7702B(c)(2)(B)) due to a loss of 
                                functional capacity, or
                                    ``(II) requires substantial 
                                supervision to protect such individual 
                                from threats to health and safety due 
                                to severe cognitive impairment and is 
                                unable to perform, without reminding or 
                                cuing assistance, at least 1 activity 
                                of daily living (as so defined) or to 
                                the extent provided in regulations 
                                prescribed by the Secretary (in 
                                consultation with the Secretary of 
                                Health and Human Services), is unable 
                                to engage in age appropriate 
                                activities.
                            ``(ii) The individual is at least 2 but not 
                        6 years of age and is unable due to a loss of 
                        functional capacity to perform (without 
                        substantial assistance from another individual) 
                        at least 2 of the following activities: eating, 
                        transferring, or mobility.
                            ``(iii) The individual is under 2 years of 
                        age and requires specific durable medical 
                        equipment by reason of a severe health 
                        condition or requires a skilled practitioner 
                        trained to address the individual's condition 
                        to be available if the individual's parents or 
                        guardians are absent.
            ``(2) Eligible caregiver.--
                    ``(A) In general.--A taxpayer shall be treated as 
                an eligible caregiver for any taxable year with respect 
                to the following individuals:
                            ``(i) The taxpayer.
                            ``(ii) The taxpayer's spouse.
                            ``(iii) An individual with respect to whom 
                        the taxpayer is allowed a deduction under 
                        section 151 for the taxable year.
                            ``(iv) An individual who would be described 
                        in clause (iii) for the taxable year if section 
                        151(c)(1)(A) were applied by substituting for 
                        the exemption amount an amount equal to the sum 
                        of the exemption amount, the standard deduction 
                        under section 63(c)(2)(C), and any additional 
                        standard deduction under section 63(c)(3) which 
                        would be applicable to the individual if clause 
                        (iii) applied.
                            ``(v) An individual who would be described 
                        in clause (iii) for the taxable year if--
                                    ``(I) the requirements of clause 
                                (iv) are met with respect to the 
                                individual, and
                                    ``(II) the requirements of 
                                subparagraph (B) are met with respect 
                                to the individual in lieu of the 
                                support test of section 152(a).
                    ``(B) Residency test.--The requirements of this 
                subparagraph are met if an individual has as his 
                principal place of abode the home of the taxpayer and--
                            ``(i) in the case of an individual who is 
                        an ancestor or descendant of the taxpayer or 
                        the taxpayer's spouse, is a member of the 
                        taxpayer's household for over half the taxable 
                        year, or
                            ``(ii) in the case of any other individual, 
                        is a member of the taxpayer's household for the 
                        entire taxable year.
                    ``(C) Special rules where more than 1 eligible 
                caregiver.--
                            ``(i) In general.--If more than 1 
                        individual is an eligible caregiver with 
                        respect to the same applicable individual for 
                        taxable years ending with or within the same 
                        calendar year, a taxpayer shall be treated as 
                        the eligible caregiver if each such individual 
                        (other than the taxpayer) files a written 
                        declaration (in such form and manner as the 
                        Secretary may prescribe) that such individual 
                        will not claim such applicable individual for 
                        the credit under this section.
                            ``(ii) No agreement.--If each individual 
                        required under clause (i) to file a written 
                        declaration under clause (i) does not do so, 
                        the individual with the highest modified 
                        adjusted gross income (as defined in section 
                        32(c)(5)) shall be treated as the eligible 
                        caregiver.
                            ``(iii) Married individuals filing 
                        separately.--In the case of married individuals 
                        filing separately, the determination under this 
                        subparagraph as to whether the husband or wife 
                        is the eligible caregiver shall be made under 
                        the rules of clause (ii) (whether or not one of 
                        them has filed a written declaration under 
                        clause (i)).
    ``(d) Identification Requirement.--No credit shall be allowed under 
this section to a taxpayer with respect to any applicable individual 
unless the taxpayer includes the name and taxpayer identification 
number of such individual, and the identification number of the 
physician certifying such individual, on the return of tax for the 
taxable year.
    ``(e) Taxable Year Must Be Full Taxable Year.--Except in the case 
of a taxable year closed by reason of the death of the taxpayer, no 
credit shall be allowable under this section in the case of a taxable 
year covering a period of less than 12 months.''.
    (b) Conforming Amendments.--
            (1) Section 6213(g)(2) of the Internal Revenue Code of 1986 
        is amended by striking ``and'' at the end of subparagraph (K), 
        by striking the period at the end of subparagraph (L) and 
        inserting ``, and'', and by inserting after subparagraph (L) 
        the following new subparagraph:
                    ``(M) an omission of a correct TIN or physician 
                identification required under section 25C(d) (relating 
to credit for taxpayers with long-term care needs) to be included on a 
return.''.
            (2) Section 6213(g)(2) of the Internal Revenue Code of 
        1986, as amended by section 303(g) of the Economic Growth and 
        Tax Relief Reconciliation Act of 2001, is amended by striking 
        ``and'' at the end of subparagraph (L), by striking the period 
        at the end of subparagraph (M) and inserting ``, and'', and by 
        inserting after subparagraph (M) the following new 
        subparagraph:
                    ``(N) an omission of a correct TIN or physician 
                identification required under section 25C(d) (relating 
                to credit for taxpayers with long-term care needs) to 
                be included on a return.''.
            (3) The table of sections for subpart A of part IV of 
        subchapter A of chapter 1 of such Code is amended by inserting 
        after the item relating to section 25B the following new item:

