[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[S. 1932 Enrolled Bill (ENR)]


        S.1932

                       One Hundred Ninth Congress

                                 of the

                        United States of America


                          AT THE SECOND SESSION

          Begun and held at the City of Washington on Tuesday,
             the third day of January, two thousand and six


                                 An Act


 
    To provide for reconciliation pursuant to section 202(a) of the 
 concurrent resolution on the budget for fiscal year 2006 (H. Con. Res. 
                                  95).

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Deficit Reduction Act of 2005''.

SEC. 2. TABLE OF TITLES.

    The table of titles is as follows:

                     TITLE I--AGRICULTURE PROVISIONS

           TITLE II--HOUSING AND DEPOSIT INSURANCE PROVISIONS

       TITLE III--DIGITAL TELEVISION TRANSITION AND PUBLIC SAFETY

                   TITLE IV--TRANSPORTATION PROVISIONS

                            TITLE V--MEDICARE

                      TITLE VI--MEDICAID AND SCHIP

             TITLE VII--HUMAN RESOURCES AND OTHER PROVISIONS

          TITLE VIII--EDUCATION AND PENSION BENEFIT PROVISIONS

                       TITLE IX--LIHEAP PROVISIONS

                  TITLE X--JUDICIARY RELATED PROVISIONS

                    TITLE I--AGRICULTURE PROVISIONS

SECTION 1001. SHORT TITLE.

    This title may be cited as the ``Agricultural Reconciliation Act of 
2005''.

                     Subtitle A--Commodity Programs

SEC. 1101. NATIONAL DAIRY MARKET LOSS PAYMENTS.

    (a) Amount.--Section 1502(c) of the Farm Security and Rural 
Investment Act of 2002 (7 U.S.C. 7982(c)) is amended by striking 
paragraph (3) and inserting the following new paragraph:
        ``(3)(A) during the period beginning on the first day of the 
    month the producers on a dairy farm enter into a contract under 
    this section and ending on September 30, 2005, 45 percent;
        ``(B) during the period beginning on October 1, 2005, and 
    ending on August 31, 2007, 34 percent; and
        ``(C) during the period beginning on September 1, 2007, 0 
    percent.''.
    (b) Duration.--Section 1502 of the Farm Security and Rural 
Investment Act of 2002 (7 U.S.C. 7982) is amended by striking ``2005'' 
each place it appears in subsections (f) and (g)(1) and inserting 
``2007''.
    (c) Conforming Amendments.--Section 1502 of the Farm Security and 
Rural Investment Act of 2002 (7 U.S.C. 7982) is amended--
        (1) in subsection (g)(1), by striking ``and subsection (h)''; 
    and
        (2) by striking subsection (h).

SEC. 1102. ADVANCE DIRECT PAYMENTS.

    (a) Covered Commodities.--Section 1103(d)(2) of the Farm Security 
and Rural Investment Act of 2002 (7 U.S.C. 7913(d)(2)) is amended in 
the first sentence by striking ``2007 crop years'' and inserting ``2005 
crop years, up to 40 percent of the direct payment for a covered 
commodity for the 2006 crop year, and up to 22 percent of the direct 
payment for a covered commodity for the 2007 crop year,''.
    (b) Peanuts.--Section 1303(e)(2) of the Farm Security and Rural 
Investment Act of 2002 (7 U.S.C. 7953(e)(2)) is amended in the first 
sentence by striking ``2007 crop years'' and inserting ``2005 crop 
years, up to 40 percent of the direct payment for the 2006 crop year, 
and up to 22 percent of the direct payment for the 2007 crop year,''.

SEC. 1103. COTTON COMPETITIVENESS PROVISIONS.

    (a) Repeal of Authority To Issue Cotton User Marketing 
Certificates.--Section 1207 of the Farm Security and Rural Investment 
Act of 2002 (7 U.S.C. 7937) is amended--
        (1) by striking subsection (a); and
        (2) in subsection (b)(1)--
            (A) in subparagraph (B), by striking ``, adjusted for the 
        value of any certificate issued under subsection (a),''; and
            (B) in subparagraph (C), by striking ``, for the value of 
        any certificates issued under subsection (a)''.
    (b) Effective Date.--The amendments made by this section take 
effect on August 1, 2006.

                        Subtitle B--Conservation

SEC. 1201. WATERSHED REHABILITATION PROGRAM.

    The authority to obligate funds previously made available under 
section 14(h)(1) of the Watershed Protection and Flood Prevention Act 
(16 U.S.C. 1012(h)(1)) for a fiscal year and unobligated as of October 
1, 2006, is hereby cancelled effective on that date.

SEC. 1202. CONSERVATION SECURITY PROGRAM.

    (a) Extension.--Section 1238A(a) of the Food Security Act of 1985 
(16 U.S.C. 3838a(a)) is amended by striking ``2007'' and inserting 
``2011''.
    (b) Funding.--Section 1241(a)(3) of the Food Security Act of 1985 
(16 U.S.C. 3841(a)(3)) is amended by striking ``not more than 
$6,037,000,000'' and all that follows through ``2014.'' and inserting 
the following: ``not more than--
            ``(A) $1,954,000,000 for the period of fiscal years 2006 
        through 2010; and
            ``(B) $5,650,000,000 for the period of fiscal years 2006 
        through 2015.''.

SEC. 1203. ENVIRONMENTAL QUALITY INCENTIVES PROGRAM.

    (a) Extension.--Section 1240B(a)(1) of the Food Security Act of 
1985 (16 U.S.C. 3839aa-2(a)(1)) is amended by striking ``2007'' and 
inserting ``2010''.
    (b) Limitation on Payments.--Section 1240G of the Food Security Act 
of 1985 (16 U.S.C. 3839aa-7) is amended by striking ``the period of 
fiscal years 2002 through 2007'' and inserting ``any six-year period''.
    (c) Funding.--Section 1241(a)(6) of the Food Security Act of 1985 
(16 U.S.C. 3841(a)(6)) is amended--
        (1) by striking ``and'' at the end of subparagraph (D); and
        (2) by striking subparagraph (E) and inserting the following 
    new subparagraphs:
            ``(E) $1,270,000,000 in each of fiscal years 2007 through 
        2009; and
            ``(F) $1,300,000,000 in fiscal year 2010.''.

                           Subtitle C--Energy

SEC. 1301. RENEWABLE ENERGY SYSTEMS AND ENERGY EFFICIENCY IMPROVEMENTS 
              PROGRAM.

    Section 9006(f) of the Farm Security and Rural Investment Act of 
2002 (7 U.S.C. 8106(f)) is amended by striking ``2007'' and inserting 
``2006 and $3,000,000 for fiscal year 2007''.

                     Subtitle D--Rural Development

SEC. 1401. ENHANCED ACCESS TO BROADBAND TELECOMMUNICATIONS SERVICES IN 
              RURAL AREAS.

    The authority to obligate funds previously made available under 
section 601(j)(1) of the Rural Electrification Act of 1936 for a fiscal 
year and unobligated as of October 1, 2006, is hereby cancelled 
effective on that date.

SEC. 1402. VALUE-ADDED AGRICULTURAL PRODUCT MARKET DEVELOPMENT GRANTS.

    The authority to obligate funds previously made available under 
section 231(b)(4) of the Agricultural Risk Protection Act of 2000 
(Public Law 106-224; 7 U.S.C. 1621 note) for a fiscal year and 
unobligated as of October 1, 2006, is hereby cancelled effective on 
that date.

SEC. 1403. RURAL BUSINESS INVESTMENT PROGRAM.

    (a) Termination of Fiscal Year 2007 and Subsequent Funding.--
Subsection (a)(1) of section 384S of the Consolidated Farm and Rural 
Development Act (7 U.S.C. 2009cc-18) is amended by inserting after 
``necessary'' the following: ``through fiscal year 2006''.
    (b) Cancellation of Unobligated Prior-Year Funds.--The authority to 
obligate funds previously made available under such section and 
unobligated as of October 1, 2006, is hereby cancelled effective on 
that date.

SEC. 1404. RURAL BUSINESS STRATEGIC INVESTMENT GRANTS.

    The authority to obligate funds previously made available under 
section 385E of the Consolidated Farm and Rural Development Act and 
unobligated as of October 1, 2006, is hereby cancelled effective on 
that date.

SEC. 1405. RURAL FIREFIGHTERS AND EMERGENCY PERSONNEL GRANTS.

    (a) Termination of Fiscal Year 2007 Funding.--Subsection (c) of 
section 6405 of the Farm Security and Rural Investment Act of 2002 (7 
U.S.C. 2655) is amended by striking ``2007'' and inserting ``2006''.
    (b) Cancellation of Unobligated Prior-Year Funds.--The authority to 
obligate funds previously made available under such section for a 
fiscal year and unobligated as of October 1, 2006, is hereby cancelled 
effective on that date.

                          Subtitle E--Research

SEC. 1501. INITIATIVE FOR FUTURE FOOD AND AGRICULTURE SYSTEMS.

    (a) Termination of Fiscal Year 2007, 2008, and 2009 Transfers.--
Subsection (b)(3)(D) of section 401 of the Agricultural Research, 
Extension, and Education Reform Act of 1998 (7 U.S.C. 7621) is amended 
by striking ``2006'' and inserting ``2009''.
    (b) Termination of Multi-Year Availability of Fiscal Year 2006 
Funds.--Paragraph (6) of subsection (f) of such section is amended to 
read as follows:
        ``(6) Availability of funds.--
            ``(A) Two-year availability.--Except as provided in 
        subparagraph (B), funds for grants under this section shall be 
        available to the Secretary for obligation for a 2-year period 
        beginning on the date of the transfer of the funds under 
        subsection (b).
            ``(B) Exception for fiscal year 2006 transfer.--In the case 
        of the funds required to be transferred by subsection 
        (b)(3)(C), the funds shall be available to the Secretary for 
        obligation for the 1-year period beginning on October 1, 
        2005.''

           TITLE II--HOUSING AND DEPOSIT INSURANCE PROVISIONS
                   Subtitle A--FHA Asset Disposition

SEC. 2001. DEFINITIONS.

    For purposes of this subtitle, the following definitions shall 
apply:
        (1) The term ``affordability requirements'' means any 
    requirements or restrictions imposed by the Secretary, at the time 
    of sale, on a multifamily real property or a multifamily loan, such 
    as use restrictions, rent restrictions, and rehabilitation 
    requirements.
        (2) The term ``discount sale'' means the sale of a multifamily 
    real property in a transaction, such as a negotiated sale, in which 
    the sale price is lower than the property market value and is set 
    outside of a competitive bidding process that has no affordability 
    requirements.
        (3) The term ``discount loan sale'' means the sale of a 
    multifamily loan in a transaction, such as a negotiated sale, in 
    which the sale price is lower than the loan market value and is set 
    outside of a competitive bidding process that has no affordability 
    requirements.
        (4) The term ``loan market value'' means the value of a 
    multifamily loan, without taking into account any affordability 
    requirements.
        (5) The term ``multifamily real property'' means any rental or 
    cooperative housing project of 5 or more units owned by the 
    Secretary that prior to acquisition by the Secretary was security 
    for a loan or loans insured under title II of the National Housing 
    Act.
        (6) The term ``multifamily loan'' means a loan held by the 
    Secretary and secured by a multifamily rental or cooperative 
    housing project of 5 or more units that was formerly insured under 
    title II of the National Housing Act.
        (7) The term ``property market value'' means the value of a 
    multifamily real property for its current use, without taking into 
    account any affordability requirements.
        (8) The term ``Secretary'' means the Secretary of Housing and 
    Urban Development.

SEC. 2002. APPROPRIATED FUNDS REQUIREMENT FOR BELOW-MARKET SALES.

    (a) Discount Sales.--Notwithstanding any other provision of law, 
except for affordability requirements for the elderly and disabled 
required by statute, disposition by the Secretary of a multifamily real 
property during fiscal years 2006 through 2010 through a discount sale 
under sections 207(l) or 246 of the National Housing Act (12 U.S.C. 
1713(l), 1715z-11), section 203 of the Housing and Community 
Development Amendments of 1978 (12 U.S.C. 1701z-11), or section 204 of 
the Departments of Veterans Affairs and Housing and Urban Development, 
and Independent Agencies Appropriations Act, 1997 (12 U.S.C. 1715z-
11a), shall be subject to the availability of appropriations to the 
extent that the property market value exceeds the sale proceeds. If the 
multifamily real property is sold, during such fiscal years, for an 
amount equal to or greater than the property market value then the 
transaction is not subject to the availability of appropriations.
    (b) Discount Loan Sales.--Notwithstanding any other provision of 
law and in accordance with the Federal Credit Reform Act of 1990 (2 
U.S.C. 661 et seq.), a discount loan sale during fiscal years 2006 
through 2010 under section 207(k) of the National Housing Act (12 
U.S.C. 1713(k)), section 203(k) of the Housing and Community 
Development Amendments of 1978 (12 U.S.C. 1701z-11(k)), or section 
204(a) of the Departments of Veterans Affairs and Housing and Urban 
Development, and Independent Agencies Appropriations Act, 1997 (12 
U.S.C. 1715z-11a(a)), shall be subject to the availability of 
appropriations to the extent that the loan market value exceeds the 
sale proceeds. If the multifamily loan is sold, during such fiscal 
years, for an amount equal to or greater than the loan market value 
then the transaction is not subject to the availability of 
appropriations.
    (c) Applicability.--This section shall not apply to any transaction 
that formally commences within one year prior to the enactment of this 
section.

SEC. 2003. UP-FRONT GRANTS.

    (a) 1997 Act.--Section 204(a) of the Departments of Veterans 
Affairs and Housing and Urban Development, and Independent Agencies 
Appropriations Act, 1997 (12 U.S.C. 1715z-11a(a)) is amended by adding 
at the end the following new sentence: ``A grant provided under this 
subsection during fiscal years 2006 through 2010 shall be available 
only to the extent that appropriations are made in advance for such 
purposes and shall not be derived from the General Insurance Fund.''.
    (b) 1978 Act.--Section 203(f)(4) of the Housing and Community 
Development Amendments of 1978 (12 U.S.C. 1701z-11(f)(4)) is amended by 
adding at the end the following new sentence: ``This paragraph shall be 
effective during fiscal years 2006 through 2010 only to the extent that 
such budget authority is made available for use under this paragraph in 
advance in appropriation Acts.''.
    (c) Applicability.--The amendments made by this section shall not 
apply to any transaction that formally commences within one year prior 
to the enactment of this section.

                     Subtitle B--Deposit Insurance

SEC. 2101. SHORT TITLE.

    This subtitle may be cited as the ``Federal Deposit Insurance 
Reform Act of 2005''.

SEC. 2102. MERGING THE BIF AND SAIF.

    (a) In General.--
        (1) Merger.--The Bank Insurance Fund and the Savings 
    Association Insurance Fund shall be merged into the Deposit 
    Insurance Fund.
        (2) Disposition of assets and liabilities.--All assets and 
    liabilities of the Bank Insurance Fund and the Savings Association 
    Insurance Fund shall be transferred to the Deposit Insurance Fund.
        (3) No separate existence.--The separate existence of the Bank 
    Insurance Fund and the Savings Association Insurance Fund shall 
    cease on the effective date of the merger thereof under this 
    section.
    (b) Repeal of Outdated Merger Provision.--Section 2704 of the 
Deposit Insurance Funds Act of 1996 (12 U.S.C. 1821 note) is repealed.
    (c) Effective Date.--This section shall take effect no later than 
the first day of the first calendar quarter that begins after the end 
of the 90-day period beginning on the date of the enactment of this 
Act.

SEC. 2103. INCREASE IN DEPOSIT INSURANCE COVERAGE.

    (a) In General.--Section 11(a)(1) of the Federal Deposit Insurance 
Act (12 U.S.C. 1821(a)(1)) is amended--
        (1) by striking subparagraph (B) and inserting the following 
    new subparagraph:
            ``(B) Net amount of insured deposit.--The net amount due to 
        any depositor at an insured depository institution shall not 
        exceed the standard maximum deposit insurance amount as 
        determined in accordance with subparagraphs (C), (D), (E) and 
        (F) and paragraph (3).''; and
        (2) by adding at the end the following new subparagraphs:
            ``(E) Standard maximum deposit insurance amount defined.--
        For purposes of this Act, the term `standard maximum deposit 
        insurance amount' means $100,000, adjusted as provided under 
        subparagraph (F) after March 31, 2010.
            ``(F) Inflation adjustment.--
                ``(i) In general.--By April 1 of 2010, and the 1st day 
            of each subsequent 5-year period, the Board of Directors 
            and the National Credit Union Administration Board shall 
            jointly consider the factors set forth under clause (v), 
            and, upon determining that an inflation adjustment is 
            appropriate, shall jointly prescribe the amount by which 
            the standard maximum deposit insurance amount and the 
            standard maximum share insurance amount (as defined in 
            section 207(k) of the Federal Credit Union Act) applicable 
            to any depositor at an insured depository institution shall 
            be increased by calculating the product of--

                    ``(I) $100,000; and
                    ``(II) the ratio of the published annual value of 
                the Personal Consumption Expenditures Chain-Type Price 
                Index (or any successor index thereto), published by 
                the Department of Commerce, for the calendar year 
                preceding the year in which the adjustment is 
                calculated under this clause, to the published annual 
                value of such index for the calendar year preceding the 
                date this subparagraph takes effect under the Federal 
                Deposit Insurance Reform Act of 2005.

            The values used in the calculation under subclause (II) 
            shall be, as of the date of the calculation, the values 
            most recently published by the Department of Commerce.
                ``(ii) Rounding.--If the amount determined under clause 
            (ii) for any period is not a multiple of $10,000, the 
            amount so determined shall be rounded down to the nearest 
            $10,000.
                ``(iii) Publication and report to the congress.--Not 
            later than April 5 of any calendar year in which an 
            adjustment is required to be calculated under clause (i) to 
            the standard maximum deposit insurance amount and the 
            standard maximum share insurance amount under such clause, 
            the Board of Directors and the National Credit Union 
            Administration Board shall--

                    ``(I) publish in the Federal Register the standard 
                maximum deposit insurance amount, the standard maximum 
                share insurance amount, and the amount of coverage 
                under paragraph (3)(A) and section 207(k)(3) of the 
                Federal Credit Union Act, as so calculated; and
                    ``(II) jointly submit a report to the Congress 
                containing the amounts described in subclause (I).

                ``(iv) 6-month implementation period.--Unless an Act of 
            Congress enacted before July 1 of the calendar year in 
            which an adjustment is required to be calculated under 
            clause (i) provides otherwise, the increase in the standard 
            maximum deposit insurance amount and the standard maximum 
            share insurance amount shall take effect on January 1 of 
            the year immediately succeeding such calendar year.
                ``(v) Inflation adjustment consideration.--In making 
            any determination under clause (i) to increase the standard 
            maximum deposit insurance amount and the standard maximum 
            share insurance amount, the Board of Directors and the 
            National Credit Union Administration Board shall jointly 
            consider--

                    ``(I) the overall state of the Deposit Insurance 
                Fund and the economic conditions affecting insured 
                depository institutions;
                    ``(II) potential problems affecting insured 
                depository institutions; or
                    ``(III) whether the increase will cause the reserve 
                ratio of the fund to fall below 1.15 percent of 
                estimated insured deposits.''.

    (b) Coverage for Certain Employee Benefit Plan Deposits.--Section 
11(a)(1)(D) of the Federal Deposit Insurance Act (12 U.S.C. 
1821(a)(1)(D)) is amended to read as follows:
            ``(D) Coverage for certain employee benefit plan 
        deposits.--
                ``(i) Pass-through insurance.--The Corporation shall 
            provide pass-through deposit insurance for the deposits of 
            any employee benefit plan.
                ``(ii) Prohibition on acceptance of benefit plan 
            deposits.--An insured depository institution that is not 
            well capitalized or adequately capitalized may not accept 
            employee benefit plan deposits.
                ``(iii) Definitions.--For purposes of this 
            subparagraph, the following definitions shall apply:

                    ``(I) Capital standards.--The terms `well 
                capitalized' and `adequately capitalized' have the same 
                meanings as in section 38.
                    ``(II) Employee benefit plan.--The term `employee 
                benefit plan' has the same meaning as in paragraph 
                (5)(B)(ii), and includes any eligible deferred 
                compensation plan described in section 457 of the 
                Internal Revenue Code of 1986.
                    ``(III) Pass-through deposit insurance.--The term 
                `pass-through deposit insurance' means, with respect to 
                an employee benefit plan, deposit insurance coverage 
                based on the interest of each participant, in 
                accordance with regulations issued by the 
                Corporation.''.

    (c) Increased Amount of Deposit Insurance for Certain Retirement 
Accounts.--Section 11(a)(3)(A) of the Federal Deposit Insurance Act (12 
U.S.C. 1821(a)(3)(A)) is amended by striking ``$100,000'' and inserting 
``$250,000 (which amount shall be subject to inflation adjustments as 
provided in paragraph (1)(F), except that $250,000 shall be substituted 
for $100,000 wherever such term appears in such paragraph)''.
    (d) Effective Date.--This section and the amendments made by this 
section shall take effect on the date the final regulations required 
under section 9(a)(2) take effect.

SEC. 2104. SETTING ASSESSMENTS AND REPEAL OF SPECIAL RULES RELATING TO 
              MINIMUM ASSESSMENTS AND FREE DEPOSIT INSURANCE.