                              ``Sec. 25C. Credit for taxpayers with 
                                        long-term care needs.''.
    (c) Effective Dates.--
            (1) In general.--Except as provided in paragraphs (2) and 
        (3), the amendments made by this section shall apply to taxable 
        years beginning after December 31, 2001.
            (2) Subsection (b)(1).--The amendments made by subsection 
        (b)(1) shall apply for the period beginning after December 31, 
        2001, and before January 1, 2004.
            (3) Subsection (b)(2).--The amendments made by subsection 
        (b)(2) shall take effect on January 1, 2004.

SEC. 503. ADDITIONAL CONSUMER PROTECTIONS FOR LONG-TERM CARE INSURANCE.

    (a) Additional Protections Applicable to Long-Term Care 
Insurance.--Subparagraphs (A) and (B) of section 7702B(g)(2) of the 
Internal Revenue Code of 1986 (relating to requirements of model 
regulation and Act) are amended to read as follows:
                    ``(A) In general.--The requirements of this 
                paragraph are met with respect to any contract if such 
                contract meets--
                            ``(i) Model regulation.--The following 
                        requirements of the model regulation:
                                    ``(I) Section 6A (relating to 
                                guaranteed renewal or 
                                noncancellability), and the 
                                requirements of section 6B of the model 
                                Act relating to such section 6A.
                                    ``(II) Section 6B (relating to 
                                prohibitions on limitations and 
                                exclusions).
                                    ``(III) Section 6C (relating to 
                                extension of benefits).
                                    ``(IV) Section 6D (relating to 
                                continuation or conversion of 
                                coverage).
                                    ``(V) Section 6E (relating to 
                                discontinuance and replacement of 
                                policies).
                                    ``(VI) Section 7 (relating to 
                                unintentional lapse).
                                    ``(VII) Section 8 (relating to 
                                disclosure), other than section 8F 
                                thereof.
                                    ``(VIII) Section 11 (relating to 
                                prohibitions against post-claims 
                                underwriting).
                                    ``(IX) Section 12 (relating to 
                                minimum standards).
                                    ``(X) Section 13 (relating to 
                                requirement to offer inflation 
                                protection), except that any 
                                requirement for a signature on a 
                                rejection of inflation protection shall 
                                permit the signature to be on an 
                                application or on a separate form.
                                    ``(XI) Section 25 (relating to 
                                prohibition against preexisting 
                                conditions and probationary periods in 
                                replacement policies or certificates).
                                    ``(XII) The provisions of section 
                                26 relating to contingent nonforfeiture 
                                benefits, if the policyholder declines 
                                the offer of a nonforfeiture provision 
                                described in paragraph (4).
                            ``(ii) Model act.--The following 
                        requirements of the model Act:
                                    ``(I) Section 6C (relating to 
                                preexisting conditions).
                                    ``(II) Section 6D (relating to 
                                prior hospitalization).
                                    ``(III) The provisions of section 8 
                                relating to contingent nonforfeiture 
                                benefits, if the policyholder declines 
                                the offer of a nonforfeiture provision 
                                described in paragraph (4).
                    ``(B) Definitions.--For purposes of this 
                paragraph--
                            ``(i) Model provisions.--The terms `model 
                        regulation' and `model Act' mean the long-term 
                        care insurance model regulation, and the long-
                        term care insurance model Act, respectively, 
                        promulgated by the National Association of 
                        Insurance Commissioners (as adopted as of 
                        September 2000).
                            ``(ii) Coordination.--Any provision of the 
                        model regulation or model Act listed under 
                        clause (i) or (ii) of subparagraph (A) shall be 
                        treated as including any other provision of 
                        such regulation or Act necessary to implement 
                        the provision.
                            ``(iii) Determination.--For purposes of 
                        this section and section 4980C, the 
                        determination of whether any requirement of a 
                        model regulation or the model Act has been met 
                        shall be made by the Secretary.''.
    (b) Excise Tax.--Paragraph (1) of section 4980C(c) of the Internal 
Revenue Code of 1986 (relating to requirements of model provisions) is 
amended to read as follows:
            ``(1) Requirements of model provisions.--
                    ``(A) Model regulation.--The following requirements 
                of the model regulation must be met:
                            ``(i) Section 9 (relating to required 
                        disclosure of rating practices to consumer).''
                            ``(ii) Section 14 (relating to application 
                        forms and replacement coverage).
                            ``(iii) Section 15 (relating to reporting 
                        requirements), except that the issuer shall 
                        also report at least annually the number of 
                        claims denied during the reporting period for 
                        each class of business (expressed as a 
                        percentage of claims denied), other than claims 
                        denied for failure to meet the waiting period 
                        or because of any applicable preexisting 
                        condition.
                            ``(iv) Section 22 (relating to filing 
                        requirements for marketing).
                            ``(v) Section 23 (relating to standards for 
                        marketing), including inaccurate completion of 
                        medical histories, other than paragraphs (1), 
                        (6), and (9) of section 23C, except that--
                                    ``(I) in addition to such 
                                requirements, no person shall, in 
                                selling or offering to sell a qualified 
                                long-term care insurance contract, 
                                misrepresent a material fact; and
                                    ``(II) no such requirements shall 
                                include a requirement to inquire or 
                                identify whether a prospective 
                                applicant or enrollee for long-term 
                                care insurance has accident and 
                                sickness insurance.
                            ``(vi) Section 24 (relating to 
                        suitability).
                            ``(vii) Section 29 (relating to standard 
                        format outline of coverage).
                            ``(viii) Section 30 (relating to 
                        requirement to deliver shopper's guide).
                The requirements referred to in clause (vi) shall not 
                include those portions of the personal worksheet 
                described in Appendix B relating to consumer protection 
                requirements not imposed by section 4980C or 7702B.
                    ``(B) Model act.--The following requirements of the 
                model Act must be met:
                            ``(i) Section 6F (relating to right to 
                        return), except that such section shall also 
                        apply to denials of applications and any refund 
                        shall be made within 30 days of the return or 
                        denial.
                            ``(ii) Section 6G (relating to outline of 
                        coverage).
                            ``(iii) Section 6H (relating to 
                        requirements for certificates under group 
                        plans).
                            ``(iv) Section 6I (relating to policy 
                        summary).
                            ``(v) Section 6J (relating to monthly 
                        reports on accelerated death benefits).
                            ``(vi) Section 7 (relating to 
                        incontestability period).
                    ``(C) Definitions.--For purposes of this paragraph, 
                the terms `model regulation' and `model Act' have the 
                meanings given such terms by section 7702B(g)(2)(B).''.
    (c) Effective Date.--The amendments made by this section shall 
apply to policies issued more than 1 year after the date of the 
enactment of this Act.

                TITLE VI--PROMOTING HEALTHIER LIFESTYLES

SEC. 601. COMMUNITY PARTNERSHIPS TO PROMOTE HEALTHY LIFESTYLES.