    (a) Setting Assessments.--Section 7(b)(2) of the Federal Deposit 
Insurance Act (12 U.S.C. 1817(b)(2)) is amended--
        (1) by striking subparagraphs (A) and (B) and inserting the 
    following new subparagraphs:
            ``(A) In general.--The Board of Directors shall set 
        assessments for insured depository institutions in such amounts 
        as the Board of Directors may determine to be necessary or 
        appropriate, subject to subparagraph (D).
            ``(B) Factors to be considered.--In setting assessments 
        under subparagraph (A), the Board of Directors shall consider 
        the following factors:
                ``(i) The estimated operating expenses of the Deposit 
            Insurance Fund.
                ``(ii) The estimated case resolution expenses and 
            income of the Deposit Insurance Fund.
                ``(iii) The projected effects of the payment of 
            assessments on the capital and earnings of insured 
            depository institutions.
                ``(iv) The risk factors and other factors taken into 
            account pursuant to paragraph (1) under the risk-based 
            assessment system, including the requirement under such 
            paragraph to maintain a risk-based system.
                ``(v) Any other factors the Board of Directors may 
            determine to be appropriate.''; and
        (2) by inserting after subparagraph (C) the following new 
    subparagraph:
            ``(D) No discrimination based on size.--No insured 
        depository institution shall be barred from the lowest-risk 
        category solely because of size.''.
    (b) Assessment Recordkeeping Period Shortened.--Paragraph (5) of 
section 7(b) of the Federal Deposit Insurance Act (12 U.S.C. 1817(b)) 
is amended to read as follows:
        ``(5) Depository institution required to maintain assessment-
    related records.--Each insured depository institution shall 
    maintain all records that the Corporation may require for verifying 
    the correctness of any assessment on the insured depository 
    institution under this subsection until the later of--
            ``(A) the end of the 3-year period beginning on the due 
        date of the assessment; or
            ``(B) in the case of a dispute between the insured 
        depository institution and the Corporation with respect to such 
        assessment, the date of a final determination of any such 
        dispute.''.
    (c) Increase in Fees for Late Assessment Payments.--Subsection (h) 
of section 18 of the Federal Deposit Insurance Act (12 U.S.C. 1828(h)) 
is amended to read as follows:
    ``(h) Penalty for Failure to Timely Pay Assessments.--
        ``(1) In general.--Subject to paragraph (3), any insured 
    depository institution which fails or refuses to pay any assessment 
    shall be subject to a penalty in an amount of not more than 1 
    percent of the amount of the assessment due for each day that such 
    violation continues.
        ``(2) Exception in case of dispute.--Paragraph (1) shall not 
    apply if--
            ``(A) the failure to pay an assessment is due to a dispute 
        between the insured depository institution and the Corporation 
        over the amount of such assessment; and
            ``(B) the insured depository institution deposits security 
        satisfactory to the Corporation for payment upon final 
        determination of the issue.
        ``(3) Special rule for small assessment amounts.--If the amount 
    of the assessment which an insured depository institution fails or 
    refuses to pay is less than $10,000 at the time of such failure or 
    refusal, the amount of any penalty to which such institution is 
    subject under paragraph (1) shall not exceed $100 for each day that 
    such violation continues.
        ``(4) Authority to modify or remit penalty.--The Corporation, 
    in the sole discretion of the Corporation, may compromise, modify 
    or remit any penalty which the Corporation may assess or has 
    already assessed under paragraph (1) upon a finding that good cause 
    prevented the timely payment of an assessment.''.
    (d) Statute of Limitations for Assessment Actions.--Subsection (g) 
of section 7 of the Federal Deposit Insurance Act (12 U.S.C. 1817(g)) 
is amended to read as follows:
    ``(g) Assessment Actions.--
        ``(1) In general.--The Corporation, in any court of competent 
    jurisdiction, shall be entitled to recover from any insured 
    depository institution the amount of any unpaid assessment lawfully 
    payable by such insured depository institution.
        ``(2) Statute of limitations.--The following provisions shall 
    apply to actions relating to assessments, notwithstanding any other 
    provision in Federal law, or the law of any State:
            ``(A) Any action by an insured depository institution to 
        recover from the Corporation the overpaid amount of any 
        assessment shall be brought within 3 years after the date the 
        assessment payment was due, subject to the exception in 
        subparagraph (E).
            ``(B) Any action by the Corporation to recover from an 
        insured depository institution the underpaid amount of any 
        assessment shall be brought within 3 years after the date the 
        assessment payment was due, subject to the exceptions in 
        subparagraphs (C) and (E).
            ``(C) If an insured depository institution has made a false 
        or fraudulent statement with intent to evade any or all of its 
        assessment, the Corporation shall have until 3 years after the 
        date of discovery of the false or fraudulent statement in which 
        to bring an action to recover the underpaid amount.
            ``(D) Except as provided in subparagraph (C), assessment 
        deposit information contained in records no longer required to 
        be maintained pursuant to subsection (b)(4) shall be considered 
        conclusive and not subject to change.
            ``(E) Any action for the underpaid or overpaid amount of 
        any assessment that became due before the amendment to this 
        subsection under the Federal Deposit Insurance Reform Act of 
        2005 took effect shall be subject to the statute of limitations 
        for assessments in effect at the time the assessment became 
        due.''.
    (e) Effective Date.--This section and the amendments made by this 
section shall take effect on the date that the final regulations 
required under section 9(a)(5) take effect.

SEC. 2105. REPLACEMENT OF FIXED DESIGNATED RESERVE RATIO WITH RESERVE 
              RANGE.

    (a) In General.--Section 7(b)(3) of the Federal Deposit Insurance 
Act (12 U.S.C. 1817(b)(3)) is amended to read as follows:
        ``(3) Designated reserve ratio.--
            ``(A) Establishment.--
                ``(i) In general.--Before the beginning of each 
            calendar year, the Board of Directors shall designate the 
            reserve ratio applicable with respect to the Deposit 
            Insurance Fund and publish the reserve ratio so designated.
                ``(ii) Rulemaking requirement.--Any change to the 
            designated reserve ratio shall be made by the Board of 
            Directors by regulation after notice and opportunity for 
            comment.
            ``(B) Range.--The reserve ratio designated by the Board of 
        Directors for any year--
                ``(i) may not exceed 1.5 percent of estimated insured 
            deposits; and
                ``(ii) may not be less than 1.15 percent of estimated 
            insured deposits.
            ``(C) Factors.--In designating a reserve ratio for any 
        year, the Board of Directors shall--
                ``(i) take into account the risk of losses to the 
            Deposit Insurance Fund in such year and future years, 
            including historic experience and potential and estimated 
            losses from insured depository institutions;
                ``(ii) take into account economic conditions generally 
            affecting insured depository institutions so as to allow 
            the designated reserve ratio to increase during more 
            favorable economic conditions and to decrease during less 
            favorable economic conditions, notwithstanding the 
            increased risks of loss that may exist during such less 
            favorable conditions, as determined to be appropriate by 
            the Board of Directors;
                ``(iii) seek to prevent sharp swings in the assessment 
            rates for insured depository institutions; and
                ``(iv) take into account such other factors as the 
            Board of Directors may determine to be appropriate, 
            consistent with the requirements of this subparagraph.
            ``(D) Publication of proposed change in ratio.--In 
        soliciting comment on any proposed change in the designated 
        reserve ratio in accordance with subparagraph (A), the Board of 
        Directors shall include in the published proposal a thorough 
        analysis of the data and projections on which the proposal is 
        based.''.
    (b) Effective Date.--This section and the amendments made by this 
section shall take effect on the date that the final regulations 
required under section 9(a)(1) take effect.

SEC. 2106. REQUIREMENTS APPLICABLE TO THE RISK-BASED ASSESSMENT SYSTEM.

    Section 7(b)(1) of the Federal Deposit Insurance Act (12 U.S.C. 
1817(b)(1)) is amended by adding at the end the following new 
subparagraphs:
            ``(E) Information concerning risk of loss and economic 
        conditions.--
                ``(i) Sources of information.--For purposes of 
            determining risk of losses at insured depository 
            institutions and economic conditions generally affecting 
            depository institutions, the Corporation shall collect 
            information, as appropriate, from all sources the Board of 
            Directors considers appropriate, such as reports of 
            condition, inspection reports, and other information from 
            all Federal banking agencies, any information available 
            from State bank supervisors, State insurance and securities 
            regulators, the Securities and Exchange Commission 
            (including information described in section 35), the 
            Secretary of the Treasury, the Commodity Futures Trading 
            Commission, the Farm Credit Administration, the Federal 
            Trade Commission, any Federal reserve bank or Federal home 
            loan bank, and other regulators of financial institutions, 
            and any information available from credit rating entities, 
            and other private economic or business analysts.
                ``(ii) Consultation with federal banking agencies.--

                    ``(I) In general.--Except as provided in subclause 
                (II), in assessing the risk of loss to the Deposit 
                Insurance Fund with respect to any insured depository 
                institution, the Corporation shall consult with the 
                appropriate Federal banking agency of such institution.
                    ``(II) Treatment on aggregate basis.--In the case 
                of insured depository institutions that are well 
                capitalized (as defined in section 38) and, in the most 
                recent examination, were found to be well managed, the 
                consultation under subclause (I) concerning the 
                assessment of the risk of loss posed by such 
                institutions may be made on an aggregate basis.

                ``(iii) Rule of construction.--No provision of this 
            paragraph shall be construed as providing any new authority 
            for the Corporation to require submission of information by 
            insured depository institutions to the Corporation.
            ``(F) Modifications to the risk-based assessment system 
        allowed only after notice and comment.--In revising or 
        modifying the risk-based assessment system at any time after 
        the date of the enactment of the Federal Deposit Insurance 
        Reform Act of 2005, the Board of Directors may implement such 
        revisions or modification in final form only after notice and 
        opportunity for comment.''.

SEC. 2107. REFUNDS, DIVIDENDS, AND CREDITS FROM DEPOSIT INSURANCE FUND.

    (a) In General.--Subsection (e) of section 7 of the Federal Deposit 
Insurance Act (12 U.S.C. 1817(e)) is amended to read as follows:
    ``(e) Refunds, Dividends, and Credits.--
        ``(1) Refunds of overpayments.--In the case of any payment of 
    an assessment by an insured depository institution in excess of the 
    amount due to the Corporation, the Corporation may--
            ``(A) refund the amount of the excess payment to the 
        insured depository institution; or
            ``(B) credit such excess amount toward the payment of 
        subsequent assessments until such credit is exhausted.
        ``(2) Dividends from excess amounts in deposit insurance 
    fund.--
            ``(A) Reserve ratio in excess of 1.5 percent of estimated 
        insured deposits.--If, at the end of a calendar year, the 
        reserve ratio of the Deposit Insurance Fund exceeds 1.5 percent 
        of estimated insured deposits, the Corporation shall declare 
        the amount in the Fund in excess of the amount required to 
        maintain the reserve ratio at 1.5 percent of estimated insured 
        deposits, as dividends to be paid to insured depository 
        institutions.
            ``(B) Reserve ratio equal to or in excess of 1.35 percent 
        of estimated insured deposits and not more than 1.5 percent.--
        If, at the end of a calendar year, the reserve ratio of the 
        Deposit Insurance Fund equals or exceeds 1.35 percent of 
        estimated insured deposits and is not more than 1.5 percent of 
        such deposits, the Corporation shall declare the amount in the 
        Fund that is equal to 50 percent of the amount in excess of the 
        amount required to maintain the reserve ratio at 1.35 percent 
        of the estimated insured deposits as dividends to be paid to 
        insured depository institutions.
            ``(C) Basis for distribution of dividends.--
                ``(i) In general.--Solely for the purposes of dividend 
            distribution under this paragraph, the Corporation shall 
            determine each insured depository institution's relative 
            contribution to the Deposit Insurance Fund (or any 
            predecessor deposit insurance fund) for calculating such 
            institution's share of any dividend declared under this 
            paragraph, taking into account the factors described in 
            clause (ii).
                ``(ii) Factors for distribution.--In implementing this 
            paragraph in accordance with regulations, the Corporation 
            shall take into account the following factors:

                    ``(I) The ratio of the assessment base of an 
                insured depository institution (including any 
                predecessor) on December 31, 1996, to the assessment 
                base of all eligible insured depository institutions on 
                that date.
                    ``(II) The total amount of assessments paid on or 
                after January 1, 1997, by an insured depository 
                institution (including any predecessor) to the Deposit 
                Insurance Fund (and any predecessor deposit insurance 
                fund).
                    ``(III) That portion of assessments paid by an 
                insured depository institution (including any 
                predecessor) that reflects higher levels of risk 
                assumed by such institution.
                    ``(IV) Such other factors as the Corporation may 
                determine to be appropriate.

            ``(D) Notice and opportunity for comment.--The Corporation 
        shall prescribe by regulation, after notice and opportunity for 
        comment, the method for the calculation, declaration, and 
        payment of dividends under this paragraph.
            ``(E) Limitation.--The Board of Directors may suspend or 
        limit dividends paid under subparagraph (B), if the Board 
        determines in writing that--
                ``(i) a significant risk of losses to the Deposit 
            Insurance Fund exists over the next 1-year period; and
                ``(ii) it is likely that such losses will be 
            sufficiently high as to justify a finding by the Board that 
            the reserve ratio should temporarily be allowed--

                    ``(I) to grow without requiring dividends under 
                subparagraph (B); or
                    ``(II) to exceed the maximum amount established 
                under subsection (b)(3)(B)(i).

            ``(F) Considerations.--In making a determination under 
        subparagraph (E), the Board shall consider--
                ``(i) national and regional conditions and their impact 
            on insured depository institutions;
                ``(ii) potential problems affecting insured depository 
            institutions or a specific group or type of depository 
            institution;
                ``(iii) the degree to which the contingent liability of 
            the Corporation for anticipated failures of insured 
            institutions adequately addresses concerns over funding 
            levels in the Deposit Insurance Fund; and
                ``(iv) any other factors that the Board determines are 
            appropriate.
            ``(G) Review of determination.--
                ``(i) Annual review.--A determination to suspend or 
            limit dividends under subparagraph (E) shall be reviewed by 
            the Board of Directors annually.
                ``(ii) Action by board.--Based on each annual review 
            under clause (i), the Board of Directors shall either renew 
            or remove a determination to suspend or limit dividends 
            under subparagraph (E), or shall make a new determination 
            in accordance with this paragraph. Unless justified under 
            the terms of the renewal or new determination, the 
            Corporation shall be required to provide cash dividends 
            under subparagraph (A) or (B), as appropriate.
        ``(3) One-time credit based on total assessment base at year-
    end 1996.--
            ``(A) In general.--Before the end of the 270-day period 
        beginning on the date of the enactment of the Federal Deposit 
        Insurance Reform Act of 2005, the Board of Directors shall, by 
        regulation after notice and opportunity for comment, provide 
        for a credit to each eligible insured depository institution 
        (or a successor insured depository institution), based on the 
        assessment base of the institution on December 31, 1996, as 
        compared to the combined aggregate assessment base of all 
        eligible insured depository institutions, taking into account 
        such factors as the Board of Directors may determine to be 
        appropriate.
            ``(B) Credit limit.--The aggregate amount of credits 
        available under subparagraph (A) to all eligible insured 
        depository institutions shall equal the amount that the 
        Corporation could collect if the Corporation imposed an 
        assessment of 10.5 basis points on the combined assessment base 
        of the Bank Insurance Fund and the Savings Association 
        Insurance Fund as of December 31, 2001.
            ``(C) Eligible insured depository institution defined.--For 
        purposes of this paragraph, the term `eligible insured 
        depository institution' means any insured depository 
        institution that--
                ``(i) was in existence on December 31, 1996, and paid a 
            deposit insurance assessment prior to that date; or
                ``(ii) is a successor to any insured depository 
            institution described in clause (i).
            ``(D) Application of credits.--
                ``(i) In general.--Subject to clause (ii), the amount 
            of a credit to any eligible insured depository institution 
            under this paragraph shall be applied by the Corporation, 
            subject to subsection (b)(3)(E), to the assessments imposed 
            on such institution under subsection (b) that become due 
            for assessment periods beginning after the effective date 
            of regulations prescribed under subparagraph (A).
                ``(ii) Temporary restriction on use of credits.--The 
            amount of a credit to any eligible insured depository 
            institution under this paragraph may not be applied to more 
            than 90 percent of the assessments imposed on such 
            institution under subsection (b) that become due for 
            assessment periods beginning in fiscal years 2008, 2009, 
            and 2010.
                ``(iii) Regulations.--The regulations prescribed under 
            subparagraph (A) shall establish the qualifications and 
            procedures governing the application of assessment credits 
            pursuant to clause (i).
            ``(E) Limitation on amount of credit for certain depository 
        institutions.--In the case of an insured depository institution 
        that exhibits financial, operational, or compliance weaknesses 
        ranging from moderately severe to unsatisfactory, or is not 
        adequately capitalized (as defined in section 38) at the 
        beginning of an assessment period, the amount of any credit 
        allowed under this paragraph against the assessment on that 
        depository institution for such period may not exceed the 
        amount calculated by applying to that depository institution 
        the average assessment rate on all insured depository 
        institutions for such assessment period.
            ``(F) Successor defined.--The Corporation shall define the 
        term `successor' for purposes of this paragraph, by regulation, 
        and may consider any factors as the Board may deem appropriate.
        ``(4) Administrative review.--
            ``(A) In general.--The regulations prescribed under 
        paragraphs (2)(D) and (3) shall include provisions allowing an 
        insured depository institution a reasonable opportunity to 
        challenge administratively the amount of the credit or dividend 
        determined under paragraph (2) or (3) for such institution.
            ``(B) Administrative review.--Any review under subparagraph 
        (A) of any determination of the Corporation under paragraph (2) 
        or (3) shall be final and not subject to judicial review.''.
    (b) Definition of Reserve Ratio.--Section 3(y) of the Federal 
Deposit Insurance Act (12 U.S.C. 1813(y)) (as amended by section 
2105(b) of this subtitle) is amended by adding at the end the following 
new paragraph:
        ``(3) Reserve ratio.--The term `reserve ratio', when used with 
    regard to the Deposit Insurance Fund other than in connection with 
    a reference to the designated reserve ratio, means the ratio of the 
    net worth of the Deposit Insurance Fund to the value of the 
    aggregate estimated insured deposits.''.

SEC. 2108. DEPOSIT INSURANCE FUND RESTORATION PLANS.

    Section 7(b)(3) of the Federal Deposit Insurance Act (12 U.S.C. 
1817(b)(3)) (as amended by section 2105(a) of this subtitle) is amended 
by adding at the end the following new subparagraph:
            ``(E) DIF restoration plans.--
                ``(i) In general.--Whenever--

                    ``(I) the Corporation projects that the reserve 
                ratio of the Deposit Insurance Fund will, within 6 
                months of such determination, fall below the minimum 
                amount specified in subparagraph (B)(ii) for the 
                designated reserve ratio; or
                    ``(II) the reserve ratio of the Deposit Insurance 
                Fund actually falls below the minimum amount specified 
                in subparagraph (B)(ii) for the designated reserve 
                ratio without any determination under subclause (I) 
                having been made,

            the Corporation shall establish and implement a Deposit 
            Insurance Fund restoration plan within 90 days that meets 
            the requirements of clause (ii) and such other conditions 
            as the Corporation determines to be appropriate.
                ``(ii) Requirements of restoration plan.--A Deposit 
            Insurance Fund restoration plan meets the requirements of 
            this clause if the plan provides that the reserve ratio of 
            the Fund will meet or exceed the minimum amount specified 
            in subparagraph (B)(ii) for the designated reserve ratio 
            before the end of the 5-year period beginning upon the 
            implementation of the plan (or such longer period as the 
            Corporation may determine to be necessary due to 
            extraordinary circumstances).
                ``(iii) Restriction on assessment credits.--As part of 
            any restoration plan under this subparagraph, the 
            Corporation may elect to restrict the application of 
            assessment credits provided under subsection (e)(3) for any 
            period that the plan is in effect.
                ``(iv) Limitation on restriction.--Notwithstanding 
            clause (iii), while any restoration plan under this 
            subparagraph is in effect, the Corporation shall apply 
            credits provided to an insured depository institution under 
            subsection (e)(3) against any assessment imposed on the 
            institution for any assessment period in an amount equal to 
            the lesser of--

                    ``(I) the amount of the assessment; or
                    ``(II) the amount equal to 3 basis points of the 
                institution's assessment base.

                ``(v) Transparency.--Not more than 30 days after the 
            Corporation establishes and implements a restoration plan 
            under clause (i), the Corporation shall publish in the 
            Federal Register a detailed analysis of the factors 
            considered and the basis for the actions taken with regard 
            to the plan.''.

SEC. 2109. REGULATIONS REQUIRED.

    (a) In General.--Not later than 270 days after the date of the 
enactment of this Act, the Board of Directors of the Federal Deposit 
Insurance Corporation shall prescribe final regulations, after notice 
and opportunity for comment--
        (1) designating the reserve ratio for the Deposit Insurance 
    Fund in accordance with section 7(b)(3) of the Federal Deposit 
    Insurance Act (as amended by section 2105 of this subtitle);
        (2) implementing increases in deposit insurance coverage in 
    accordance with the amendments made by section 2103 of this 
    subtitle;
        (3) implementing the dividend requirement under section 7(e)(2) 
    of the Federal Deposit Insurance Act (as amended by section 2107 of 
    this subtitle);
        (4) implementing the 1-time assessment credit to certain 
    insured depository institutions in accordance with section 7(e)(3) 
    of the Federal Deposit Insurance Act, as amended by section 2107 of 
    this subtitle, including the qualifications and procedures under 
    which the Corporation would apply assessment credits; and
        (5) providing for assessments under section 7(b) of the Federal 
    Deposit Insurance Act, as amended by this subtitle.
    (b) Transition Provisions.--
        (1) Continuation of existing assessment regulations.--No 
    provision of this subtitle or any amendment made by this subtitle 
    shall be construed as affecting the authority of the Corporation to 
    set or collect deposit insurance assessments pursuant to any 
    regulations in effect before the effective date of the final 
    regulations prescribed under subsection (a).
        (2) Treatment of dif members under existing regulations.--As of 
    the date of the merger of the Bank Insurance Fund and the Savings 
    Association Insurance Fund pursuant to section 2102, the assessment 
    regulations in effect immediately before the date of the enactment 
    of this Act shall continue to apply to all members of the Deposit 
    Insurance Fund, until such regulations are modified by the 
    Corporation, notwithstanding that such regulations may refer to 
    ``Bank Insurance Fund members'' or ``Savings Association Insurance 
    Fund members''.

       TITLE III--DIGITAL TELEVISION TRANSITION AND PUBLIC SAFETY

SEC. 3001. SHORT TITLE; DEFINITION.

    (a) Short Title.--This title may be cited as the ``Digital 
Television Transition and Public Safety Act of 2005''.
    (b) Definition.--As used in this Act, the term ``Assistant 
Secretary'' means the Assistant Secretary for Communications and 
Information of the Department of Commerce.

SEC. 3002. ANALOG SPECTRUM RECOVERY: FIRM DEADLINE.

    (a) Amendments.--Section 309(j)(14) of the Communications Act of 
1934 (47 U.S.C. 309(j)(14)) is amended--
        (1) in subparagraph (A)--
            (A) by inserting ``full-power'' before ``television 
        broadcast license''; and
            (B) by striking ``December 31, 2006'' and inserting 
        ``February 17, 2009'';
        (2) by striking subparagraph (B);
        (3) in subparagraph (C)(i)(I), by striking ``or (B)'';
        (4) in subparagraph (D), by striking ``subparagraph (C)(i)'' 
    and inserting ``subparagraph (B)(i)''; and
        (5) by redesignating subparagraphs (C) and (D) as subparagraphs 
    (B) and (C), respectively.
    (b) Terminations of Analog Licenses and Broadcasting.--The Federal 
Communications Commission shall take such actions as are necessary--
        (1) to terminate all licenses for full-power television 
    stations in the analog television service, and to require the 
    cessation of broadcasting by full-power stations in the analog 
    television service, by February 18, 2009; and
        (2) to require by February 18, 2009, that all broadcasting by 
    Class A stations, whether in the analog television service or 
    digital television service, and all broadcasting by full-power 
    stations in the digital television service, occur only on channels 
    between channels 2 and 36, inclusive, or 38 and 51, inclusive 
    (between frequencies 54 and 698 megahertz, inclusive).
    (c) Conforming Amendments.--
        (1) Section 337(e) of the Communications Act of 1934 (47 U.S.C. 
    337(e)) is amended--
            (A) in paragraph (1)--
                (i) by striking ``channels 60 to 69'' and inserting 
            ``channels 52 to 69'';
                (ii) by striking ``person who'' and inserting ``full-
            power television station licensee that'';
                (iii) by striking ``746 and 806 megahertz'' and 
            inserting ``698 and 806 megahertz''; and
                (iv) by striking ``the date on which the digital 
            television service transition period terminates, as 
            determined by the Commission'' and inserting ``February 17, 
            2009'';
            (B) in paragraph (2), by striking ``746 megahertz'' and 
        inserting ``698 megahertz''.

SEC. 3003. AUCTION OF RECOVERED SPECTRUM.

    (a) Deadline for Auction.--Section 309(j) of the Communications Act 
of 1934 (47 U.S.C. 309(j)) is amended--
        (1) by redesignating the second paragraph (15) of such section 
    (as added by section 203(b) of the Commercial Spectrum Enhancement 
    Act (Public Law 108-494; 118 Stat. 3993)), as paragraph (16) of 
    such section; and
        (2) in the first paragraph (15) of such section (as added by 
    section 3(a) of the Auction Reform Act of 2002 (Public Law 107-195; 
    116 Stat. 716)), by adding at the end of subparagraph (C) the 
    following new clauses:
                ``(v) Additional deadlines for recovered analog 
            spectrum.--Notwithstanding subparagraph (B), the Commission 
            shall conduct the auction of the licenses for recovered 
            analog spectrum by commencing the bidding not later than 
            January 28, 2008, and shall deposit the proceeds of such 
            auction in accordance with paragraph (8)(E)(ii) not later 
            than June 30, 2008.
                ``(vi) Recovered analog spectrum.--For purposes of 
            clause (v), the term `recovered analog spectrum' means the 
            spectrum between channels 52 and 69, inclusive (between 
            frequencies 698 and 806 megahertz, inclusive) reclaimed 
            from analog television service broadcasting under paragraph 
            (14), other than--

                    ``(I) the spectrum required by section 337 to be 
                made available for public safety services; and
                    ``(II) the spectrum auctioned prior to the date of 
                enactment of the Digital Television Transition and 
                Public Safety Act of 2005.''.

    (b) Extension of Auction Authority.--Section 309(j)(11) of such Act 
(47 U.S.C. 309(j)(11)) is amended by striking ``2007'' and inserting 
``2011''.

SEC. 3004. RESERVATION OF AUCTION PROCEEDS.

    Section 309(j)(8) of the Communications Act of 1934 (47 U.S.C. 
309(j)(8)) is amended--
        (1) in subparagraph (A), by striking ``subparagraph (B) or 
    subparagraph (D)'' and inserting ``subparagraphs (B), (D), and 
    (E)'';
        (2) in subparagraph (C)(i), by inserting before the semicolon 
    at the end the following: ``, except as otherwise provided in 
    subparagraph (E)(ii)''; and
        (3) by adding at the end the following new subparagraph:
            ``(E) Transfer of receipts.--
                ``(i) Establishment of fund.--There is established in 
            the Treasury of the United States a fund to be known as the 
            Digital Television Transition and Public Safety Fund.
                ``(ii) Proceeds for funds.--Notwithstanding 
            subparagraph (A), the proceeds (including deposits and 
            upfront payments from successful bidders) from the use of a 
            competitive bidding system under this subsection with 
            respect to recovered analog spectrum shall be deposited in 
            the Digital Television Transition and Public Safety Fund.
                ``(iii) Transfer of amount to treasury.--On September 
            30, 2009, the Secretary shall transfer $7,363,000,000 from 
            the Digital Television Transition and Public Safety Fund to 
            the general fund of the Treasury.
                ``(iv) Recovered analog spectrum.--For purposes of 
            clause (i), the term `recovered analog spectrum' has the 
            meaning provided in paragraph (15)(C)(vi).''.

SEC. 3005. DIGITAL-TO-ANALOG CONVERTER BOX PROGRAM.

    (a) Creation of Program.--The Assistant Secretary shall--
        (1) implement and administer a program through which households 
    in the United States may obtain coupons that can be applied toward 
    the purchase of digital-to-analog converter boxes; and
        (2) make payments of not to exceed $990,000,000, in the 
    aggregate, through fiscal year 2009 to carry out that program from 
    the Digital Television Transition and Public Safety Fund 
    established under section 309(j)(8)(E) of the Communications Act of 
    1934 (47 U.S.C. 309(j)(8)(E)).
    (b) Credit.--The Assistant Secretary may borrow from the Treasury 
beginning on October 1, 2006, such sums as may be necessary, but not to 
exceed $1,500,000,000, to implement this section. The Assistant 
Secretary shall reimburse the Treasury, without interest, as funds are 
deposited into the Digital Television Transition and Public Safety 
Fund.
    (c) Program Specifications.--
        (1) Limitations.--
            (A) Two-per-household maximum.--A household may obtain 
        coupons by making a request as required by the regulations 
        under this section between January 1, 2008, and March 31, 2009, 
        inclusive. The Assistant Secretary shall ensure that each 
        requesting household receives, via the United States Postal 
        Service, no more than two coupons.
            (B) No combinations of coupons.--Two coupons may not be 
        used in combination toward the purchase of a single digital-to-
        analog converter box.
            (C) Duration.--All coupons shall expire 3 months after 
        issuance.
        (2) Distribution of coupons.--The Assistant Secretary shall 
    expend not more than $100,000,000 on administrative expenses and 
    shall ensure that the sum of--
            (A) all administrative expenses for the program, including 
        not more than $5,000,000 for consumer education concerning the 
        digital television transition and the availability of the 
        digital-to-analog converter box program; and
            (B) the total maximum value of all the coupons redeemed, 
        and issued but not expired, does not exceed $990,000,000.
        (3) Use of additional amount.--If the Assistant Secretary 
    transmits to the Committee on Energy and Commerce of the House of 
    Representatives and Committee on Commerce, Science, and 
    Transportation of the Senate a statement certifying that the sum 
    permitted to be expended under paragraph (2) will be insufficient 
    to fulfill the requests for coupons from eligible households--
            (A) paragraph (2) shall be applied--
                (i) by substituting ``$160,000,000'' for 
            ``$100,000,000''; and
                (ii) by substituting ``$1,500,000,000'' for 
            ``$990,000,000'';
            (B) subsection (a)(2) shall be applied by substituting 
        ``$1,500,000,000'' for ``$990,000,000''; and
            (C) the additional amount permitted to be expended shall be 
        available 60 days after the Assistant Secretary sends such 
        statement.
        (4) Coupon value.--The value of each coupon shall be $40.
    (d) Definition of Digital-to-Analog Converter Box.--For purposes of 
this section, the term ``digital-to-analog converter box'' means a 
stand-alone device that does not contain features or functions except 
those necessary to enable a consumer to convert any channel broadcast 
in the digital television service into a format that the consumer can 
display on television receivers designed to receive and display signals 
only in the analog television service, but may also include a remote 
control device.

SEC. 3006. PUBLIC SAFETY INTEROPERABLE COMMUNICATIONS.

    (a) Creation of Program.--The Assistant Secretary, in consultation 
with the Secretary of the Department of Homeland Security--
        (1) may take such administrative action as is necessary to 
    establish and implement a grant program to assist public safety 
    agencies in the acquisition of, deployment of, or training for the 
    use of interoperable communications systems that utilize, or enable 
    interoperability with communications systems that can utilize, 
    reallocated public safety spectrum for radio communication; and
        (2) shall make payments of not to exceed $1,000,000,000, in the 
    aggregate, through fiscal year 2010 to carry out that program from 
    the Digital Television Transition and Public Safety Fund 
    established under section 309(j)(8)(E) of the Communications Act of 
    1934 (47 U.S.C. 309(j)(8)(E)).
    (b) Credit.--The Assistant Secretary may borrow from the Treasury 
beginning on October 1, 2006, such sums as may be necessary, but not to 
exceed $1,000,000,000, to implement this section. The Assistant 
Secretary shall reimburse the Treasury, without interest, as funds are 
deposited into the Digital Television Transition and Public Safety 
Fund.
    (c) Condition of Grants.--In order to obtain a grant under the 
grant program, a public safety agency shall agree to provide, from non-
Federal sources, not less than 20 percent of the costs of acquiring and 
deploying the interoperable communications systems funded under the 
grant program.
    (d) Definitions.--For purposes of this section:
        (1) Public safety agency.--The term ``public safety agency'' 
    means any State, local, or tribal government entity, or 
    nongovernmental organization authorized by such entity, whose sole 
    or principal purpose is to protect the safety of life, health, or 
    property.
        (2) Interoperable communications systems.--The term 
    ``interoperable communications systems'' means communications 
    systems which enable public safety agencies to share information 
    amongst local, State, Federal, and tribal public safety agencies in 
    the same area via voice or data signals.
        (3) Reallocated public safety spectrum.--The term ``reallocated 
    public safety spectrum'' means the bands of spectrum located at 
    764-776 megahertz and 794-806 megahertz, inclusive.

SEC. 3007. NYC 9/11 DIGITAL TRANSITION.

    (a) Funds Available.--From the Digital Television Transition and 
Public Safety Fund established under section 309(j)(8)(E) of the 
Communications Act of 1934 (47 U.S.C. 309(j)(8)(E)) the Assistant 
Secretary shall make payments of not to exceed $30,000,000, in the 
aggregate, which shall be available to carry out this section for 
fiscal years 2007 through 2008. The Assistant Secretary may borrow from 
the Treasury beginning October 1, 2006, such sums as may be necessary 
not to exceed $30,000,000 to implement and administer the program in 
accordance with this section. The Assistant Secretary shall reimburse 
the Treasury, without interest, as funds are deposited into the Digital 
Television Transition and Public Safety Fund.
    (b) Use of Funds.--The sums available under subsection (a) shall be 
made available by the Assistant Secretary by grant to be used to 
reimburse the Metropolitan Television Alliance for costs incurred in 
the design and deployment of a temporary digital television broadcast 
system to ensure that, until a permanent facility atop the Freedom 
Tower is constructed, the members of the Metropolitan Television 
Alliance can provide the New York City area with an adequate digital 
television signal as determined by the Federal Communications 
Commission.
    (c) Definitions.--For purposes of this section:
        (1) Metropolitan television alliance.--The term ``Metropolitan 
    Television Alliance'' means the organization formed by New York 
    City television broadcast station licensees to locate new shared 
    facilities as a result of the attacks on September 11, 2001 and the 
    loss of use of shared facilities that housed broadcast equipment.
        (2) New york city area.--The term ``New York City area'' means 
    the five counties comprising New York City and counties of northern 
    New Jersey in immediate proximity to New York City (Bergen, Essex, 
    Union, and Hudson Counties).

SEC. 3008. LOW-POWER TELEVISION AND TRANSLATOR DIGITAL-TO-ANALOG 
              CONVERSION.

    (a) Creation of Program.--The Assistant Secretary shall make 
payments of not to exceed $10,000,000, in the aggregate, during the 
fiscal year 2008 and 2009 period from the Digital Television Transition 
and Public Safety Fund established under section 309(j)(8)(E) of the 
Communications Act of 1934 (47 U.S.C. 309(j)(8)(E)) to implement and 
administer a program through which each eligible low-power television 
station may receive compensation toward the cost of the purchase of a 
digital-to-analog conversion device that enables it to convert the 
incoming digital signal of its corresponding full-power television 
station to analog format for transmission on the low-power television 
station's analog channel. An eligible low-power television station may 
receive such compensation only if it submits a request for such 
compensation on or before February 17, 2009. Priority compensation 
shall be given to eligible low-power television stations in which the 
license is held by a non-profit corporation and eligible low-power 
television stations that serve rural areas of fewer than 10,000 
viewers.
    (b) Credit.--The Assistant Secretary may borrow from the Treasury 
beginning October 1, 2006, such sums as may be necessary, but not to 
exceed $10,000,000, to implement this section. The Assistant Secretary 
shall reimburse the Treasury, without interest, as funds are deposited 
into the Digital Television Transition and Public Safety Fund.
    (c) Eligible Stations.--For purposes of this section, the term 
``eligible low-power television station'' means a low-power television 
broadcast station, Class A television station, television translator 
station, or television booster station--
        (1) that is itself broadcasting exclusively in analog format; 
    and
        (2) that has not purchased a digital-to-analog conversion 
    device prior to the date of enactment of the Digital Television 
    Transition and Public Safety Act of 2005.

SEC. 3009. LOW-POWER TELEVISION AND TRANSLATOR UPGRADE PROGRAM.

    (a) Establishment.--The Assistant Secretary shall make payments of 
not to exceed $65,000,000, in the aggregate, during fiscal year 2009 
from the Digital Television Transition and Public Safety Fund 
established under section 309(j)(8)(E) of the Communications Act of 
1934 (47 U.S.C. 309(j)(8)(E)) to implement and administer a program 
through which each licensee of an eligible low-power television station 
may receive reimbursement for equipment to upgrade low-power television 
stations from analog to digital in eligible rural communities, as that 
term is defined in section 610(b)(2) of the Rural Electrification Act 
of 1937 (7 U.S.C. 950bb(b)(2)). Such reimbursements shall be issued to 
eligible stations no earlier than October 1, 2010. Priority 
reimbursements shall be given to eligible low-power television stations 
in which the license is held by a non-profit corporation and eligible 
low-power television stations that serve rural areas of fewer than 
10,000 viewers.
    (b) Eligible Stations.--For purposes of this section, the term 
``eligible low-power television station'' means a low-power television 
broadcast station, Class A television station, television translator 
station, or television booster station--
        (1) that is itself broadcasting exclusively in analog format; 
    and
        (2) that has not converted from analog to digital operations 
    prior to the date of enactment of the Digital Television Transition 
    and Public Safety Act of 2005.

SEC. 3010. NATIONAL ALERT AND TSUNAMI WARNING PROGRAM.

    The Assistant Secretary shall make payments of not to exceed 
$156,000,000, in the aggregate, during the fiscal year 2007 through 
2012 period from the Digital Television Transition and Public Safety 
Fund established under section 309(j)(8)(E) of the Communications Act 
of 1934 (47 U.S.C. 309(j)(8)(E)) to implement a unified national alert 
system capable of alerting the public, on a national, regional, or 
local basis to emergency situations by using a variety of 
communications technologies. The Assistant Secretary shall use 
$50,000,000 of such amounts to implement a tsunami warning and coastal 
vulnerability program.

SEC. 3011. ENHANCE 911.

    The Assistant Secretary shall make payments of not to exceed 
$43,500,000, in the aggregate, from the Digital Television Transition 
and Public Safety Fund established under section 309(j)(8)(E) of the 
Communications Act of 1934 (47 U.S.C. 309(j)(8)(E)) to implement the 
ENHANCE 911 Act of 2004.

SEC. 3012. ESSENTIAL AIR SERVICE PROGRAM.

    (a) In General.--If the amount appropriated to carry out the 
essential air service program under subchapter II of chapter 417 of 
title 49, United States Code, equals or exceeds $110,000,000 for fiscal 
year 2007 or 2008, then the Secretary of Commerce shall make 
$15,000,000 available, from the Digital Television Transition and 
Public Safety Fund established by section 309(j)(8)(E) of the 
Communications Act of 1934 (47 U.S.C. 309(j)(8)(E)), to the Secretary 
of Transportation for use in carrying out the essential air service 
program for that fiscal year.
    (b) Application With Other Funds.--Amounts made available under 
subsection (a) for any fiscal year shall be in addition to any 
amounts--
        (1) appropriated for that fiscal year; or
        (2) derived from fees collected pursuant to section 45301(a)(1) 
    of title 49, United States Code, that are made available for 
    obligation and expenditure to carry out the essential air service 
    program for that fiscal year.
    (c) Advances.--The Secretary of Transportation may borrow from the 
Treasury such sums as may be necessary, but not to exceed $30,000,000 
on a temporary and reimbursable basis to implement subsection (a). The 
Secretary of Transportation shall reimburse the Treasury, without 
interest, as funds are deposited into the Digital Television Transition 
and Public Safety Fund under section 309(j)(8)(E) of the Communications 
Act of 1934 (47 U.S.C. 309(j)(8)(E)) and made available to the 
Secretary under subsection (a).

SEC. 3013. SUPPLEMENTAL LICENSE FEES.

    In addition to any fees assessed under the Communications Act of 
1934 (47 U.S.C. 151 et seq.), the Federal Communications Commission 
shall assess extraordinary fees for licenses in the aggregate amount of 
$10,000,000, which shall be deposited in the Treasury during fiscal 
year 2006 as offsetting receipts.

                  TITLE IV--TRANSPORTATION PROVISIONS

SEC. 4001. EXTENSION OF VESSEL TONNAGE DUTIES.

    (a) Extension of Duties.--Section 36 of the Act entitled ``An Act 
to provide revenue, equalize duties and encourage the industries of the 
United States, and for other purposes'', approved August 5, 1909 (36 
Stat. 111; 46 U.S.C. App. 121), is amended--
        (1) by striking ``9 cents per ton'' and all that follows 
    through ``2002,'' the first place it appears and inserting ``4.5 
    cents per ton, not to exceed in the aggregate 22.5 cents per ton in 
    any one year, for fiscal years 2006 through 2010,''; and
        (2) by striking ``27 cents per ton'' and all that follows 
    through ``2002,'' and inserting ``13.5 cents per ton, not to exceed 
    67.5 cents per ton per annum, for fiscal years 2006 through 
    2010,''.
    (b) Conforming Amendment.--The Act entitled ``An Act concerning 
tonnage duties on vessels entering otherwise than by sea'', approved 
March 8, 1910 (36 Stat. 234; 46 U.S.C. App. 132), is amended by 
striking ``9 cents per ton'' and all that follows through ``and 2 
cents'' and inserting ``4.5 cents per ton, not to exceed in the 
aggregate 22.5 cents per ton in any one year, for fiscal years 2006 
through 2010, and 2 cents''.

                           TITLE V--MEDICARE
               Subtitle A--Provisions Relating to Part A

SEC. 5001. HOSPITAL QUALITY IMPROVEMENT.