    (a) Grants.--The Secretary of Health and Human Services (referred 
to in this title as the ``Secretary'') shall award grants to States to 
enable such States to provide assistance to eligible community 
partnerships that will carry out activities to promote healthy 
lifestyles.
    (b) Eligibility.--
            (1) State.--To be eligible to receive a grant under 
        subsection (a), a State shall prepare and submit to the 
        Secretary an application at such time, in such manner and 
        containing such information as the Secretary may require.
            (2) Community partnership.--To be eligible to receive 
        assistance from a State under a grant under subsection (a), an 
        entity shall--
                    (A) be a partnership consisting of one or more 
                public and private organizations (such as hospitals, 
                health centers, other health care providers, employers, 
                local educational agencies, community organizations, 
                and public health organizations); and
                    (B) prepare and submit to the State an application 
                at such time, in such manner and containing such 
                information as the State may require, including a 
                description of the activities that the partnership will 
                carry out with assistance provided under this section.
    (c) Activities.--A State shall use amounts received under a grant 
under this section to support activities conducted by an eligible 
community partnership to promote health lifestyles, including--
            (1) activities to reduce the primary risk factors for 
        diseases, such as smoking, obesity, and sedentary lifestyles;
            (2) implementing employee health promotion programs in the 
        workplace using best practices to improve health access, 
        education, and prevention promotion and disease management;
            (3) activities to decrease hospital inpatient admissions of 
        individuals with chronic diseases; and
            (4) the development of programs relating to mental health 
        and substance abuse.
    (d) Authorization of Appropriations.--There are authorized to be 
appropriated to carry out this section, such sums as may be necessary 
for each of fiscal years 2003 through 2005.

SEC. 602. WORKSITE WELLNESS GRANT PROGRAM.

    (a) Grants.--The Secretary shall award grants to States (through 
State health departments or other State agencies working in 
consultation with the State health agency) to enable such States to 
provide assistance to employers that employ not to exceed 100 employees 
to enable such employers to establish and operate worksite wellness 
programs for their employees.
    (b) Application.--To be eligible to receive a grant under 
subsection (a), a State shall prepare and submit to the Secretary an 
application at such time, in such manner, and containing such 
information as the Secretary may require, including--
            (1) a description of the manner in which the State intends 
        to use amounts received under the grant; and
            (2) assurances that the State will only use amounts 
        provided under such grant to provide assistance to employers 
        that can demonstrate that they are in compliance with minimum 
        program characteristics (relative to scope and regularity of 
        services offered) that are developed by the Secretary in 
        consultation with experts in public health and representatives 
        of small employers.
    (c) Allocation.--Grants shall be allocated among States based on 
the population of individuals employed by small employers in such 
States.
    (d) Program Characteristics.--In developing minimum program 
characteristics under subsection (b)(2), the Secretary shall ensure 
that all activities established or enhanced under a grant under this 
section have clearly defined goals and objectives and demonstrate how 
receipt of such assistance will help to achieve established State or 
local health objectives based on the National Health Promotion and 
Disease Prevention Objectives.
    (e) Use of Funds.--Amounts received under a grant awarded under 
subsection (a) shall be used by a State to provide grants to employers 
(as described in subsection (a)), nonprofit organizations, or public 
authorities, or to operate State-based worksite wellness programs.
    (f) Special Emphasis.--In funding employer worksite wellness 
projects under this section, a State shall give special emphasis to--
            (1) the development of joint wellness programs between 
        employers;
            (2) the development of employee assistance programs dealing 
        with substance abuse;
            (3) maximizing the use of, and coordination with, existing 
        community resources such as nonprofit health organizations; and
            (4) encouraging the participation of dependents of 
        employees and retirees in wellness programs.
    (g) Authorization of Appropriations.--There are authorized to be 
appropriated to carry out this section, such sums as may be necessary 
for each of fiscal years 2003 through 2005.

SEC. 603. COMPREHENSIVE SCHOOL HEALTH EDUCATION.