    (a) Submission of Hospital Data.--Section 1886(b)(3)(B) of the 
Social Security Act (42 U.S.C. 1395ww(b)(3)(B)) is amended--
        (1) in clause (i)--
            (A) in subclause (XIX), by striking ``2007'' and inserting 
        ``2006''; and
            (B) in subclause (XX), by striking ``for fiscal year 2008 
        and each subsequent fiscal year,'' and inserting ``for each 
        subsequent fiscal year, subject to clause (viii),'';
        (2) in clause (vii)--
            (A) in subclause (I), by striking ``for each of fiscal 
        years 2005 through 2007'' and inserting ``for fiscal years 2005 
        and 2006''; and
            (B) in subclause (II), by striking ``Each'' and inserting 
        ``For fiscal years 2005 and 2006, each''; and
        (3) by adding at the end the following new clauses:
                ``(viii)(I) For purposes of clause (i) for fiscal year 
            2007 and each subsequent fiscal year, in the case of a 
            subsection (d) hospital that does not submit, to the 
            Secretary in accordance with this clause, data required to 
            be submitted on measures selected under this clause with 
            respect to such a fiscal year, the applicable percentage 
            increase under clause (i) for such fiscal year shall be 
            reduced by 2.0 percentage points. Such reduction shall 
            apply only with respect to the fiscal year involved and the 
            Secretary shall not take into account such reduction in 
            computing the applicable percentage increase under clause 
            (i) for a subsequent fiscal year, and the Secretary and the 
            Medicare Payment Advisory Commission shall carry out the 
            requirements under section 5001(b) of the Deficit Reduction 
            Act of 2005.
                ``(II) Each subsection (d) hospital shall submit data 
            on measures selected under this clause to the Secretary in 
            a form and manner, and at a time, specified by the 
            Secretary for purposes of this clause.
                ``(III) The Secretary shall expand, beyond the measures 
            specified under clause (vii)(II) and consistent with the 
            succeeding subclauses, the set of measures that the 
            Secretary determines to be appropriate for the measurement 
            of the quality of care furnished by hospitals in inpatient 
            settings.
                ``(IV) Effective for payments beginning with fiscal 
            year 2007, in expanding the number of measures under 
            subclause (III), the Secretary shall begin to adopt the 
            baseline set of performance measures as set forth in the 
            November 2005 report by the Institute of Medicine of the 
            National Academy of Sciences under section 238(b) of the 
            Medicare Prescription Drug, Improvement, and Modernization 
            Act of 2003.
                ``(V) Effective for payments beginning with fiscal year 
            2008, the Secretary shall add other measures that reflect 
            consensus among affected parties and, to the extent 
            feasible and practicable, shall include measures set forth 
            by one or more national consensus building entities.
                ``(VI) For purposes of this clause and clause (vii), 
            the Secretary may replace any measures or indicators in 
            appropriate cases, such as where all hospitals are 
            effectively in compliance or the measures or indicators 
            have been subsequently shown not to represent the best 
            clinical practice.
                ``(VII) The Secretary shall establish procedures for 
            making data submitted under this clause available to the 
            public. Such procedures shall ensure that a hospital has 
            the opportunity to review the data that are to be made 
            public with respect to the hospital prior to such data 
            being made public. The Secretary shall report quality 
            measures of process, structure, outcome, patients' 
            perspectives on care, efficiency, and costs of care that 
            relate to services furnished in inpatient settings in 
            hospitals on the Internet website of the Centers for 
            Medicare & Medicaid Services.''.
    (b) Plan for Hospital Value Based Purchasing Program.--
        (1) In general.--The Secretary of Health and Human Services 
    shall develop a plan to implement a value based purchasing program 
    for payments under the Medicare program for subsection (d) 
    hospitals beginning with fiscal year 2009.
        (2) Details.--Such a plan shall include consideration of the 
    following issues:
            (A) The on-going development, selection, and modification 
        process for measures of quality and efficiency in hospital 
        inpatient settings.
            (B) The reporting, collection, and validation of quality 
        data.
            (C) The structure of value based payment adjustments, 
        including the determination of thresholds or improvements in 
        quality that would substantiate a payment adjustment, the size 
        of such payments, and the sources of funding for the value 
        based payments.
            (D) The disclosure of information on hospital performance.
    In developing such a plan, the Secretary shall consult with 
    relevant affected parties and shall consider experience with such 
    demonstrations that are relevant to the value based purchasing 
    program under this subsection.
    (c) Quality Adjustment in DRG Payments for Certain Hospital 
Acquired Infections.--
        (1) In general.--Section 1886(d)(4) of the Social Security Act 
    (42 U.S.C. 1395ww(d)(4)) is amended by adding at the end the 
    following new subparagraph:
    ``(D)(i) For discharges occurring on or after October 1, 2008, the 
diagnosis-related group to be assigned under this paragraph for a 
discharge described in clause (ii) shall be a diagnosis-related group 
that does not result in higher payment based on the presence of a 
secondary diagnosis code described in clause (iv).
    ``(ii) A discharge described in this clause is a discharge which 
meets the following requirements:
        ``(I) The discharge includes a condition identified by a 
    diagnosis code selected under clause (iv) as a secondary diagnosis.
        ``(II) But for clause (i), the discharge would have been 
    classified to a diagnosis-related group that results in a higher 
    payment based on the presence of a secondary diagnosis code 
    selected under clause (iv).
        ``(III) At the time of admission, no code selected under clause 
    (iv) was present.
    ``(iii) As part of the information required to be reported by a 
hospital with respect to a discharge of an individual in order for 
payment to be made under this subsection, for discharges occurring on 
or after October 1, 2007, the information shall include the secondary 
diagnosis of the individual at admission.
    ``(iv) By not later than October 1, 2007, the Secretary shall 
select diagnosis codes associated with at least two conditions, each of 
which codes meets all of the following requirements (as determined by 
the Secretary):
        ``(I) Cases described by such code have a high cost or high 
    volume, or both, under this title.
        ``(II) The code results in the assignment of a case to a 
    diagnosis-related group that has a higher payment when the code is 
    present as a secondary diagnosis.
        ``(III) The code describes such conditions that could 
    reasonably have been prevented through the application of evidence-
    based guidelines.
The Secretary may from time to time revise (through addition or 
deletion of codes) the diagnosis codes selected under this clause so 
long as there are diagnosis codes associated with at least two 
conditions selected for discharges occurring during any fiscal year.
    ``(v) In selecting and revising diagnosis codes under clause (iv), 
the Secretary shall consult with the Centers for Disease Control and 
Prevention and other appropriate entities.
    ``(vi) Any change resulting from the application of this 
subparagraph shall not be taken into account in adjusting the weighting 
factors under subparagraph (C)(i) or in applying budget neutrality 
under subparagraph (C)(iii).''.
        (2) No judicial review.--Section 1886(d)(7)(B) of such Act (42 
    U.S.C. 1395ww(d)(7)(B)) is amended by inserting before the period 
    the following: ``, including the selection and revision of codes 
    under paragraph (4)(D)''.

SEC. 5002. CLARIFICATION OF DETERMINATION OF MEDICAID PATIENT DAYS FOR 
              DSH COMPUTATION.

    (a) In General.--Section 1886(d)(5)(F)(vi) of the Social Security 
Act (42 U.S.C. 1395ww(d)(5)(F)(vi)) is amended by adding after and 
below subclause (II) the following:
``In determining under subclause (II) the number of the hospital's 
patient days for such period which consist of patients who (for such 
days) were eligible for medical assistance under a State plan approved 
under title XIX, the Secretary may, to the extent and for the period 
the Secretary determines appropriate, include patient days of patients 
not so eligible but who are regarded as such because they receive 
benefits under a demonstration project approved under title XI.''.
    (b) Ratification and Prospective Application of Previous 
Regulations.--
        (1) In general.--Subject to paragraph (2), regulations 
    described in paragraph (3), insofar as such regulations provide for 
    the treatment of individuals eligible for medical assistance under 
    a demonstration project approved under title XI of the Social 
    Security Act under section 1886(d)(5)(F)(vi) of such Act, are 
    hereby ratified, effective as of the date of their respective 
    promulgations.
        (2) No application to closed cost reports.--Paragraph (1) shall 
    not be applied in a manner that requires the reopening of any cost 
    reports which are closed as of the date of the enactment of this 
    Act.
        (3) Regulations described.--For purposes of paragraph (1), the 
    regulations described in this paragraph are as follows:
            (A) 2000 regulation.--Regulations promulgated on January 
        20, 2000, at 65 Federal Register 3136 et seq., including the 
        policy in such regulations regarding discharges occurring prior 
        to January 20, 2000.
            (B) 2003 regulation.--Regulations promulgated on August 1, 
        2003, at 68 Federal Register 45345 et seq.

SEC. 5003. IMPROVEMENTS TO THE MEDICARE-DEPENDENT HOSPITAL (MDH) 
              PROGRAM.

    (a) 5-Year Extension.--
        (1) Extension of Payment Methodology.--Section 1886(d)(5)(G) of 
    the Social Security Act (42 U.S.C. 1395ww(d)(5)(G)) is amended--
            (A) in clause (i), by striking ``October 1, 2006'' and 
        inserting ``October 1, 2011''; and
            (B) in clause (ii)(II)--
                (i) by striking ``October 1, 2006'' and inserting 
            ``October 1, 2011''; and
                (ii) by inserting ``or for discharges in the fiscal 
            year'' after ``for the cost reporting period''.
        (2) Conforming amendments.--
            (A) Extension of target amount.--Section 1886(b)(3)(D) of 
        such Act (42 U.S.C. 1395ww(b)(3)(D)) is amended--
                (i) in the matter preceding clause (i)--

                    (I) by striking ``beginning'' and inserting 
                ``occurring''; and
                    (II) by striking ``October 1, 2006'' and inserting 
                ``October 1, 2011''; and

                (ii) in clause (iv), by striking ``through fiscal year 
            2005'' and inserting ``through fiscal year 2011''.
            (B) Permitting hospitals to decline reclassification.--
        Section 13501(e)(2) of the Omnibus Budget Reconciliation Act of 
        1993 (42 U.S.C. 1395ww note) is amended by striking ``through 
        fiscal year 2005'' and inserting ``through fiscal year 2011''.
    (b) Option To Use 2002 as Base Year.--Section 1886(b)(3) of such 
Act (42 U.S.C. 1395ww(b)(3)) is amended--
        (1) in subparagraph (D), by inserting ``subject to subparagraph 
    (K),'' after ``(d)(5)(G)),''; and
        (2) by adding at the end the following new subparagraph:
    ``(K)(i) With respect to discharges occurring on or after October 
1, 2006, in the case of a medicare-dependent, small rural hospital, for 
purposes of applying subparagraph (D)--
        ``(I) there shall be substituted for the base cost reporting 
    period described in subparagraph (D)(i) the 12-month cost reporting 
    period beginning during fiscal year 2002; and
        ``(II) any reference in such subparagraph to the `first cost 
    reporting period' described in such subparagraph is deemed a 
    reference to the first cost reporting period beginning on or after 
    October 1, 2006.
    ``(ii) This subparagraph shall only apply to a hospital if the 
substitution described in clause (i)(I) results in an increase in the 
target amount under subparagraph (D) for the hospital.''.
    (c) Enhanced Payment for Amount by Which the Target Exceeds the PPS 
Rate.--Section 1886(d)(5)(G)(ii)(II) of such Act (42 U.S.C. 
1395ww(d)(5)(G)(iv)(II)) is amended by inserting ``(or 75 percent in 
the case of discharges occurring on or after October 1, 2006)'' after 
``50 percent''.
    (d) Enhanced Disproportionate Share Hospital (DSH) Treatment for 
Medicare-Dependent Hospitals.--Section 1886(d)(5)(F)(xiv)(II) of such 
Act (42 U.S.C. 1395ww(d)(5)(F)(xiv)(II)) is amended by inserting ``or, 
in the case of discharges occurring on or after October 1, 2006, as a 
medicare-dependent, small rural hospital under subparagraph (G)(iv)'' 
before the period at the end.

SEC. 5004. REDUCTION IN PAYMENTS TO SKILLED NURSING FACILITIES FOR BAD 
              DEBT.

    (a) In General.--Section 1861(v)(1) of the Social Security Act (42 
U.S.C. 1395x(v)(1)) is amended by adding at the end the following new 
subparagraph:
    ``(V) In determining such reasonable costs for skilled nursing 
facilities with respect to cost reporting periods beginning on or after 
October 1, 2005, the amount of bad debts otherwise treated as allowed 
costs which are attributable to the coinsurance amounts under this 
title for individuals who are entitled to benefits under part A and--
        ``(i) are not described in section 1935(c)(6)(A)(ii) shall be 
    reduced by 30 percent of such amount otherwise allowable; and
        ``(ii) are described in such section shall not be reduced.''.
    (b) Technical Amendment.--Section 1861(v)(1)(T) of such Act (42 
U.S.C. 1395x(v)(1)(T)) is amended by striking ``section 1833(t)(5)(B)'' 
and inserting ``section 1833(t)(8)(B)''.

SEC. 5005. EXTENDED PHASE-IN OF THE INPATIENT REHABILITATION FACILITY 
              CLASSIFICATION CRITERIA.

    (a) In General.--Notwithstanding section 412.23(b)(2) of title 42, 
Code of Federal Regulations, the Secretary of Health and Human Services 
shall apply the applicable percent specified in subsection (b) in the 
classification criterion used under the IRF regulation (as defined in 
subsection (c)) to determine whether a hospital or unit of a hospital 
is an inpatient rehabilitation facility under the Medicare program 
under title XVIII of the Social Security Act.
    (b) Applicable Percent.--For purposes of subsection (a), the 
applicable percent specified in this subsection for cost reporting 
periods--
        (1) beginning during the 12-month period beginning on July 1, 
    2006, is 60 percent;
        (2) beginning during the 12-month period beginning on July 1, 
    2007, is 65 percent; and
        (3) beginning on or after July 1, 2008, is 75 percent.
    (c) IRF Regulation.--For purposes of subsection (a), the term ``IRF 
regulation'' means the rule published in the Federal Register on May 7, 
2004, entitled ``Medicare Program; Final Rule; Changes to the Criteria 
for Being Classified as an Inpatient Rehabilitation Facility'' (69 Fed. 
Reg. 25752).

SEC. 5006. DEVELOPMENT OF A STRATEGIC PLAN REGARDING PHYSICIAN 
              INVESTMENT IN SPECIALTY HOSPITALS.

    (a) Development.--
        (1) In general.--The Secretary of Health and Human Services (in 
    this section referred to as the ``Secretary'') shall develop a 
    strategic and implementing plan to address issues described in 
    paragraph (2) regarding physician investment in specialty hospitals 
    (as defined in section 1877(h)(7)(A) of the Social Security Act (42 
    U.S.C. 1395nn(h)(7)(A)).
        (2) Issues described.--The issues described in this paragraph 
    are the following:
            (A) Proportionality of investment return.
            (B) Bona fide investment.
            (C) Annual disclosure of investment information.
            (D) The provision by specialty hospitals of--
                (i) care to patients who are eligible for medical 
            assistance under a State plan approved under title XIX of 
            the Social Security Act, including patients not so eligible 
            but who are regarded as such because they receive benefits 
            under a demonstration project approved under title XI of 
            such Act; and
                (ii) charity care.
            (E) Appropriate enforcement.
    (b) Reports.--
        (1) Interim report.--Not later than 3 months after the date of 
    the enactment of this Act, the Secretary shall submit an interim 
    report to the appropriate committees of jurisdiction of Congress on 
    the status of the development of the plan under subsection (a).
        (2) Final report.--Not later than six months after the date of 
    the enactment of this Act, the Secretary shall submit a final 
    report to the appropriate committees of jurisdiction of Congress on 
    the plan developed under subsection (a) together with 
    recommendations for such legislation and administrative actions as 
    the Secretary considers appropriate.
    (c) Continuation of Suspension on Enrollment.--
        (1) In general.--Subject to paragraph (2), the Secretary shall 
    continue the suspension on enrollment of new specialty hospitals 
    (as so defined) under title XVIII of the Social Security Act until 
    the earlier of--
            (A) the date that the Secretary submits the final report 
        under subsection (b)(2); or
            (B) the date that is six months after the date of the 
        enactment of this Act.
        (2) Extension of suspension.--If the Secretary fails to submit 
    the final report described in subsection (b)(2) by the date 
    required under such subsection, the Secretary shall--
            (A) extend the suspension on enrollment under paragraph (1) 
        for an additional two months; and
            (B) provide a certification to the appropriate committees 
        of jurisdiction of Congress of such failure.
    (d) Waiver.--In developing the plan and report required under this 
section, the Secretary may waive such requirements of section 553 of 
title 5, United States Code, as the Secretary determines necessary.
    (e) Funding.--Out of any funds in the Treasury not otherwise 
appropriated, there are appropriated to the Secretary for fiscal year 
2006, $2,000,000 to carry out this section.

SEC. 5007. MEDICARE DEMONSTRATION PROJECTS TO PERMIT GAINSHARING 
              ARRANGEMENTS.

    (a) Establishment.--The Secretary shall establish under this 
section a qualified gainsharing demonstration program under which the 
Secretary shall approve demonstration projects by not later than 
November 1, 2006, to test and evaluate methodologies and arrangements 
between hospitals and physicians designed to govern the utilization of 
inpatient hospital resources and physician work to improve the quality 
and efficiency of care provided to Medicare beneficiaries and to 
develop improved operational and financial hospital performance with 
sharing of remuneration as specified in the project. Such projects 
shall be operational by not later than January 1, 2007.
    (b) Requirements Described.--A demonstration project under this 
section shall meet the following requirements for purposes of 
maintaining or improving quality while achieving cost savings:
        (1) Arrangement for remuneration as share of savings.--The 
    demonstration project shall involve an arrangement between a 
    hospital and a physician under which the hospital provides 
    remuneration to the physician that represents solely a share of the 
    savings incurred directly as a result of collaborative efforts 
    between the hospital and the physician.
        (2) Written plan agreement.--The demonstration project shall be 
    conducted pursuant to a written agreement that--
            (A) is submitted to the Secretary prior to implementation 
        of the project; and
            (B) includes a plan outlining how the project will achieve 
        improvements in quality and efficiency.
        (3) Patient notification.--The demonstration project shall 
    include a notification process to inform patients who are treated 
    in a hospital participating in the project of the participation of 
    the hospital in such project.
        (4) Monitoring quality and efficiency of care.--The 
    demonstration project shall provide measures to ensure that the 
    quality and efficiency of care provided to patients who are treated 
    in a hospital participating in the demonstration project is 
    continuously monitored to ensure that such quality and efficiency 
    is maintained or improved.
        (5) Independent review.--The demonstration project shall 
    certify, prior to implementation, that the elements of the 
    demonstration project are reviewed by an organization that is not 
    affiliated with the hospital or the physician participating in the 
    project.
        (6) Referral limitations.--The demonstration project shall not 
    be structured in such a manner as to reward any physician 
    participating in the project on the basis of the volume or value of 
    referrals to the hospital by the physician.
    (c) Waiver of Certain Restrictions.--
        (1) In general.--An incentive payment made by a hospital to a 
    physician under and in accordance with a demonstration project 
    shall not constitute--
            (A) remuneration for purposes of section 1128B of the 
        Social Security Act (42 U.S.C. 1320a-7b);
            (B) a payment intended to induce a physician to reduce or 
        limit services to a patient entitled to benefits under Medicare 
        or a State plan approved under title XIX of such Act in 
        violation of section 1128A of such Act (42 U.S.C. 1320a-7a); or
            (C) a financial relationship for purposes of section 1877 
        of such Act (42 U.S.C. 1395nn).
        (2) Protection for existing arrangements.--In no case shall the 
    failure to comply with the requirements described in paragraph (1) 
    affect a finding made by the Inspector General of the Department of 
    Health and Human Services prior to the date of the enactment of 
    this Act that an arrangement between a hospital and a physician 
    does not violate paragraph (1) or (2) of section 1128A(a) of the 
    Social Security Act (42 U.S.C. 1320a-7(a)).
    (d) Program Administration.--
        (1) Solicitation of applications.--By not later than 90 days 
    after the date of the enactment of this Act, the Secretary shall 
    solicit applications for approval of a demonstration project, in 
    such form and manner, and at such time specified by the Secretary.
        (2) Number of projects approved.--The Secretary shall approve 
    not more than 6 demonstration projects, at least 2 of which shall 
    be located in a rural area.
        (3) Duration.--The qualified gainsharing demonstration program 
    under this section shall be conducted for the period beginning on 
    January 1, 2007, and ending on December 31, 2009.
    (e) Reports.--
        (1) Initial report.--By not later than December 1, 2006, the 
    Secretary shall submit to Congress a report on the number of 
    demonstration projects that will be conducted under this section.
        (2) Project update.--By not later than December 1, 2007, the 
    Secretary shall submit to Congress a report on the details of such 
    projects (including the project improvements towards quality and 
    efficiency described in subsection (b)(2)(B)).
        (3) Quality improvement and savings.--By not later than 
    December 1, 2008, the Secretary shall submit to Congress a report 
    on quality improvement and savings achieved as a result of the 
    qualified gainsharing demonstration program established under 
    subsection (a).
        (4) Final report.--By not later than May 1, 2010, the Secretary 
    shall submit to Congress a final report on the information 
    described in paragraph (3).
    (f) Funding.--
        (1) In general.--Out of any funds in the Treasury not otherwise 
    appropriated, there are appropriated to the Secretary for fiscal 
    year 2006 $6,000,000, to carry out this section.
        (2) Availability.--Funds appropriated under paragraph (1) shall 
    remain available for expenditure through fiscal year 2010.
    (g) Definitions.--For purposes of this section:
        (1) Demonstration project.--The term ``demonstration project'' 
    means a project implemented under the qualified gainsharing 
    demonstration program established under subsection (a).
        (2) Hospital.--The term ``hospital'' means a hospital that 
    receives payment under section 1886(d) of the Social Security Act 
    (42 U.S.C. 1395ww(d)), and does not include a critical access 
    hospital (as defined in section 1861(mm) of such Act (42 U.S.C. 
    1395x(mm))).
        (3) Medicare.--The term ``Medicare'' means the programs under 
    title XVIII of the Social Security Act.
        (4) Physician.--The term ``physician'' means, with respect to a 
    demonstration project, a physician described in paragraph (1) or 
    (3) of section 1861(r) of the Social Security Act (42 U.S.C. 
    1395x(r)) who is licensed as such a physician in the area in which 
    the project is located and meets requirements to provide services 
    for which benefits are provided under Medicare. Such term shall be 
    deemed to include a practitioner described in section 
    1842(e)(18)(C) of such Act (42 U.S.C. 1395u(e)(18)(C)).
        (5) Secretary.--The term ``Secretary'' means the Secretary of 
    Health and Human Services.

SEC. 5008. POST-ACUTE CARE PAYMENT REFORM DEMONSTRATION PROGRAM.

    (a) Establishment.--
        (1) In general.--By not later than January 1, 2008, the 
    Secretary of Health and Human Services (in this section referred to 
    as the ``Secretary'') shall establish a demonstration program for 
    purposes of understanding costs and outcomes across different post-
    acute care sites. Under such program, with respect to diagnoses 
    specified by the Secretary, an individual who receives treatment 
    from a provider for such a diagnosis shall receive a single 
    comprehensive assessment on the date of discharge from a subsection 
    (d) hospital (as defined in section 1886(d)(1)(B) of the Social 
    Security Act (42 U.S.C. 1395ww(d)(1)(B))) of the needs of the 
    patient and the clinical characteristics of the diagnosis to 
    determine the appropriate placement of such patient in a post-acute 
    care site. The Secretary shall use a standardized patient 
    assessment instrument across all post-acute care sites to measure 
    functional status and other factors during the treatment and at 
    discharge from each provider. Participants in the program shall 
    provide information on the fixed and variable costs for each 
    individual. An additional comprehensive assessment shall be 
    provided at the end of the episode of care.
        (2) Number of sites.--The Secretary shall conduct the 
    demonstration program under this section with sufficient numbers to 
    determine statistically reliable results.
        (3) Duration.--The Secretary shall conduct the demonstration 
    program under this section for a 3-year period.
    (b) Waiver Authority.--The Secretary may waive such requirements of 
titles XI and XVIII of the Social Security Act (42 U.S.C. 1301 et seq.; 
42 U.S.C. 1395 et seq.) as may be necessary for the purpose of carrying 
out the demonstration program under this section.
    (c) Report.--Not later than 6 months after the completion of the 
demonstration program under this section, the Secretary shall submit to 
Congress a report on such program, that includes the results of the 
program and recommendations for such legislation and administrative 
action as the Secretary determines to be appropriate.
    (d) Funding.--The Secretary shall provide for the transfer from the 
Federal Hospital Insurance Trust Fund established under section 1817 of 
the Social Security Act (42 U.S.C. 1395i), $6,000,000 for the costs of 
carrying out the demonstration program under this section.

               Subtitle B--Provisions Relating to Part B

                     CHAPTER 1--PAYMENT PROVISIONS

SEC. 5101. BENEFICIARY OWNERSHIP OF CERTAIN DURABLE MEDICAL EQUIPMENT 
              (DME).

    (a) DME.--
        (1) In general.--Section 1834(a)(7)(A) of the Social Security 
    Act (42 U.S.C. 1395m(a)(7)(A)) is amended to read as follows:
            ``(A) Payment.--In the case of an item of durable medical 
        equipment not described in paragraphs (2) through (6), the 
        following rules shall apply:
                ``(i) Rental.--

                    ``(I) In general.--Except as provided in clause 
                (iii), payment for the item shall be made on a monthly 
                basis for the rental of the item during the period of 
                medical need (but payments under this clause may not 
                extend over a period of continuous use (as determined 
                by the Secretary) of longer than 13 months).
                    ``(II) Payment amount.--Subject to subparagraph 
                (B), the amount recognized for the item, for each of 
                the first 3 months of such period, is 10 percent of the 
                purchase price recognized under paragraph (8) with 
                respect to the item, and, for each of the remaining 
                months of such period, is 7.5 percent of such purchase 
                price.

                ``(ii) Ownership after rental.--On the first day that 
            begins after the 13th continuous month during which payment 
            is made for the rental of an item under clause (i), the 
            supplier of the item shall transfer title to the item to 
            the individual.
                ``(iii) Purchase agreement option for power-driven 
            wheelchairs.--In the case of a power-driven wheelchair, at 
            the time the supplier furnishes the item, the supplier 
            shall offer the individual the option to purchase the item, 
            and payment for such item shall be made on a lump-sum basis 
            if the individual exercises such option.
                ``(iv) Maintenance and servicing.--After the supplier 
            transfers title to the item under clause (ii) or in the 
            case of a power-driven wheelchair for which a purchase 
            agreement has been entered into under clause (iii), 
            maintenance and servicing payments shall, if the Secretary 
            determines such payments are reasonable and necessary, be 
            made (for parts and labor not covered by the supplier's or 
            manufacturer's warranty, as determined by the Secretary to 
            be appropriate for the particular type of durable medical 
            equipment), and such payments shall be in an amount 
            determined to be appropriate by the Secretary.''.
        (2) Effective date.--The amendment made by paragraph (1) shall 
    apply to items furnished for which the first rental month occurs on 
    or after January 1, 2006.
    (b) Oxygen Equipment.--
        (1) In general.--Section 1834(a)(5) of such Act (42 U.S.C. 
    1395m(a)(5)) is amended--
            (A) in subparagraph (A), by striking ``and (E)'' and 
        inserting ``(E), and (F)''; and
            (B) by adding at the end the following new subparagraph:
            ``(F) Ownership of Equipment.--
                ``(i) In general.--Payment for oxygen equipment 
            (including portable oxygen equipment) under this paragraph 
            may not extend over a period of continuous use (as 
            determined by the Secretary) of longer than 36 months.
                ``(ii) Ownership.--

                    ``(I) Transfer of title.--On the first day that 
                begins after the 36th continuous month during which 
                payment is made for the equipment under this paragraph, 
                the supplier of the equipment shall transfer title to 
                the equipment to the individual.
                    ``(II) Payments for oxygen and maintenance and 
                servicing.--After the supplier transfers title to the 
                equipment under subclause (I)--

                        ``(aa) payments for oxygen shall continue to be 
                    made in the amount recognized for oxygen under 
                    paragraph (9) for the period of medical need; and
                        ``(bb) maintenance and servicing payments 
                    shall, if the Secretary determines such payments 
                    are reasonable and necessary, be made (for parts 
                    and labor not covered by the supplier's or 
                    manufacturer's warranty, as determined by the 
                    Secretary to be appropriate for the equipment), and 
                    such payments shall be in an amount determined to 
                    be appropriate by the Secretary.''.
        (2) Effective date.--
            (A) In general.--The amendments made by paragraph (1) shall 
        take effect on January 1, 2006.
            (B) Application to certain individuals.--In the case of an 
        individual receiving oxygen equipment on December 31, 2005, for 
        which payment is made under section 1834(a) of the Social 
        Security Act (42 U.S.C. 1395m(a)), the 36-month period 
        described in paragraph (5)(F)(i) of such section, as added by 
        paragraph (1), shall begin on January 1, 2006.

SEC. 5102. ADJUSTMENTS IN PAYMENT FOR IMAGING SERVICES.

    (a) Multiple Procedure Payment Reduction for Imaging Exempted From 
Budget Neutrality.--Section 1848(c)(2)(B) of the Social Security Act 
(42 U.S.C. 1395w-4(c)(2)(B)) is amended--
        (1) in clause (ii)(II), by striking ``clause (iv)'' and 
    inserting ``clauses (iv) and (v)'';
        (2) in clause (iv) in the heading, by inserting ``of certain 
    additional expenditures'' after ``Exemption''; and
        (3) by adding at the end the following new clause:
                ``(v) Exemption of certain reduced expenditures from 
            budget-neutrality calculation.--The following reduced 
            expenditures, as estimated by the Secretary, shall not be 
            taken into account in applying clause (ii)(II):

                    ``(I) Reduced payment for multiple imaging 
                procedures.--Effective for fee schedules established 
                beginning with 2007, reduced expenditures attributable 
                to the multiple procedure payment reduction for imaging 
                under the final rule published by the Secretary in the 
                Federal Register on November 21, 2005 (42 CFR 405, et 
                al.) insofar as it relates to the physician fee 
                schedules for 2006 and 2007.''.

    (b) Reduction in Physician Fee Schedule to OPD Payment Amount for 
Imaging Services.--Section 1848 of such Act (42 U.S.C. 1395w-4) is 
amended--
        (1) in subsection (b), by adding at the end the following new 
    paragraph:
        ``(4) Special rule for imaging services.--
            ``(A) In general.--In the case of imaging services 
        described in subparagraph (B) furnished on or after January 1, 
        2007, if--
                ``(i) the technical component (including the technical 
            component portion of a global fee) of the service 
            established for a year under the fee schedule described in 
            paragraph (1) without application of the geographic 
            adjustment factor described in paragraph (1)(C), exceeds
                ``(ii) the Medicare OPD fee schedule amount established 
            under the prospective payment system for hospital 
            outpatient department services under paragraph (3)(D) of 
            section 1833(t) for such service for such year, determined 
            without regard to geographic adjustment under paragraph 
            (2)(D) of such section,
        the Secretary shall substitute the amount described in clause 
        (ii), adjusted by the geographic adjustment factor described in 
        paragraph (1)(C), for the fee schedule amount for such 
        technical component for such year.
            ``(B) Imaging services described.--For purposes of 
        subparagraph (A), imaging services described in this 
        subparagraph are imaging and computer-assisted imaging 
        services, including X-ray, ultrasound (including 
        echocardiography), nuclear medicine (including positron 
        emission tomography), magnetic resonance imaging, computed 
        tomography, and fluoroscopy, but excluding diagnostic and 
        screening mammography.''; and
        (2) in subsection (c)(2)(B)(v), as added by subsection (a)(3), 
    by adding at the end the following new subclause:

                    ``(II) OPD payment cap for imaging services.--
                Effective for fee schedules established beginning with 
                2007, reduced expenditures attributable to subsection 
                (b)(4).''.

SEC. 5103. LIMITATION ON PAYMENTS FOR PROCEDURES IN AMBULATORY SURGICAL 
              CENTERS.

    Section 1833(i)(2) of the Social Security Act (42 U.S.C. 
1395l(i)(2)) is amended--
        (1) in subparagraph (A), by inserting ``subject to subparagraph 
    (E),'' after ``subparagraph (D),'';
        (2) in subparagraph (D)(ii), by inserting before the period at 
    the end the following: ``and taking into account reduced 
    expenditures that would apply if subparagraph (E) were to continue 
    to apply, as estimated by the Secretary''; and
        (3) by adding at the end the following new subparagraph:
    ``(E) With respect to surgical procedures furnished on or after 
January 1, 2007, and before the effective date of the implementation of 
a revised payment system under subparagraph (D), if--
        ``(i) the standard overhead amount under subparagraph (A) for a 
    facility service for such procedure, without the application of any 
    geographic adjustment, exceeds
        ``(ii) the Medicare OPD fee schedule amount established under 
    the prospective payment system for hospital outpatient department 
    services under paragraph (3)(D) of section 1833(t) for such service 
    for such year, determined without regard to geographic adjustment 
    under paragraph (2)(D) of such section,
the Secretary shall substitute under subparagraph (A) the amount 
described in clause (ii) for the standard overhead amount for such 
service referred to in clause (i).''.

SEC. 5104. UPDATE FOR PHYSICIANS' SERVICES FOR 2006.

    (a) Update for 2006.--Section 1848(d) of the Social Security Act 
(42 U.S.C. 1395w-4(d)) is amended--
        (1) in paragraph (4)(B), in the matter preceding clause (i), by 
    striking ``paragraph (5)'' and inserting ``paragraphs (5) and 
    (6)''; and
        (2) by adding at the end the following new paragraph:
        ``(6) Update for 2006.--The update to the single conversion 
    factor established in paragraph (1)(C) for 2006 shall be 0 
    percent.''.
    (b) Not Treated as Change in Law and Regulation in Sustainable 
Growth Rate Determination.--The amendments made by subsection (a) shall 
not be treated as a change in law for purposes of applying section 
1848(f)(2)(D) of the Social Security Act (42 U.S.C. 1395w-4(f)(2)(D)).
    (c) MedPAC Report.--
        (1) In general.--By not later than March 1, 2007, the Medicare 
    Payment Advisory Commission shall submit a report to Congress on 
    mechanisms that could be used to replace the sustainable growth 
    rate system under section 1848(f) of the Social Security Act (42 
    U.S.C. 1395w-4(f)).
        (2) Requirements.--The report required under paragraph (1) 
    shall--
            (A) identify and examine alternative methods for assessing 
        volume growth;
            (B) review options to control the volume of physicians' 
        services under the Medicare program while maintaining access to 
        such services by Medicare beneficiaries;
            (C) examine the application of volume controls under the 
        Medicare physician fee schedule under section 1848 of the 
        Social Security Act (42 U.S.C. 1395w-4);
            (D) identify levels of application of volume controls, such 
        as group practice, hospital medical staff, type of service, 
        geographic area, and outliers;
            (E) examine the administrative feasibility of implementing 
        the options reviewed under subparagraph (B), including the 
        availability of data and time lags;
            (F) examine the extent to which the alternative methods 
        identified and examined under subparagraph (A) should be 
        specified in such section 1848; and
            (G) identify the appropriate level of discretion for the 
        Secretary of Health and Human Services to change payment rates 
        under the Medicare physician fee schedule or otherwise take 
        steps that affect physician behavior.
    Such report shall include such recommendations on alternative 
    mechanisms to replace the sustainable growth rate system as the 
    Medicare Payment Advisory Commission determines appropriate.
        (3) Funding.--Out of any funds in the Treasury not otherwise 
    appropriated, there are appropriated to the Medicare Payment 
    Advisory Commission $550,000, to carry out this subsection.

SEC. 5105. THREE-YEAR TRANSITION OF HOLD HARMLESS PAYMENTS FOR SMALL 
              RURAL HOSPITALS UNDER THE PROSPECTIVE PAYMENT SYSTEM FOR 
              HOSPITAL OUTPATIENT DEPARTMENT SERVICES.

    Section 1833(t)(7)(D)(i) of the Social Security Act (42 U.S.C. 
1395l(t)(7)(D)(i)) is amended--
        (1) by inserting ``(I)'' before ``In the case''; and
        (2) by adding at the end the following new subclause:
                ``(II) In the case of a hospital located in a rural 
            area and that has not more than 100 beds and that is not a 
            sole community hospital (as defined in section 
            1886(d)(5)(D)(iii)), for covered OPD services furnished on 
            or after January 1, 2006, and before January 1, 2009, for 
            which the PPS amount is less than the pre-BBA amount, the 
            amount of payment under this subsection shall be increased 
            by the applicable percentage of the amount of such 
            difference. For purposes of the previous sentence, with 
            respect to covered OPD services furnished during 2006, 
            2007, or 2008, the applicable percentage shall be 95 
            percent, 90 percent, and 85 percent, respectively.''.

SEC. 5106. UPDATE TO THE COMPOSITE RATE COMPONENT OF THE BASIC CASE-MIX 
              ADJUSTED PROSPECTIVE PAYMENT SYSTEM FOR DIALYSIS 
              SERVICES.

    Section 1881(b)(12) of the Social Security Act (42 U.S.C. 
1395rr(b)(12)) is amended--
        (1) in subparagraph (F), in the flush matter at the end, by 
    striking ``Nothing'' and inserting ``Except as provided in 
    subparagraph (G), nothing'';
        (2) by redesignating subparagraph (G) as subparagraph (H); and
        (3) by inserting after subparagraph (F) the following new 
    subparagraph:
    ``(G) The Secretary shall increase the amount of the composite rate 
component of the basic case-mix adjusted system under subparagraph (B) 
for dialysis services furnished on or after January 1, 2006, by 1.6 
percent above the amount of such composite rate component for such 
services furnished on December 31, 2005.''.

SEC. 5107. REVISIONS TO PAYMENTS FOR THERAPY SERVICES.

    (a) Exception to Caps for 2006.--
        (1) In general.--Section 1833(g) of the Social Security Act (42 
    U.S.C. 1395l(g)) is amended--
            (A) in each of paragraphs (1) and (3), by striking 
        ``paragraph (4)'' and inserting ``paragraphs (4) and (5)''; and
            (B) by adding at the end the following new paragraph:
    ``(5) With respect to expenses incurred during 2006 for services, 
the Secretary shall implement a process under which an individual 
enrolled under this part may, upon request of the individual or a 
person on behalf of the individual, obtain an exception from the 
uniform dollar limitation specified in paragraph (2), for services 
described in paragraphs (1) and (3) if the provision of such services 
is determined to be medically necessary. Under such process, if the 
Secretary does not make a decision on such a request for an exception 
within 10 business days of the date of the Secretary's receipt of the 
request, the Secretary shall be deemed to have found the services to be 
medically necessary.''.
        (2) Timely implementation.--The Secretary of Health and Human 
    Services shall waive such provisions of law and regulation 
    (including those described in section 110(c) of Public Law 108-173) 
    as are necessary to implement the amendments made by paragraph (1) 
    on a timely basis and, notwithstanding any other provision of law, 
    may implement such amendments by program instruction or otherwise. 
    There shall be no administrative or judicial review under section 
    1869 or section 1878 of the Social Security Act (42 U.S.C. 1395ff 
    and 1395oo), or otherwise of the process (including the 
    establishment of the process) under section 1833(g)(5) of such Act, 
    as added by paragraph (1).
    (b) Implementation of Clinically Appropriate Code Edits In Order To 
Identify and Eliminate Improper Payments for Therapy Services.--By not 
later than July 1, 2006, the Secretary of Health and Human Services 
shall implement clinically appropriate code edits with respect to 
payments under part B of title XVIII of the Social Security Act for 
physical therapy services, occupational therapy services, and speech-
language pathology services in order to identify and eliminate improper 
payments for such services, including edits of clinically illogical 
combinations of procedure codes and other edits to control 
inappropriate billings.

                        CHAPTER 2--MISCELLANEOUS

SEC. 5111. ACCELERATED IMPLEMENTATION OF INCOME-RELATED REDUCTION IN 
              PART B PREMIUM SUBSIDY.

    Section 1839(i)(3)(B) of the Social Security Act (42 U.S.C. 
1395r(i)(3)(B)) is amended--
        (1) in the heading, by striking ``5-year'' and inserting ``3-
    year'';
        (2) in the matter preceding clause (i), by striking ``2011'' 
    and inserting ``2009'';
        (3) in clause (i), by striking ``20 percent'' and inserting 
    ``33 percent'';
        (4) in clause (ii), by striking ``40 percent'' and inserting 
    ``67 percent''; and
        (5) by striking clauses (iii) and (iv).

SEC. 5112. MEDICARE COVERAGE OF ULTRASOUND SCREENING FOR ABDOMINAL 
              AORTIC ANEURYSMS.

    (a) In General.--Section 1861 of the Social Security Act (42 U.S.C. 
1395x) is amended--
        (1) in subsection (s)(2)--
            (A) by striking ``and'' at the end of subparagraph (Y);
            (B) by adding ``and'' at the end of subparagraph (Z) and 
        moving such subparagraph 2 ems to the left; and
            (C) by adding at the end the following new subparagraph:
        ``(AA) ultrasound screening for abdominal aortic aneurysm (as 
    defined in subsection (bbb)) for an individual--
            ``(i) who receives a referral for such an ultrasound 
        screening as a result of an initial preventive physical 
        examination (as defined in section 1861(ww)(1));
            ``(ii) who has not been previously furnished such an 
        ultrasound screening under this title; and
            ``(iii) who--
                ``(I) has a family history of abdominal aortic 
            aneurysm; or
                ``(II) manifests risk factors included in a beneficiary 
            category recommended for screening by the United States 
            Preventive Services Task Force regarding abdominal aortic 
            aneurysms;''; and
        (2) by adding at the end the following new subsection:

          ``Ultrasound Screening for Abdominal Aortic Aneurysm

    ``(bbb) The term `ultrasound screening for abdominal aortic 
aneurysm' means--
        ``(1) a procedure using sound waves (or such other procedures 
    using alternative technologies, of commensurate accuracy and cost, 
    that the Secretary may specify) provided for the early detection of 
    abdominal aortic aneurysm; and
        ``(2) includes a physician's interpretation of the results of 
    the procedure.''.
    (b) Inclusion of Ultrasound Screening for Abdominal Aortic Aneurysm 
in Initial Preventive Physical Examination.--Section 1861(ww)(2) of 
such Act (42 U.S.C. 1395x(ww)(2)) is amended by adding at the end the 
following new subparagraph:
        ``(L) Ultrasound screening for abdominal aortic aneurysm as 
    defined in section 1861(bbb).''.
    (c) Payment for Ultrasound Screening for Abdominal Aortic 
Aneurysm.--Section 1848(j)(3) of such Act (42 U.S.C. 1395w-4(j)(3)) is 
amended by inserting ``(2)(AA),'' after ``(2)(W),''.
    (d) Frequency.--Section 1862(a)(1) of such Act (42 U.S.C. 
1395y(a)(1)) is amended--
        (1) by striking ``and'' at the end of subparagraph (L);
        (2) by striking the semicolon at the end of subparagraph (M) 
    and inserting ``, and''; and
        (3) by adding at the end the following new subparagraph:
        ``(N) in the case of ultrasound screening for abdominal aortic 
    aneurysm which is performed more frequently than is provided for 
    under section 1861(s)(2)(AA);''.
    (e) Non-Application of Part B Deductible.--Section 1833(b) of such 
Act (42 U.S.C. 1395l(b)) is amended in the first sentence--
        (1) by striking ``and'' before ``(6)''; and
        (2) by inserting ``, and (7) such deductible shall not apply 
    with respect to ultrasound screening for abdominal aortic aneurysm 
    (as defined in section 1861(bbb))'' before the period at the end.
    (f) Effective Date.--The amendments made by this section shall 
apply to services furnished on or after January 1, 2007.