    (a) In General.--The Secretary shall use amounts appropriated in 
each fiscal year under subsection (d) to expand comprehensive school 
health education programs administered by the Centers for Disease 
Control and Prevention under sections 301 and 311 of the Public Health 
Service Act (42 U.S.C. 241 and 243).
    (b) Specified Use of Funds.--In meeting the requirement of 
subsection (a), the Secretary shall expand the number of children 
receiving planned, sequential kindergarten through 12th grade 
comprehensive school education as a component of comprehensive programs 
of school health, including--
            (1) physical education programs that provide lifelong 
        physical activity;
            (2) healthy school food service selections;
            (3) programs that promote a healthy and safe school 
        environment;
            (4) schoolsite health promotion for faculty and staff;
            (5) integrated school and community health promotion 
        efforts; and
            (6) school nursing disease prevention and health promotion 
        services.
    (c) Coordination of Existing Programs.--The Secretary of Health and 
Human Services, the Secretary of Education, and the Secretary of 
Agriculture shall work cooperatively to coordinate existing school 
health education programs within the jurisdiction of their respective 
Departments in a manner that maximizes the efficiency and effectiveness 
of Federal expenditures for such programs.
    (d) Authorization of Appropriations.--There are authorized to be 
appropriated to carry out this section, such sums as may be necessary 
for each of fiscal years 2003 through 2005.

                      TITLE VII--MEDICARE FAIRNESS

          Subtitle A--Medicare Value and Quality Demonstration

SEC. 701. FINDINGS.

    The Senate makes the following findings:
            (1) The United States Government should reward physicians, 
        hospitals, and other health care providers that provide high-
        quality, cost-effective health care to beneficiaries under the 
        medicare program.
            (2) The Journal of the American Medical Association has 
        published quality indicators in an article entitled ``Quality 
        of Medical Care Delivered to Medicare Beneficiaries: A Profile 
        at State and National Levels''.
            (3) The cost of health care is--
                    (A) reflected in the type and volume of physicians' 
                services and in physician ordering and prescribing 
                behavior; and
                    (B) reflected in the amount of the average payment 
                to hospitals under the medicare program for each 
                medicare beneficiary in each State.
            (4) Physician and hospital practice patterns contribute to 
        the total cost and quality of care for each medicare 
        beneficiary in each State.
            (5) The original medicare fee-for-service program under 
        parts A and B of title XVIII of the Social Security Act does 
        not include a mechanism to pay for interventions designed to 
        improve quality of care. While the framework for payments to 
managed care organizations under the Medicare+Choice program under part 
C of such title allows for the reallocation of capitation revenues to 
cover such things as disease state management and quality improvement 
infrastructure, even the most optimistic projections for managed care 
enrollment leave the majority of medicare beneficiaries in the original 
medicare fee-for-service program.

SEC. 702. DEMONSTRATION PROJECT TO ENCOURAGE THE PROVISION OF HIGH-
              QUALITY, COST-EFFECTIVE INPATIENT HOSPITAL SERVICES.