SEC. 5113. IMPROVING PATIENT ACCESS TO, AND UTILIZATION OF, COLORECTAL 
              CANCER SCREENING.

    (a) Non-Application of Deductible for Colorectal Cancer Screening 
Tests.--Section 1833(b) of the Social Security Act (42 U.S.C. 
1395l(b)), as amended by section 5112(e), is amended in the first 
sentence--
        (1) by striking ``and'' before ``(7)''; and
        (2) by inserting ``, and (8) such deductible shall not apply 
    with respect to colorectal cancer screening tests (as described in 
    section 1861(pp)(1))'' before the period at the end.
    (b) Conforming Amendments.--Paragraphs (2)(C)(ii) and (3)(C)(ii) of 
section 1834(d) of such Act (42 U.S.C. 1395m(d)) are each amended--
        (1) by striking ``deductible and'' in the heading; and
        (2) in subclause (I), by striking ``deductible or'' each place 
    it appears.
    (c) Effective Date.--The amendments made by this section shall 
apply to services furnished on or after January 1, 2007.

SEC. 5114. DELIVERY OF SERVICES AT FEDERALLY QUALIFIED HEALTH CENTERS.

    (a) Coverage.--
        (1) In general.--Section 1861(aa)(3) of the Social Security Act 
    (42 U.S.C. 1395x(aa)(3)) is amended--
            (A) in subparagraph (A), by striking ``, and'' and 
        inserting ``and services described in subsections (qq) and 
        (vv); and'';
            (B) in subparagraph (B), by striking ``sections 329, 330, 
        and 340'' and inserting ``section 330''; and
            (C) in the flush matter at the end, by inserting ``by the 
        center or by a health care professional under contract with the 
        center'' after ``outpatient of a Federally qualified health 
        center''.
        (2) Consolidated billing.--The first sentence of section 
    1842(b)(6)(F) of such Act (42 U.S.C. 1395u(b)(6)(F)) is amended--
            (A) by striking ``and (G)'' and inserting ``(G)''; and
            (B) by inserting before the period at the end the 
        following: ``, and (H) in the case of services described in 
        section 1861(aa)(3) that are furnished by a health care 
        professional under contract with a Federally qualified health 
        center, payment shall be made to the center''.
    (b) Technical Corrections.--Clauses (i) and (ii)(II) of section 
1861(aa)(4)(A) of such Act (42 U.S.C. 1395x(aa)(4)(A)) are each amended 
by striking ``(other than subsection (h))''.
    (c) Effective Dates.--The amendments made by this section shall 
apply to services furnished on or after January 1, 2006.

SEC. 5115. WAIVER OF PART B LATE ENROLLMENT PENALTY FOR CERTAIN 
              INTERNATIONAL VOLUNTEERS.

    (a) In General.--
        (1) Waiver of penalty.--Section 1839(b) of the Social Security 
    Act (42 U.S.C. 1395r(b)) is amended in the second sentence by 
    inserting the following before the period at the end: ``or months 
    for which the individual can demonstrate that the individual was an 
    individual described in section 1837(k)(3)''.
        (2) Special enrollment period.--
            (A) In general.--Section 1837 of such Act (42 U.S.C. 1395p) 
        is amended by adding at the end the following new subsection:
    ``(k)(1) In the case of an individual who--
        ``(A) at the time the individual first satisfies paragraph (1) 
    or (2) of section 1836, is described in paragraph (3), and has 
    elected not to enroll (or to be deemed enrolled) under this section 
    during the individual's initial enrollment period; or
        ``(B) has terminated enrollment under this section during a 
    month in which the individual is described in paragraph (3),
there shall be a special enrollment period described in paragraph (2).
    ``(2) The special enrollment period described in this paragraph is 
the 6-month period beginning on the first day of the month which 
includes the date that the individual is no longer described in 
paragraph (3).
    ``(3) For purposes of paragraph (1), an individual described in 
this paragraph is an individual who--
        ``(A) is serving as a volunteer outside of the United States 
    through a program--
            ``(i) that covers at least a 12-month period; and
            ``(ii) that is sponsored by an organization described in 
        section 501(c)(3) of the Internal Revenue Code of 1986 and 
        exempt from taxation under section 501(a) of such Code; and
        ``(B) demonstrates health insurance coverage while serving in 
    the program.''.
            (B) Coverage period.--Section 1838 of such Act (42 U.S.C. 
        1395q) is amended by adding at the end the following new 
        subsection:
    ``(f) Notwithstanding subsection (a), in the case of an individual 
who enrolls during a special enrollment period pursuant to section 
1837(k), the coverage period shall begin on the first day of the month 
following the month in which the individual so enrolls.''.
    (b) Effective Date.--The amendment made by subsection (a)(1) shall 
apply to months beginning with January 2007 and the amendments made by 
subsection (a)(2) shall take effect on January 1, 2007.

            Subtitle C--Provisions Relating to Parts A and B

SEC. 5201. HOME HEALTH PAYMENTS.

    (a) 2006 Update.--Section 1895(b)(3)(B)(ii) of the Social Security 
Act (42 U.S.C. 1395fff(b)(3)(B)(ii)) is amended--
        (1) in subclause (III), by striking ``each of 2005 and 2006'' 
    and inserting ``all of 2005'';
        (2) by striking ``or'' at the end of subclause (III);
        (3) in subclause (IV), by striking ``2007 and'' and by 
    redesignating such subclause as subclause (V); and
        (4) by inserting after subclause (III) the following new 
    subclause:

                    ``(IV) 2006, 0 percent; and''.

    (b) Applying Rural Add-On Policy for 2006.--Section 421(a) of 
Medicare Prescription Drug, Improvement, and Modernization Act of 2003 
(Public Law 108-173; 117 Stat. 2283) is amended by inserting ``and 
episodes and visits beginning on or after January 1, 2006, and before 
January 1, 2007,'' after ``April 1, 2005,''.
    (c) Home Health Care Quality Improvement.--Section 1895(b)(3)(B) of 
the Social Security Act (42 U.S.C. 1395fff(b)(3)(B)) is amended--
        (1) in clause (ii)(V), as redesignated by subsection (a)(3), by 
    inserting ``subject to clause (v),'' after ``subsequent year,''; 
    and
        (2) by adding at the end the following new clause:
                ``(v) Adjustment if quality data not submitted.--

                    ``(I) Adjustment.--For purposes of clause (ii)(V), 
                for 2007 and each subsequent year, in the case of a 
                home health agency that does not submit data to the 
                Secretary in accordance with subclause (II) with 
                respect to such a year, the home health market basket 
                percentage increase applicable under such clause for 
                such year shall be reduced by 2 percentage points. Such 
                reduction shall apply only with respect to the year 
                involved, and the Secretary shall not take into account 
                such reduction in computing the prospective payment 
                amount under this section for a subsequent year, and 
                the Medicare Payment Advisory Commission shall carry 
                out the requirements under section 5201(d) of the 
                Deficit Reduction Act of 2005.
                    ``(II) Submission of quality data.--For 2007 and 
                each subsequent year, each home health agency shall 
                submit to the Secretary such data that the Secretary 
                determines are appropriate for the measurement of 
                health care quality. Such data shall be submitted in a 
                form and manner, and at a time, specified by the 
                Secretary for purposes of this clause.
                    ``(III) Public availability of data submitted.--The 
                Secretary shall establish procedures for making data 
                submitted under subclause (II) available to the public. 
                Such procedures shall ensure that a home health agency 
                has the opportunity to review the data that is to be 
                made public with respect to the agency prior to such 
                data being made public.''.

    (d) MedPAC Report on Value Based Purchasing.--
        (1) In general.--Not later than June 1, 2007, the Medicare 
    Payment Advisory Commission shall submit to Congress a report that 
    includes recommendations on a detailed structure of value based 
    payment adjustments for home health services under the Medicare 
    program under title XVIII of the Social Security Act. Such report 
    shall include recommendations concerning the determination of 
    thresholds, the size of such payments, sources of funds, and the 
    relationship of payments for improvement and attainment of quality.
        (2) Funding.--Out of any funds in the Treasury not otherwise 
    appropriated, there are appropriated to the Medicare Payment 
    Advisory Commission $550,000, to carry out this subsection.

SEC. 5202. REVISION OF PERIOD FOR PROVIDING PAYMENT FOR CLAIMS THAT ARE 
              NOT SUBMITTED ELECTRONICALLY.

    (a) Revision.--
        (1) Part a.--Section 1816(c)(3)(B)(ii) of the Social Security 
    Act (42 U.S.C. 1395h(c)(3)(B)(ii)) is amended by striking ``26 
    days'' and inserting ``28 days''.
        (2) Part b.--Section 1842(c)(3)(B)(ii) of such Act (42 U.S.C. 
    1395u(c)(3)(B)(ii)) is amended by striking ``26 days'' and 
    inserting ``28 days''.
    (b) Effective Date.--The amendments made by this section shall 
apply to claims submitted on or after January 1, 2006.

SEC. 5203. TIMEFRAME FOR PART A AND B PAYMENTS.

    Notwithstanding sections 1816(c) and 1842(c)(2) of the Social 
Security Act or any other provision of law--
        (1) any payment from the Federal Hospital Insurance Trust Fund 
    under section 1817 of the Social Security Act (42 U.S.C. 1395i) or 
    from the Federal Supplementary Medical Insurance Trust Fund under 
    section 1841 of such Act (42 U.S.C. 1395t) for claims submitted 
    under part A or B of title XVIII of such Act for items and services 
    furnished under such part A or B, respectively, that would 
    otherwise be payable during the period beginning on September 22, 
    2006, and ending on September 30, 2006, shall be paid on the first 
    business day of October 2006; and
        (2) no interest or late penalty shall be paid to an entity or 
    individual for any delay in a payment by reason of the application 
    of paragraph (1).

SEC. 5204. MEDICARE INTEGRITY PROGRAM FUNDING.

    Section 1817(k)(4) of the Social Security Act (42 U.S.C. 
1395i(k)(4)) is amended--
        (1) in subparagraph (B), by striking ``The amount'' and 
    inserting ``Subject to subparagraph (C), the amount''; and
        (2) by adding at the end the following new subparagraph:
            ``(C) Adjustments.--The amount appropriated under 
        subparagraph (A) for a fiscal year is increased as follows:
                ``(i) For fiscal year 2006, $100,000,000.''.

               Subtitle D--Provisions Relating to Part C

SEC. 5301. PHASE-OUT OF RISK ADJUSTMENT BUDGET NEUTRALITY IN 
              DETERMINING THE AMOUNT OF PAYMENTS TO MEDICARE ADVANTAGE 
              ORGANIZATIONS.

    (a) In General.--Section 1853 of the Social Security Act (42 U.S.C. 
1395w-23) is amended--
        (1) in subsection (j)(1)--
            (A) in subparagraph (A)--
                (i) by inserting ``(or, beginning with 2007, \1/12\ of 
            the applicable amount determined under subsection (k)(1))'' 
            after ``1853(c)(1)''; and
                (ii) by inserting ``(for years before 2007)'' after 
            ``adjusted as appropriate'';
            (B) in subparagraph (B), by inserting ``(for years before 
        2007)'' after ``adjusted as appropriate''; and
        (2) by adding at the end the following new subsection:
    ``(k) Determination of Applicable Amount for Purposes of 
Calculating the Benchmark Amounts.--
        ``(1) Applicable amount defined.--For purposes of subsection 
    (j), subject to paragraph (2), the term `applicable amount' means 
    for an area--
            ``(A) for 2007--
                ``(i) if such year is not specified under subsection 
            (c)(1)(D)(ii), an amount equal to the amount specified in 
            subsection (c)(1)(C) for the area for 2006--

                    ``(I) first adjusted by the rescaling factor for 
                2006 for the area (as made available by the Secretary 
                in the announcement of the rates on April 4, 2005, 
                under subsection (b)(1), but excluding any national 
                adjustment factors for coding intensity and risk 
                adjustment budget neutrality that were included in such 
                factor); and
                    ``(II) then increased by the national per capita MA 
                growth percentage, described in subsection (c)(6) for 
                2007, but not taking into account any adjustment under 
                subparagraph (C) of such subsection for a year before 
                2004;

                ``(ii) if such year is specified under subsection 
            (c)(1)(D)(ii), an amount equal to the greater of--

                    ``(I) the amount determined under clause (i) for 
                the area for the year; or
                    ``(II) the amount specified in subsection (c)(1)(D) 
                for the area for the year; and

            ``(B) for a subsequent year--
                ``(i) if such year is not specified under subsection 
            (c)(1)(D)(ii), an amount equal to the amount determined 
            under this paragraph for the area for the previous year 
            (determined without regard to paragraph (2)), increased by 
            the national per capita MA growth percentage, described in 
            subsection (c)(6) for that succeeding year, but not taking 
            into account any adjustment under subparagraph (C) of such 
            subsection for a year before 2004; and
                ``(ii) if such year is specified under subsection 
            (c)(1)(D)(ii), an amount equal to the greater of--

                    ``(I) the amount determined under clause (i) for 
                the area for the year; or
                    ``(II) the amount specified in subsection (c)(1)(D) 
                for the area for the year.

        ``(2) Phase-out of budget neutrality factor.--
            ``(A) In general.--Except as provided in subparagraph (D), 
        in the case of 2007 through 2010, the applicable amount 
        determined under paragraph (1) shall be multiplied by a factor 
        equal to 1 plus the product of--
                ``(i) the percent determined under subparagraph (B) for 
            the year; and
                ``(ii) the applicable phase-out factor for the year 
            under subparagraph (C).
            ``(B) Percent determined.--
                ``(i) In general.--For purposes of subparagraph (A)(i), 
            subject to clause (iv), the percent determined under this 
            subparagraph for a year is a percent equal to a fraction 
            the numerator of which is described in clause (ii) and the 
            denominator of which is described in clause (iii).
                ``(ii) Numerator based on difference between 
            demographic rate and risk rate.--

                    ``(I) In general.--The numerator described in this 
                clause is an amount equal to the amount by which the 
                demographic rate described in subclause (II) exceeds 
                the risk rate described in subclause (III).
                    ``(II) Demographic rate.--The demographic rate 
                described in this subclause is the Secretary's estimate 
                of the total payments that would have been made under 
                this part in the year if all the monthly payment 
                amounts for all MA plans were equal to \1/12\ of the 
                annual MA capitation rate under subsection (c)(1) for 
                the area and year, adjusted pursuant to subsection 
                (a)(1)(C).
                    ``(III) Risk rate.--The risk rate described in this 
                subclause is the Secretary's estimate of the total 
                payments that would have been made under this part in 
                the year if all the monthly payment amounts for all MA 
                plans were equal to the amount described in subsection 
                (j)(1)(A) (determined as if this paragraph had not 
                applied) under subsection (j) for the area and year, 
                adjusted pursuant to subsection (a)(1)(C).

                ``(iii) Denominator based on risk rate.--The 
            denominator described in this clause is equal to the total 
            amount estimated for the year under clause (ii)(III).
                ``(iv) Requirements.--In estimating the amounts under 
            the previous clauses, the Secretary shall--

                    ``(I) use a complete set of the most recent and 
                representative Medicare Advantage risk scores under 
                subsection (a)(3) that are available from the risk 
                adjustment model announced for the year;
                    ``(II) adjust the risk scores to reflect changes in 
                treatment and coding practices in the fee-for-service 
                sector;
                    ``(III) adjust the risk scores for differences in 
                coding patterns between Medicare Advantage plans and 
                providers under the original Medicare fee-for-service 
                program under parts A and B to the extent that the 
                Secretary has identified such differences, as required 
                in subsection (a)(1)(C);
                    ``(IV) as necessary, adjust the risk scores for 
                late data submitted by Medicare Advantage 
                organizations;
                    ``(V) as necessary, adjust the risk scores for 
                lagged cohorts; and
                    ``(VI) as necessary, adjust the risk scores for 
                changes in enrollment in Medicare Advantage plans 
                during the year.

                ``(v) Authority.--In computing such amounts the 
            Secretary may take into account the estimated health risk 
            of enrollees in preferred provider organization plans 
            (including MA regional plans) for the year.
            ``(C) Applicable phase-out factor.--For purposes of 
        subparagraph (A)(ii), the term `applicable phase-out factor' 
        means--
                ``(i) for 2007, 0.55;
                ``(ii) for 2008, 0.40;
                ``(iii) for 2009, 0.25; and
                ``(iv) for 2010, 0.05.
            ``(D) Termination of application.--Subparagraph (A) shall 
        not apply in a year if the amount estimated under subparagraph 
        (B)(ii)(III) for the year is equal to or greater than the 
        amount estimated under subparagraph (B)(ii)(II) for the year.
        ``(3) No revision in percent.--
            ``(A) In general.--The Secretary may not make any 
        adjustment to the percent determined under paragraph (2)(B) for 
        any year.
            ``(B) Rule of construction.--Nothing in this subsection 
        shall be construed to limit the authority of the Secretary to 
        make adjustments to the applicable amounts determined under 
        paragraph (1) as appropriate for purposes of updating data or 
        for purposes of adopting an improved risk adjustment 
        methodology.''.
    (b) Refinements to Health Status Adjustment.--Section 1853(a)(1)(C) 
of such Act (42 U.S.C. 1395w-23) is amended--
        (1) by designating the matter after the heading as a clause (i) 
    with the following heading: ``In general.--'' and indenting 
    appropriately; and
        (2) by adding at the end the following:
                ``(ii) Application during phase-out of budget 
            neutrality factor.--For 2006 through 2010:

                    ``(I) In applying the adjustment under clause (i) 
                for health status to payment amounts, the Secretary 
                shall ensure that such adjustment reflects changes in 
                treatment and coding practices in the fee-for-service 
                sector and reflects differences in coding patterns 
                between Medicare Advantage plans and providers under 
                part A and B to the extent that the Secretary has 
                identified such differences.
                    ``(II) In order to ensure payment accuracy, the 
                Secretary shall conduct an analysis of the differences 
                described in subclause (I). The Secretary shall 
                complete such analysis by a date necessary to ensure 
                that the results of such analysis are incorporated into 
                the risk scores only for 2008, 2009, and 2010. In 
                conducting such analysis, the Secretary shall use data 
                submitted with respect to 2004 and subsequent years, as 
                available.''.

SEC. 5302. RURAL PACE PROVIDER GRANT PROGRAM.