    (a) Purpose.--The purpose of the demonstration project conducted 
under this section is to encourage the provision of high-quality, cost-
effective health care to beneficiaries under the medicare program under 
title XVIII of the Social Security Act (42 U.S.C. 1395 et seq.) by 
providing incentive payments to hospitals located in States in which 
high-quality and cost-effective services are being provided in order to 
finance further quality improvements.
    (b) Demonstration Project.--
            (1) Establishment.--Not later than 6 months after the date 
        of enactment of this Act, the Secretary shall establish a 
        demonstration project under which--
                    (A) the Secretary provides bonus payments to 
                providers of inpatient hospital services that deliver 
                high-quality health care at low costs in accordance 
                with the methodology established by the Agency for 
                Healthcare Research and Quality under paragraph (2); 
                and
                    (B) the Secretary funds a plan at each site to 
                increase the number of providers of inpatient hospital 
                services that provide high-quality, low-cost health 
                care to beneficiaries under the medicare program under 
                title XVIII of the Social Security Act.
            (2) Value and quality ranking methodology.--
                    (A) In general.--The Agency for Healthcare Research 
                and Quality shall establish a value and quality ranking 
                methodology under which the Secretary awards bonus 
                payments to providers of inpatient hospital services 
                located in those States that demonstrate that such 
                providers in the State are providing high value because 
                of the high-quality, cost-effective health care 
                services being provided to medicare beneficiaries.
                    (B) Basis.--The methodology established under 
                subparagraph (A) shall be based on the rank and 
                performance on medicare quality indicators contained in 
                the article entitled ``Quality of Medical Care 
                Delivered to Medicare Beneficiaries: A Profile at State 
                and National Levels'' published in the October 4, 2000, 
                issue of the Journal of the American Medical 
                Association or such other quality indicators as the 
                Secretary determines to be appropriate.
            (3) Sites.--The Secretary shall select 2 States in which to 
        conduct the demonstration project--
                    (A) from among the top 25 States (as ranked using 
                the methodology established under paragraph (2)) that 
                are also among the group of 25 States with the lowest 
                per capita cost to the medicare program under title 
                XVIII of the Social Security Act during the most recent 
                12-month period for which data are available; and
                    (B) based upon information contained in 
                applications submitted to the Secretary by such States 
                at such time, in such form and manner, and containing 
                such information as the Secretary may require.
            (4) Duration of project.--The demonstration project shall 
        be conducted over a 5-year period.
    (c) Reports.--The Secretary shall submit to the appropriate 
committees of Congress interim reports on the demonstration project and 
a final report on the project within 6 months after the conclusion of 
the project together with recommendations for such legislative or 
administrative action as the Secretary determines appropriate.
    (d) Waiver.--The Secretary shall waive such provisions of titles XI 
and XVIII of the Social Security Act (42 U.S.C. 1301 et seq. and 1395 
et seq.) as may be necessary to conduct the demonstration project under 
this section.
    (e) Definitions.--In this section:
            (1) Provider of inpatient hospital services.--The term 
        ``provider of inpatient hospital services'' means any 
        individual or entity that receives payment under the medicare 
        program under title XVIII of the Social Security Act (42 U.S.C. 
        1395 et seq.) for providing an inpatient hospital service (as 
        defined in section 1861(b) of such Act (42 U.S.C. 1395x(b))).
            (2) Secretary.--The term ``Secretary'' means the Secretary 
        of Health and Human Services.
    (f) Funding.--There are appropriated from the Federal Hospital 
Insurance Trust Fund under section 1817 of the Social Security Act (42 
U.S.C. 1395i) such sums as the Secretary determines are necessary to 
conduct the demonstration project under this section.

SEC. 703. DEMONSTRATION PROJECT TO ENCOURAGE THE PROVISION OF HIGH-