    (a) Definitions.--In this section:
        (1) CMS.--The term ``CMS'' means the Centers for Medicare & 
    Medicaid Services.
        (2) PACE program.--The term ``PACE program'' has the meaning 
    given that term in sections 1894(a)(2) and 1934(a)(2) of the Social 
    Security Act (42 U.S.C. 1395eee(a)(2); 1396u-4(a)(2)).
        (3) PACE provider.--The term ``PACE provider'' has the meaning 
    given that term in section 1894(a)(3) or 1934(a)(3) of the Social 
    Security Act (42 U.S.C. 1395eee(a)(3); 1396u-4(a)(3)).
        (4) Rural area.--The term ``rural area'' has the meaning given 
    that term in section 1886(d)(2)(D) of the Social Security Act (42 
    U.S.C. 1395ww(d)(2)(D)).
        (5) Rural pace pilot site.--The term ``rural PACE pilot site'' 
    means a PACE provider that has been approved to provide services in 
    a geographic service area that is, in whole or in part, a rural 
    area, and that has received a site development grant under this 
    section.
        (6) Secretary.--The term ``Secretary'' means the Secretary of 
    Health and Human Services.
    (b) Site Development Grants and Technical Assistance Program.--
        (1) Site development grants.--
            (A) In general.--The Secretary shall establish a process 
        and criteria to award site development grants to qualified PACE 
        providers that have been approved to serve a rural area.
            (B) Amount per award.--A site development grant awarded 
        under subparagraph (A) to any individual rural PACE pilot site 
        shall not exceed $750,000.
            (C) Number of awards.--Not more than 15 rural PACE pilot 
        sites shall be awarded a site development grant under 
        subparagraph (A).
            (D) Use of funds.--Funds made available under a site 
        development grant awarded under subparagraph (A) may be used 
        for the following expenses only to the extent such expenses are 
        incurred in relation to establishing or delivering PACE program 
        services in a rural area:
                (i) Feasibility analysis and planning.
                (ii) Interdisciplinary team development.
                (iii) Development of a provider network, including 
            contract development.
                (iv) Development or adaptation of claims processing 
            systems.
                (v) Preparation of special education and outreach 
            efforts required for the PACE program.
                (vi) Development of expense reporting required for 
            calculation of outlier payments or reconciliation 
            processes.
                (vii) Development of any special quality of care or 
            patient satisfaction data collection efforts.
                (viii) Establishment of a working capital fund to 
            sustain fixed administrative, facility, or other fixed 
            costs until the provider reaches sufficient enrollment 
            size.
                (ix) Startup and development costs incurred prior to 
            the approval of the rural PACE pilot site's PACE provider 
            application by CMS.
                (x) Any other efforts determined by the rural PACE 
            pilot site to be critical to its successful startup, as 
            approved by the Secretary.
            (E) Appropriation.--
                (i) In general.--Out of funds in the Treasury not 
            otherwise appropriated, there are appropriated to the 
            Secretary to carry out this subsection for fiscal year 
            2006, $7,500,000.
                (ii) Availability.--Funds appropriated under clause (i) 
            shall remain available for expenditure through fiscal year 
            2008.
        (2) Technical assistance program.--The Secretary shall 
    establish a technical assistance program to provide--
            (A) outreach and education to State agencies and provider 
        organizations interested in establishing PACE programs in rural 
        areas; and
            (B) technical assistance necessary to support rural PACE 
        pilot sites.
    (c) Cost Outlier Protection for Rural PACE Pilot Sites.--
        (1) Establishment of fund for reimbursement of outlier costs.--
    Notwithstanding any other provision of law, the Secretary shall 
    establish an outlier fund to reimburse rural PACE pilot sites for 
    recognized outlier costs (as defined in paragraph (3)) incurred for 
    eligible outlier participants (as defined in paragraph (2)) in an 
    amount, subject to paragraph (4), equal to 80 percent of the amount 
    by which the recognized outlier costs exceeds $50,000.
        (2) Eligible outlier participant.--For purposes of this 
    subsection, the term ``eligible outlier participant'' means a PACE 
    program eligible individual (as defined in sections 1894(a)(5) and 
    1934(a)(5) of the Social Security Act (42 U.S.C. 1395eee(a)(5); 
    1396u-4(a)(5))) who resides in a rural area and with respect to 
    whom the rural PACE pilot site incurs more than $50,000 in 
    recognized costs in a 12-month period.
        (3) Recognized outlier costs defined.--
            (A) In general.--For purposes of this subsection, the term 
        ``recognized outlier costs'' means, with respect to services 
        furnished to an eligible outlier participant by a rural PACE 
        pilot site, the least of the following (as documented by the 
        site to the satisfaction of the Secretary) for the provision of 
        inpatient and related physician and ancillary services for the 
        eligible outlier participant in a given 12-month period:
                (i) If the services are provided under a contract 
            between the pilot site and the provider, the payment rate 
            specified under the contract.
                (ii) The payment rate established under the original 
            Medicare fee-for-service program for such service.
                (iii) The amount actually paid for the services by the 
            pilot site.
            (B) Inclusion in only one period.--Recognized outlier costs 
        may not be included in more than one 12-month period.
        (3) Outlier expense payment.--
            (A) Payment for outlier costs.--Subject to subparagraph 
        (B), in the case of a rural PACE pilot site that has incurred 
        outlier costs for an eligible outlier participant, the rural 
        PACE pilot site shall receive an outlier expense payment equal 
        to 80 percent of such costs that exceed $50,000.
        (4) Limitations.--
            (A) Costs incurred per eligible outlier participant.--The 
        total amount of outlier expense payments made under this 
        subsection to a rural PACE pilot site with respect to an 
        eligible outlier participant for any 12-month period shall not 
        exceed $100,000 for the 12-month period used to calculate the 
        payment.
            (B) Costs incurred per provider.--No rural PACE pilot site 
        may receive more than $500,000 in total outlier expense 
        payments in a 12-month period.
            (C) Limitation of outlier cost reimbursement period.--A 
        rural PACE pilot site shall only receive outlier expense 
        payments under this subsection with respect to costs incurred 
        during the first 3 years of the site's operation.
        (5) Requirement to access risk reserves prior to payment.--A 
    rural PACE pilot site shall access and exhaust any risk reserves 
    held or arranged for the provider (other than revenue or reserves 
    maintained to satisfy the requirements of section 460.80(c) of 
    title 42, Code of Federal Regulations) and any working capital 
    established through a site development grant awarded under 
    subsection (b)(1), prior to receiving any payment from the outlier 
    fund.
        (6) Application.--In order to receive an outlier expense 
    payment under this subsection with respect to an eligible outlier 
    participant, a rural PACE pilot site shall submit an application 
    containing--
            (A) documentation of the costs incurred with respect to the 
        participant;
            (B) a certification that the site has complied with the 
        requirements under paragraph (4); and
            (C) such additional information as the Secretary may 
        require.
        (7) Appropriation.--
            (A) In general.--Out of funds in the Treasury not otherwise 
        appropriated, there are appropriated to the Secretary to carry 
        out this subsection for fiscal year 2006, $10,000,000.
            (B) Availability.--Funds appropriated under subparagraph 
        (A) shall remain available for expenditure through fiscal year 
        2010.
    (d) Evaluation of PACE Providers Serving Rural Service Areas.--Not 
later than 60 months after the date of enactment of this Act, the 
Secretary shall submit a report to Congress containing an evaluation of 
the experience of rural PACE pilot sites.
    (e) Amounts in Addition to Payments Under Social Security Act.--Any 
amounts paid under the authority of this section to a PACE provider 
shall be in addition to payments made to the provider under section 
1894 or 1934 of the Social Security Act (42 U.S.C. 1395eee; 1396u-4).

                      TITLE VI--MEDICAID AND SCHIP
                          Subtitle A--Medicaid

               CHAPTER 1--PAYMENT FOR PRESCRIPTION DRUGS

SEC. 6001. FEDERAL UPPER PAYMENT LIMIT FOR MULTIPLE SOURCE DRUGS AND 
              OTHER DRUG PAYMENT PROVISIONS.

    (a) Modification of Federal Upper Payment Limit for Multiple Source 
Drugs; Definition of Multiple Source Drugs.--Section 1927 of the Social 
Security Act (42 U.S.C. 1396r-8) is amended--
        (1) in subsection (e)(4)--
            (A) by striking ``The Secretary'' and inserting ``Subject 
        to paragraph (5), the Secretary''; and
            (B) by inserting ``(or, effective January 1, 2007, two or 
        more)'' after ``three or more'';
        (2) by adding at the end of subsection (e) the following new 
    paragraph:
        ``(5) Use of amp in upper payment limits.--Effective January 1, 
    2007, in applying the Federal upper reimbursement limit under 
    paragraph (4) and section 447.332(b) of title 42 of the Code of 
    Federal Regulations, the Secretary shall substitute 250 percent of 
    the average manufacturer price (as computed without regard to 
    customary prompt pay discounts extended to wholesalers) for 150 
    percent of the published price.'';
        (3) in subsection (k)(7)(A)(i), in the matter preceding 
    subclause (I), by striking ``are 2 or more drug products'' and 
    inserting ``at least 1 other drug product''; and
        (4) in subclauses (I), (II), and (III) of subsection 
    (k)(7)(A)(i), by striking ``are'' and inserting ``is'' each place 
    it appears.
    (b) Disclosure of Price Information to States and the Public.--
Subsection (b)(3) of such section is amended--
        (1) in subparagraph (A)--
            (A) in clause (i), by inserting ``month of a'' after ``last 
        day of each''; and
            (B) by adding at the end the following: ``Beginning July 1, 
        2006, the Secretary shall provide on a monthly basis to States 
        under subparagraph (D)(iv) the most recently reported average 
        manufacturer prices for single source drugs and for multiple 
        source drugs and shall, on at least a quarterly basis, update 
        the information posted on the website under subparagraph 
        (D)(v).''; and
        (2) in subparagraph (D)--
            (A) by striking ``and'' at the end of clause (ii);
            (B) by striking the period at the end of clause (iii) and 
        inserting a comma; and
            (C) by inserting after clause (iii) the following new 
        clauses:
                ``(iv) to States to carry out this title, and
                ``(v) to the Secretary to disclose (through a website 
            accessible to the public) average manufacturer prices.''.
    (c) Definition of Average Manufacturer Price.--
        (1) Exclusion of customary prompt pay discounts extended to 
    wholesalers.--Subsection (k)(1) of such section is amended--
            (A) by striking ``The term'' and inserting the following:
            ``(A) In general.--Subject to subparagraph (B), the term'';
            (B) by striking ``, after deducting customary prompt pay 
        discounts''; and
            (C) by adding at the end the following:
            ``(B) Exclusion of customary prompt pay discounts extended 
        to wholesalers.--The average manufacturer price for a covered 
        outpatient drug shall be determined without regard to customary 
        prompt pay discounts extended to wholesalers.''.
        (2) Manufacturer reporting of prompt pay discounts.--Subsection 
    (b)(3)(A)(i) of such section is amended by inserting ``, customary 
    prompt pay discounts extended to wholesalers,'' after ``(k)(1))''.
        (3) Requirement to promulgate regulation.--
            (A) Inspector general recommendations.--Not later than June 
        1, 2006, the Inspector General of the Department of Health and 
        Human Services shall--
                (i) review the requirements for, and manner in which, 
            average manufacturer prices are determined under section 
            1927 of the Social Security Act, as amended by this 
            section; and
                (ii) shall submit to the Secretary of Health and Human 
            Services and Congress such recommendations for changes in 
            such requirements or manner as the Inspector General 
            determines to be appropriate.
            (B) Deadline for promulgation.--Not later than July 1, 
        2007, the Secretary of Health and Human Services shall 
        promulgate a regulation that clarifies the requirements for, 
        and manner in which, average manufacturer prices are determined 
        under section 1927 of the Social Security Act, taking into 
        consideration the recommendations submitted to the Secretary in 
        accordance with subparagraph (A)(ii).
    (d) Exclusion of Sales at a Nominal Price From Determination of 
Best Price.--
        (1) Manufacturer reporting of sales.--Subsection (b)(3)(A)(iii) 
    of such section is amended by inserting before the period at the 
    end the following: ``, and, for calendar quarters beginning on or 
    after January 1, 2007 and only with respect to the information 
    described in subclause (III), for covered outpatient drugs''.
        (2) Limitation on sales at a nominal price.--Subsection (c)(1) 
    of such section is amended by adding at the end the following new 
    subparagraph:
            ``(D) Limitation on sales at a nominal price.--
                ``(i) In general.--For purposes of subparagraph 
            (C)(ii)(III) and subsection (b)(3)(A)(iii)(III), only sales 
            by a manufacturer of covered outpatient drugs at nominal 
            prices to the following shall be considered to be sales at 
            a nominal price or merely nominal in amount:

                    ``(I) A covered entity described in section 
                340B(a)(4) of the Public Health Service Act.
                    ``(II) An intermediate care facility for the 
                mentally retarded.
                    ``(III) A State-owned or operated nursing facility.
                    ``(IV) Any other facility or entity that the 
                Secretary determines is a safety net provider to which 
                sales of such drugs at a nominal price would be 
                appropriate based on the factors described in clause 
                (ii).

                ``(ii) Factors.--The factors described in this clause 
            with respect to a facility or entity are the following:

                    ``(I) The type of facility or entity.
                    ``(II) The services provided by the facility or 
                entity.
                    ``(III) The patient population served by the 
                facility or entity.
                    ``(IV) The number of other facilities or entities 
                eligible to purchase at nominal prices in the same 
                service area.

                ``(iii) Nonapplication.--Clause (i) shall not apply 
            with respect to sales by a manufacturer at a nominal price 
            of covered outpatient drugs pursuant to a master agreement 
            under section 8126 of title 38, United States Code.''.
    (e) Retail Survey Prices; State Payment and Utilization Rates; and 
Performance Rankings.--Such section is further amended by inserting 
after subsection (e) the following new subsection:
    ``(f) Survey of Retail Prices; State Payment and Utilization Rates; 
and Performance Rankings.--
        ``(1) Survey of retail prices.--
            ``(A) Use of vendor.--The Secretary may contract services 
        for--
                ``(i) the determination on a monthly basis of retail 
            survey prices for covered outpatient drugs that represent a 
            nationwide average of consumer purchase prices for such 
            drugs, net of all discounts and rebates (to the extent any 
            information with respect to such discounts and rebates is 
            available); and
                ``(ii) the notification of the Secretary when a drug 
            product that is therapeutically and pharmaceutically 
            equivalent and bioequivalent becomes generally available.
            ``(B) Secretary response to notification of availability of 
        multiple source products.--If contractor notifies the Secretary 
        under subparagraph (A)(ii) that a drug product described in 
        such subparagraph has become generally available, the Secretary 
        shall make a determination, within 7 days after receiving such 
        notification, as to whether the product is now described in 
        subsection (e)(4).
            ``(C) Use of competitive bidding.--In contracting for such 
        services, the Secretary shall competitively bid for an outside 
        vendor that has a demonstrated history in--
                ``(i) surveying and determining, on a representative 
            nationwide basis, retail prices for ingredient costs of 
            prescription drugs;
                ``(ii) working with retail pharmacies, commercial 
            payers, and States in obtaining and disseminating such 
            price information; and
                ``(iii) collecting and reporting such price information 
            on at least a monthly basis.
        In contracting for such services, the Secretary may waive such 
        provisions of the Federal Acquisition Regulation as are 
        necessary for the efficient implementation of this subsection, 
        other than provisions relating to confidentiality of 
        information and such other provisions as the Secretary 
        determines appropriate.
            ``(D) Additional provisions.--A contract with a vendor 
        under this paragraph shall include such terms and conditions as 
        the Secretary shall specify, including the following:
                ``(i) The vendor must monitor the marketplace and 
            report to the Secretary each time there is a new covered 
            outpatient drug generally available.
                ``(ii) The vendor must update the Secretary no less 
            often than monthly on the retail survey prices for covered 
            outpatient drugs.
                ``(iii) The contract shall be effective for a term of 2 
            years.
            ``(E) Availability of information to states.--Information 
        on retail survey prices obtained under this paragraph, 
        including applicable information on single source drugs, shall 
        be provided to States on at least a monthly basis. The 
        Secretary shall devise and implement a means for providing 
        access to each State agency designated under section 1902(a)(5) 
        with responsibility for the administration or supervision of 
        the administration of the State plan under this title of the 
        retail survey price determined under this paragraph.
        ``(2) Annual state report.--Each State shall annually report to 
    the Secretary information on--
            ``(A) the payment rates under the State plan under this 
        title for covered outpatient drugs;
            ``(B) the dispensing fees paid under such plan for such 
        drugs; and
            ``(C) utilization rates for noninnovator multiple source 
        drugs under such plan.
        ``(3) Annual state performance rankings.--
            ``(A) Comparative analysis.--The Secretary annually shall 
        compare, for the 50 most widely prescribed drugs identified by 
        the Secretary, the national retail sales price data (collected 
        under paragraph (1)) for such drugs with data on prices under 
        this title for each such drug for each State.
            ``(B) Availability of information.--The Secretary shall 
        submit to Congress and the States full information regarding 
        the annual rankings made under subparagraph (A).
        ``(4) Appropriation.--Out of any funds in the Treasury not 
    otherwise appropriated, there is appropriated to the Secretary of 
    Health and Human Services $5,000,000 for each of fiscal years 2006 
    through 2010 to carry out this subsection.''.
    (f) Miscellaneous Amendments.--
        (1) In general.--Sections 1927(g)(1)(B)(i)(II) and 
    1861(t)(2)(B)(ii)(I) of such Act are each amended by inserting 
    ``(or its successor publications)'' after ``United States 
    Pharmacopoeia-Drug Information''.
        (2) Paperwork reduction.--The last sentence of section 
    1927(g)(2)(A)(ii) of such Act (42 U.S.C. 1396r-8(g)(2)(A)(ii)) is 
    amended by inserting before the period at the end the following: 
    ``, or to require verification of the offer to provide consultation 
    or a refusal of such offer''.
        (3) Effective date.--The amendments made by this subsection 
    shall take effect on the date of the enactment of this Act.
    (g) Effective Date.--Except as otherwise provided, the amendments 
made by this section shall take effect on January 1, 2007, without 
regard to whether or not final regulations to carry out such amendments 
have been promulgated by such date.

SEC. 6002. COLLECTION AND SUBMISSION OF UTILIZATION DATA FOR CERTAIN 
              PHYSICIAN ADMINISTERED DRUGS.

    (a) In General.--Section 1927(a) of the Social Security Act (42 
U.S.C. 1396r-8(a)) is amended by adding at the end the following new 
paragraph:
        ``(7) Requirement for submission of utilization data for 
    certain physician administered drugs.--
            ``(A) Single source drugs.--In order for payment to be 
        available under section 1903(a) for a covered outpatient drug 
        that is a single source drug that is physician administered 
        under this title (as determined by the Secretary), and that is 
        administered on or after January 1, 2006, the State shall 
        provide for the collection and submission of such utilization 
        data and coding (such as J-codes and National Drug Code 
        numbers) for each such drug as the Secretary may specify as 
        necessary to identify the manufacturer of the drug in order to 
        secure rebates under this section for drugs administered for 
        which payment is made under this title.
            ``(B) Multiple source drugs.--
                ``(i) Identification of most frequently physician 
            administered multiple source drugs.--Not later than January 
            1, 2007, the Secretary shall publish a list of the 20 
            physician administered multiple source drugs that the 
            Secretary determines have the highest dollar volume of 
            physician administered drugs dispensed under this title. 
            The Secretary may modify such list from year to year to 
            reflect changes in such volume.
                ``(ii) Requirement.--In order for payment to be 
            available under section 1903(a) for a covered outpatient 
            drug that is a multiple source drug that is physician 
            administered (as determined by the Secretary), that is on 
            the list published under clause (i), and that is 
            administered on or after January 1, 2008, the State shall 
            provide for the submission of such utilization data and 
            coding (such as J-codes and National Drug Code numbers) for 
            each such drug as the Secretary may specify as necessary to 
            identify the manufacturer of the drug in order to secure 
            rebates under this section.
            ``(C) Use of ndc codes.--Not later than January 1, 2007, 
        the information shall be submitted under subparagraphs (A) and 
        (B)(ii) using National Drug Code codes unless the Secretary 
        specifies that an alternative coding system should be used.
            ``(D) Hardship waiver.--The Secretary may delay the 
        application of subparagraph (A) or (B)(ii), or both, in the 
        case of a State to prevent hardship to States which require 
        additional time to implement the reporting system required 
        under the respective subparagraph.''.
    (b) Limitation on Payment.--Section 1903(i)(10) of such Act (42 
U.S.C. 1396b(i)(10)), is amended--
        (1) by striking ``and'' at the end of subparagraph (A);
        (2) by striking ``or'' at the end of subparagraph (B) and 
    inserting ``and''; and
        (3) by adding at the end the following new subparagraph:
            ``(C) with respect to covered outpatient drugs described in 
        section 1927(a)(7), unless information respecting utilization 
        data and coding on such drugs that is required to be submitted 
        under such section is submitted in accordance with such 
        section; or''.

SEC. 6003. IMPROVED REGULATION OF DRUGS SOLD UNDER A NEW DRUG 
              APPLICATION APPROVED UNDER SECTION 505(C) OF THE FEDERAL 
              FOOD, DRUG, AND COSMETIC ACT.

    (a) Inclusion With Other Reported Average Manufacturer and Best 
Prices.--Section 1927(b)(3)(A) of the Social Security Act (42 U.S.C. 
1396r-8(b)(3)(A)) is amended--
        (1) by striking clause (i) and inserting the following:
                ``(i) not later than 30 days after the last day of each 
            rebate period under the agreement--

                    ``(I) on the average manufacturer price (as defined 
                in subsection (k)(1)) for covered outpatient drugs for 
                the rebate period under the agreement (including for 
                all such drugs that are sold under a new drug 
                application approved under section 505(c) of the 
                Federal Food, Drug, and Cosmetic Act); and
                    ``(II) for single source drugs and innovator 
                multiple source drugs (including all such drugs that 
                are sold under a new drug application approved under 
                section 505(c) of the Federal Food, Drug, and Cosmetic 
                Act), on the manufacturer's best price (as defined in 
                subsection (c)(1)(C)) for such drugs for the rebate 
                period under the agreement;''; and

        (2) in clause (ii), by inserting ``(including for such drugs 
    that are sold under a new drug application approved under section 
    505(c) of the Federal Food, Drug, and Cosmetic Act)'' after 
    ``drugs''.
    (b) Conforming Amendments.--Section 1927 of such Act (42 U.S.C. 
1396r-8) is amended--
        (1) in subsection (c)(1)(C)--
            (A) in clause (i), in the matter preceding subclause (I), 
        by inserting after ``or innovator multiple source drug of a 
        manufacturer'' the following: ``(including the lowest price 
        available to any entity for any such drug of a manufacturer 
        that is sold under a new drug application approved under 
        section 505(c) of the Federal Food, Drug, and Cosmetic Act)''; 
        and
            (B) in clause (ii)--
                (i) in subclause (II), by striking ``and'' at the end;
                (ii) in subclause (III), by striking the period at the 
            end and inserting ``; and''; and
                (iii) by adding at the end the following:

                    ``(IV) in the case of a manufacturer that approves, 
                allows, or otherwise permits any other drug of the 
                manufacturer to be sold under a new drug application 
                approved under section 505(c) of the Federal Food, 
                Drug, and Cosmetic Act, shall be inclusive of the 
                lowest price for such authorized drug available from 
                the manufacturer during the rebate period to any 
                manufacturer, wholesaler, retailer, provider, health 
                maintenance organization, nonprofit entity, or 
                governmental entity within the United States, excluding 
                those prices described in subclauses (I) through (IV) 
                of clause (i).''; and

        (2) in subsection (k), as amended by section 6001(c)(1), by 
    adding at the end the following:
            ``(C) Inclusion of section 505(c) drugs.--In the case of a 
        manufacturer that approves, allows, or otherwise permits any 
        drug of the manufacturer to be sold under a new drug 
        application approved under section 505(c) of the Federal Food, 
        Drug, and Cosmetic Act, such term shall be inclusive of the 
        average price paid for such drug by wholesalers for drugs 
        distributed to the retail pharmacy class of trade.''.
    (c) Effective Date.--The amendments made by this section take 
effect on January 1, 2007.