              QUALITY, COST-EFFECTIVE PHYSICIANS' SERVICES.

    (a) Purpose.--The purpose of the demonstration project conducted 
under this section is to encourage the provision of high-quality, cost-
effective health care to beneficiaries under the medicare program under 
title XVIII of the Social Security Act (42 U.S.C. 1395 et seq.) by 
providing incentive payments to physicians located in States in which 
high-quality and cost-effective services are being provided in order to 
finance further quality improvements.
    (b) Demonstration Project.--
            (1) Establishment.--Not later than 6 months after the date 
        of enactment of this Act, the Secretary shall establish a 
        demonstration project under which--
                    (A) the Secretary provides bonus payments to 
                providers of physicians' services that deliver high-
                quality, cost-effective health care in accordance with 
                the methodology established by the Agency for 
                Healthcare Research and Quality under paragraph (2); 
                and
                    (B) the Secretary funds a plan in each State to 
                increase the number of providers of physicians' 
                services that provide high-quality, cost-effective 
                health care to beneficiaries under the medicare program 
                under title XVIII of the Social Security Act.
            (2) Value and quality ranking methodology.--
                    (A) In general.--The Agency for Healthcare Research 
                and Quality shall establish a value and quality ranking 
                methodology under which the Secretary awards bonus 
                payments to providers of physicians' services located 
                in those States that demonstrate that such providers in 
                the State are providing high value because of the high-
                quality, cost-effective health care services being 
                provided to medicare beneficiaries.
                    (B) Basis.--The methodology established under 
                subparagraph (A) shall be based on the rank and 
                performance on medicare quality indicators contained in 
                the article entitled ``Quality of Medical Care 
                Delivered to Medicare Beneficiaries: A Profile at State 
                and National Levels'' published in the October 4, 2000, 
                issue of the Journal of the American Medical 
                Association or such other quality indicators as the 
                Secretary determines to be appropriate.
            (3) Sites.--The Secretary shall select 2 States in which to 
        conduct the demonstration project--
                    (A) from among the top 25 States (as ranked using 
                the methodology established under paragraph (2)) that 
                are also among the 25 States with the lowest per capita 
                cost to the medicare program under title XVIII of the 
                Social Security Act during the most recent 12-month 
                period for which data are available; and
                    (B) based upon information contained in 
                applications submitted to the Secretary by such States 
                at such time, in such form and manner, and containing 
                such information as the Secretary may require.
            (4) Duration of project.--The demonstration project shall 
        be conducted over a 5-year period.
    (c) Reports.--The Secretary shall submit to the appropriate 
committees of Congress interim reports on the demonstration project and 
a final report on the project within 6 months after the conclusion of 
the project together with recommendations for such legislative or 
administrative action as the Secretary determines appropriate.
    (d) Waiver.--The Secretary shall waive such provisions of titles XI 
and XVIII of the Social Security Act (42 U.S.C. 1301 et seq. and 1395 
et seq.) as may be necessary to conduct the demonstration project under 
this section.
    (e) Definitions.--In this section:
            (1) Provider of physicians' services.--The term ``provider 
        of physicians' services'' means any individual or entity that 
        receives payment under the medicare program under title XVIII 
        of the Social Security Act (42 U.S.C. 1395 et seq.) for 
        providing physicians' services (as defined in section 1861(q) 
        of such Act (42 U.S.C. 1395x(q))).
            (2) Secretary.--The term ``Secretary'' means the Secretary 
        of Health and Human Services.
    (f) Funding.--There are appropriated from the Federal Supplementary 
Medical Insurance Trust Fund under section 1841 of the Social Security 
Act (42 U.S.C. 1395t) such sums as the Secretary determines are 
necessary to conduct the demonstration project under this section.

          Subtitle B--Graduate Medical Education Demonstration

SEC. 711. CLINICAL ROTATION DEMONSTRATION PROJECT.

    (a) Establishment.--Not later than 6 months after the date of 
enactment of this Act, the Secretary shall establish a demonstration 
project that provides for demonstration grants designed to provide 
financial or other incentives to hospitals to attract educators and 
clinical practitioners so that hospitals that serve beneficiaries under 
the medicare program under title XVIII of the Social Security Act (42 
U.S.C. 1395 et seq.) who are residents of underserved areas may host 
clinical rotations.
    (b) Duration of Project.--The demonstration project shall be 
conducted over a 5-year period.
    (c) Funding.--
            (1) In general.--Subject to paragraph (2), the Secretary 
        shall pay the costs of the demonstration project conducted 
        under this section from the Federal Hospital Insurance Trust 
        Fund under section 1817 of the Social Security Act (42 U.S.C. 
        1395i).
            (2) Cap on funding.--The Secretary may not expend more than 
        $20,000,000 to conduct the demonstration project under this 
        section.
            (3) Budget neutrality for demonstration project.--
        Notwithstanding any other provision of law, the Secretary shall 
        provide for an appropriate reduction in the aggregate amount of 
        additional payments made under subsection (d)(5)(B) of section 
        1886 of the Social Security Act (42 U.S.C. 1395ww) for the 
        indirect costs of medical education and for direct graduate 
        medical education costs under subsection (h) of such section to 
        reflect any increase in amounts expended from the Federal 
        Hospital Insurance Trust Fund as a result of the demonstration 
        project conducted under this section.
    (d) Reports.--The Secretary shall submit to the appropriate 
committees of Congress interim reports on the demonstration project and 
a final report on such project within 6 months after the conclusion of 
the project together with recommendations for such legislative or 
administrative action as the Secretary determines appropriate.
    (e) Waiver.--The Secretary shall waive such provisions of titles XI 
and XVIII of the Social Security Act (42 U.S.C. 1301 et seq. and 1395 
et seq.) as may be necessary to conduct the demonstration project under 
this section.
    (f) Definitions.--In this section:
            (1) Hospital.--The term ``hospital'' means any subsection 
        (d) hospital (as defined in section 1886(d)(1)(B) of the Social 
        Security Act (42 U.S.C. 1395ww(d)(1)(B)) that had indirect or 
        direct costs of medical education during the most recent cost 
        reporting period preceding the date of enactment of this Act.
            (2) Secretary.--The term ``Secretary'' means the Secretary 
        of Health and Human Services.
            (3) Underserved area.--The term ``underserved area'' means 
        such medically underserved urban areas and medically 
        underserved rural areas as the Secretary may specify.
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