SEC. 6004. CHILDREN'S HOSPITAL PARTICIPATION IN SECTION 340B DRUG 
              DISCOUNT PROGRAM.

    (a) In General.--Section 1927(a)(5)(B) of the Social Security Act 
(42 U.S.C. 1396r-8(a)(5)(B)) is amended by inserting before the period 
at the end the following: ``and a children's hospital described in 
section 1886(d)(1)(B)(iii) which meets the requirements of clauses (i) 
and (iii) of section 340B(b)(4)(L) of the Public Health Service Act and 
which would meet the requirements of clause (ii) of such section if 
that clause were applied by taking into account the percentage of care 
provided by the hospital to patients eligible for medical assistance 
under a State plan under this title''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to drugs purchased on or after the date of the enactment of this 
Act.

                CHAPTER 2--LONG-TERM CARE UNDER MEDICAID

              Subchapter A--Reform of Asset Transfer Rules

SEC. 6011. LENGTHENING LOOK-BACK PERIOD; CHANGE IN BEGINNING DATE FOR 
              PERIOD OF INELIGIBILITY.

    (a) Lengthening Look-Back Period for All Disposals to 5 Years.--
Section 1917(c)(1)(B)(i) of the Social Security Act (42 U.S.C. 
1396p(c)(1)(B)(i)) is amended by inserting ``or in the case of any 
other disposal of assets made on or after the date of the enactment of 
the Deficit Reduction Act of 2005'' before ``, 60 months''.
    (b) Change in Beginning Date for Period of Ineligibility.--Section 
1917(c)(1)(D) of such Act (42 U.S.C. 1396p(c)(1)(D)) is amended--
        (1) by striking ``(D) The date'' and inserting ``(D)(i) In the 
    case of a transfer of asset made before the date of the enactment 
    of the Deficit Reduction Act of 2005, the date''; and
        (2) by adding at the end the following new clause:
    ``(ii) In the case of a transfer of asset made on or after the date 
of the enactment of the Deficit Reduction Act of 2005, the date 
specified in this subparagraph is the first day of a month during or 
after which assets have been transferred for less than fair market 
value, or the date on which the individual is eligible for medical 
assistance under the State plan and would otherwise be receiving 
institutional level care described in subparagraph (C) based on an 
approved application for such care but for the application of the 
penalty period, whichever is later, and which does not occur during any 
other period of ineligibility under this subsection.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to transfers made on or after the date of the enactment of this 
Act.
    (d) Availability of Hardship Waivers.--Each State shall provide for 
a hardship waiver process in accordance with section 1917(c)(2)(D) of 
the Social Security Act (42 U.S.C. 1396p(c)(2)(D))--
        (1) under which an undue hardship exists when application of 
    the transfer of assets provision would deprive the individual--
            (A) of medical care such that the individual's health or 
        life would be endangered; or
            (B) of food, clothing, shelter, or other necessities of 
        life; and
        (2) which provides for--
            (A) notice to recipients that an undue hardship exception 
        exists;
            (B) a timely process for determining whether an undue 
        hardship waiver will be granted; and
            (C) a process under which an adverse determination can be 
        appealed.
    (e) Additional Provisions on Hardship Waivers.--
        (1) Application by facility.--Section 1917(c)(2) of the Social 
    Security Act (42 U.S.C. 1396p(c)(2)) is amended--
            (A) by striking the semicolon at the end of subparagraph 
        (D) and inserting a period; and
            (B) by adding after and below such subparagraph the 
        following:
    ``The procedures established under subparagraph (D) shall permit 
    the facility in which the institutionalized individual is residing 
    to file an undue hardship waiver application on behalf of the 
    individual with the consent of the individual or the personal 
    representative of the individual.''.
        (2) Authority to make bed hold payments for hardship 
    applicants.--Such section is further amended by adding at the end 
    the following: ``While an application for an undue hardship waiver 
    is pending under subparagraph (D) in the case of an individual who 
    is a resident of a nursing facility, if the application meets such 
    criteria as the Secretary specifies, the State may provide for 
    payments for nursing facility services in order to hold the bed for 
    the individual at the facility, but not in excess of payments for 
    30 days.''.

SEC. 6012. DISCLOSURE AND TREATMENT OF ANNUITIES.

    (a) In General.--Section 1917 of the Social Security Act (42 U.S.C. 
1396p) is amended by redesignating subsection (e) as subsection (f) and 
by inserting after subsection (d) the following new subsection:
    ``(e)(1) In order to meet the requirements of this section for 
purposes of section 1902(a)(18), a State shall require, as a condition 
for the provision of medical assistance for services described in 
subsection (c)(1)(C)(i) (relating to long-term care services) for an 
individual, the application of the individual for such assistance 
(including any recertification of eligibility for such assistance) 
shall disclose a description of any interest the individual or 
community spouse has in an annuity (or similar financial instrument, as 
may be specified by the Secretary), regardless of whether the annuity 
is irrevocable or is treated as an asset. Such application or 
recertification form shall include a statement that under paragraph (2) 
the State becomes a remainder beneficiary under such an annuity or 
similar financial instrument by virtue of the provision of such medical 
assistance.
    ``(2)(A) In the case of disclosure concerning an annuity under 
subsection (c)(1)(F), the State shall notify the issuer of the annuity 
of the right of the State under such subsection as a preferred 
remainder beneficiary in the annuity for medical assistance furnished 
to the individual. Nothing in this paragraph shall be construed as 
preventing such an issuer from notifying persons with any other 
remainder interest of the State's remainder interest under such 
subsection.
    ``(B) In the case of such an issuer receiving notice under 
subparagraph (A), the State may require the issuer to notify the State 
when there is a change in the amount of income or principal being 
withdrawn from the amount that was being withdrawn at the time of the 
most recent disclosure described in paragraph (1). A State shall take 
such information into account in determining the amount of the State's 
obligations for medical assistance or in the individual's eligibility 
for such assistance.
    ``(3) The Secretary may provide guidance to States on categories of 
transactions that may be treated as a transfer of asset for less than 
fair market value.
    ``(4) Nothing in this subsection shall be construed as preventing a 
State from denying eligibility for medical assistance for an individual 
based on the income or resources derived from an annuity described in 
paragraph (1).''.
    (b) Requirement for State To Be Named as a Remainder Beneficiary.--
Section 1917(c)(1) of such Act (42 U.S.C. 1396p(c)(1)), is amended by 
adding at the end the following:
    ``(F) For purposes of this paragraph, the purchase of an annuity 
shall be treated as the disposal of an asset for less than fair market 
value unless--
        ``(i) the State is named as the remainder beneficiary in the 
    first position for at least the total amount of medical assistance 
    paid on behalf of the annuitant under this title; or
        ``(ii) the State is named as such a beneficiary in the second 
    position after the community spouse or minor or disabled child and 
    is named in the first position if such spouse or a representative 
    of such child disposes of any such remainder for less than fair 
    market value.''.
    (c) Inclusion of Transfers To Purchase Balloon Annuities.--Section 
1917(c)(1) of such Act (42 U.S.C. 1396p(c)(1)), as amended by 
subsection (b), is amended by adding at the end the following:
    ``(G) For purposes of this paragraph with respect to a transfer of 
assets, the term `assets' includes an annuity purchased by or on behalf 
of an annuitant who has applied for medical assistance with respect to 
nursing facility services or other long-term care services under this 
title unless--
        ``(i) the annuity is--
            ``(I) an annuity described in subsection (b) or (q) of 
        section 408 of the Internal Revenue Code of 1986; or
            ``(II) purchased with proceeds from--
                ``(aa) an account or trust described in subsection (a), 
            (c), or (p) of section 408 of such Code;
                ``(bb) a simplified employee pension (within the 
            meaning of section 408(k) of such Code); or
                ``(cc) a Roth IRA described in section 408A of such 
            Code; or
        ``(ii) the annuity--
            ``(I) is irrevocable and nonassignable;
            ``(II) is actuarially sound (as determined in accordance 
        with actuarial publications of the Office of the Chief Actuary 
        of the Social Security Administration); and
            ``(III) provides for payments in equal amounts during the 
        term of the annuity, with no deferral and no balloon payments 
        made.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to transactions (including the purchase of an annuity) occurring 
on or after the date of the enactment of this Act.

SEC. 6013. APPLICATION OF ``INCOME-FIRST'' RULE IN APPLYING COMMUNITY 
              SPOUSE'S INCOME BEFORE ASSETS IN PROVIDING SUPPORT OF 
              COMMUNITY SPOUSE.

    (a) In General.--Section 1924(d) of the Social Security Act (42 
U.S.C. 1396r-5(d)) is amended by adding at the end the following new 
subparagraph:
        ``(6) Application of `income first' rule to revision of 
    community spouse resource allowance.--For purposes of this 
    subsection and subsections (c) and (e), a State must consider that 
    all income of the institutionalized spouse that could be made 
    available to a community spouse, in accordance with the calculation 
    of the community spouse monthly income allowance under this 
    subsection, has been made available before the State allocates to 
    the community spouse an amount of resources adequate to provide the 
    difference between the minimum monthly maintenance needs allowance 
    and all income available to the community spouse.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to transfers and allocations made on or after the date of the 
enactment of this Act by individuals who become institutionalized 
spouses on or after such date.

SEC. 6014. DISQUALIFICATION FOR LONG-TERM CARE ASSISTANCE FOR 
              INDIVIDUALS WITH SUBSTANTIAL HOME EQUITY.

    (a) In General.--Section 1917 of the Social Security Act, as 
amended by section 6012(a), is further amended by redesignating 
subsection (f) as subsection (g) and by inserting after subsection (e) 
the following new subsection:
    ``(f)(1)(A) Notwithstanding any other provision of this title, 
subject to subparagraphs (B) and (C) of this paragraph and paragraph 
(2), in determining eligibility of an individual for medical assistance 
with respect to nursing facility services or other long-term care 
services, the individual shall not be eligible for such assistance if 
the individual's equity interest in the individual's home exceeds 
$500,000.
    ``(B) A State may elect, without regard to the requirements of 
section 1902(a)(1) (relating to statewideness) and section 
1902(a)(10)(B) (relating to comparability), to apply subparagraph (A) 
by substituting for `$500,000', an amount that exceeds such amount, but 
does not exceed $750,000.
    ``(C) The dollar amounts specified in this paragraph shall be 
increased, beginning with 2011, from year to year based on the 
percentage increase in the consumer price index for all urban consumers 
(all items; United States city average), rounded to the nearest $1,000.
    ``(2) Paragraph (1) shall not apply with respect to an individual 
if--
        ``(A) the spouse of such individual, or
        ``(B) such individual's child who is under age 21, or (with 
    respect to States eligible to participate in the State program 
    established under title XVI) is blind or permanently and totally 
    disabled, or (with respect to States which are not eligible to 
    participate in such program) is blind or disabled as defined in 
    section 1614,
is lawfully residing in the individual's home.
    ``(3) Nothing in this subsection shall be construed as preventing 
an individual from using a reverse mortgage or home equity loan to 
reduce the individual's total equity interest in the home.
    ``(4) The Secretary shall establish a process whereby paragraph (1) 
is waived in the case of a demonstrated hardship.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to individuals who are determined eligible for medical assistance 
with respect to nursing facility services or other long-term care 
services based on an application filed on or after January 1, 2006.

SEC. 6015. ENFORCEABILITY OF CONTINUING CARE RETIREMENT COMMUNITIES 
              (CCRC) AND LIFE CARE COMMUNITY ADMISSION CONTRACTS.

    (a) Admission Policies of Nursing Facilities.--Section 1919(c)(5) 
of the Social Security Act (42 U.S.C. 1396r(c)(5)) is amended--
        (1) in subparagraph (A)(i)(II), by inserting ``subject to 
    clause (v),'' after ``(II)''; and
        (2) by adding at the end of subparagraph (B) the following new 
    clause:
                ``(v) Treatment of continuing care retirement 
            communities admission contracts.--Notwithstanding subclause 
            (II) of subparagraph (A)(i), subject to subsections (c) and 
            (d) of section 1924, contracts for admission to a State 
            licensed, registered, certified, or equivalent continuing 
            care retirement community or life care community, including 
            services in a nursing facility that is part of such 
            community, may require residents to spend on their care 
            resources declared for the purposes of admission before 
            applying for medical assistance.''.
    (b) Treatment of Entrance Fees.--Section 1917 of such Act (42 
U.S.C. 1396p), as amended by sections 6012(a) and 6014(a), is amended 
by redesignating subsection (g) as subsection (h) and by inserting 
after subsection (f) the following new subsection:
    ``(g) Treatment of Entrance Fees of Individuals Residing in 
Continuing Care Retirement Communities.--
        ``(1) In general.--For purposes of determining an individual's 
    eligibility for, or amount of, benefits under a State plan under 
    this title, the rules specified in paragraph (2) shall apply to 
    individuals residing in continuing care retirement communities or 
    life care communities that collect an entrance fee on admission 
    from such individuals.
        ``(2) Treatment of entrance fee.--For purposes of this 
    subsection, an individual's entrance fee in a continuing care 
    retirement community or life care community shall be considered a 
    resource available to the individual to the extent that--
            ``(A) the individual has the ability to use the entrance 
        fee, or the contract provides that the entrance fee may be 
        used, to pay for care should other resources or income of the 
        individual be insufficient to pay for such care;
            ``(B) the individual is eligible for a refund of any 
        remaining entrance fee when the individual dies or terminates 
        the continuing care retirement community or life care community 
        contract and leaves the community; and
            ``(C) the entrance fee does not confer an ownership 
        interest in the continuing care retirement community or life 
        care community.''.

SEC. 6016. ADDITIONAL REFORMS OF MEDICAID ASSET TRANSFER RULES.

    (a) Requirement To Impose Partial Months of Ineligibility.--Section 
1917(c)(1)(E) of the Social Security Act (42 U.S.C. 1396p(c)(1)(E)) is 
amended by adding at the end the following:
    ``(iv) A State shall not round down, or otherwise disregard any 
fractional period of ineligibility determined under clause (i) or (ii) 
with respect to the disposal of assets.''.
    (b) Authority for States To Accumulate Multiple Transfers Into One 
Penalty Period.--Section 1917(c)(1) of such Act (42 U.S.C. 
1396p(c)(1)), as amended by subsections (b) and (c) of section 6012, is 
amended by adding at the end the following:
    ``(H) Notwithstanding the preceding provisions of this paragraph, 
in the case of an individual (or individual's spouse) who makes 
multiple fractional transfers of assets in more than 1 month for less 
than fair market value on or after the applicable look-back date 
specified in subparagraph (B), a State may determine the period of 
ineligibility applicable to such individual under this paragraph by--
        ``(i) treating the total, cumulative uncompensated value of all 
    assets transferred by the individual (or individual's spouse) 
    during all months on or after the look-back date specified in 
    subparagraph (B) as 1 transfer for purposes of clause (i) or (ii) 
    (as the case may be) of subparagraph (E); and
        ``(ii) beginning such period on the earliest date which would 
    apply under subparagraph (D) to any of such transfers.''.
    (c) Inclusion of Transfer of Certain Notes and Loans Assets.--
Section 1917(c)(1) of such Act (42 U.S.C. 1396p(c)(1)), as amended by 
subsection (b), is amended by adding at the end the following:
    ``(I) For purposes of this paragraph with respect to a transfer of 
assets, the term `assets' includes funds used to purchase a promissory 
note, loan, or mortgage unless such note, loan, or mortgage--
        ``(i) has a repayment term that is actuarially sound (as 
    determined in accordance with actuarial publications of the Office 
    of the Chief Actuary of the Social Security Administration);
        ``(ii) provides for payments to be made in equal amounts during 
    the term of the loan, with no deferral and no balloon payments 
    made; and
        ``(iii) prohibits the cancellation of the balance upon the 
    death of the lender.
In the case of a promissory note, loan, or mortgage that does not 
satisfy the requirements of clauses (i) through (iii), the value of 
such note, loan, or mortgage shall be the outstanding balance due as of 
the date of the individual's application for medical assistance for 
services described in subparagraph (C).''.
    (d) Inclusion of Transfers To Purchase Life Estates.--Section 
1917(c)(1) of such Act (42 U.S.C. 1396p(c)(1)), as amended by 
subsection (c), is amended by adding at the end the following:
    ``(J) For purposes of this paragraph with respect to a transfer of 
assets, the term `assets' includes the purchase of a life estate 
interest in another individual's home unless the purchaser resides in 
the home for a period of at least 1 year after the date of the 
purchase.''.
    (e) Effective Dates.--
        (1) In general.--Except as provided in paragraphs (2) and (3), 
    the amendments made by this section shall apply to payments under 
    title XIX of the Social Security Act (42 U.S.C. 1396 et seq.) for 
    calendar quarters beginning on or after the date of enactment of 
    this Act, without regard to whether or not final regulations to 
    carry out such amendments have been promulgated by such date.
        (2) Exceptions.--The amendments made by this section shall not 
    apply--
            (A) to medical assistance provided for services furnished 
        before the date of enactment;
            (B) with respect to assets disposed of on or before the 
        date of enactment of this Act; or
            (C) with respect to trusts established on or before the 
        date of enactment of this Act.
        (3) Extension of effective date for state law amendment.--In 
    the case of a State plan under title XIX of the Social Security Act 
    (42 U.S.C. 1396 et seq.) which the Secretary of Health and Human 
    Services determines requires State legislation in order for the 
    plan to meet the additional requirements imposed by the amendments 
    made by a provision of this section, the State plan shall not be 
    regarded as failing to comply with the requirements of such title 
    solely on the basis of its failure to meet these additional 
    requirements before the first day of the first calendar quarter 
    beginning after the close of the first regular session of the State 
    legislature that begins after the date of the enactment of this 
    Act. For purposes of the previous sentence, in the case of a State 
    that has a 2-year legislative session, each year of the session is 
    considered to be a separate regular session of the State 
    legislature.

           Subchapter B--Expanded Access to Certain Benefits

SEC. 6021. EXPANSION OF STATE LONG-TERM CARE PARTNERSHIP PROGRAM.

    (a) Expansion Authority.--
        (1) In general.--Section 1917(b) of the Social Security Act (42 
    U.S.C. 1396p(b)) is amended--
            (A) in paragraph (1)(C)--
                (i) in clause (ii), by inserting ``and which satisfies 
            clause (iv), or which has a State plan amendment that 
            provides for a qualified State long-term care insurance 
            partnership (as defined in clause (iii))'' after ``1993,''; 
            and
                (ii) by adding at the end the following new clauses:
        ``(iii) For purposes of this paragraph, the term `qualified 
    State long-term care insurance partnership' means an approved State 
    plan amendment under this title that provides for the disregard of 
    any assets or resources in an amount equal to the insurance benefit 
    payments that are made to or on behalf of an individual who is a 
    beneficiary under a long-term care insurance policy if the 
    following requirements are met:
            ``(I) The policy covers an insured who was a resident of 
        such State when coverage first became effective under the 
        policy.
            ``(II) The policy is a qualified long-term care insurance 
        policy (as defined in section 7702B(b) of the Internal Revenue 
        Code of 1986) issued not earlier than the effective date of the 
        State plan amendment.
            ``(III) The policy meets the model regulations and the 
        requirements of the model Act specified in paragraph (5).
            ``(IV) If the policy is sold to an individual who--
                ``(aa) has not attained age 61 as of the date of 
            purchase, the policy provides compound annual inflation 
            protection;
                ``(bb) has attained age 61 but has not attained age 76 
            as of such date, the policy provides some level of 
            inflation protection; and
                ``(cc) has attained age 76 as of such date, the policy 
            may (but is not required to) provide some level of 
            inflation protection.
            ``(V) The State Medicaid agency under section 1902(a)(5) 
        provides information and technical assistance to the State 
        insurance department on the insurance department's role of 
        assuring that any individual who sells a long-term care 
        insurance policy under the partnership receives training and 
        demonstrates evidence of an understanding of such policies and 
        how they relate to other public and private coverage of long-
        term care.
            ``(VI) The issuer of the policy provides regular reports to 
        the Secretary, in accordance with regulations of the Secretary, 
        that include notification regarding when benefits provided 
        under the policy have been paid and the amount of such benefits 
        paid, notification regarding when the policy otherwise 
        terminates, and such other information as the Secretary 
        determines may be appropriate to the administration of such 
        partnerships.
            ``(VII) The State does not impose any requirement affecting 
        the terms or benefits of such a policy unless the State imposes 
        such requirement on long-term care insurance policies without 
        regard to whether the policy is covered under the partnership 
        or is offered in connection with such a partnership.
    In the case of a long-term care insurance policy which is exchanged 
    for another such policy, subclause (I) shall be applied based on 
    the coverage of the first such policy that was exchanged. For 
    purposes of this clause and paragraph (5), the term `long-term care 
    insurance policy' includes a certificate issued under a group 
    insurance contract.
        ``(iv) With respect to a State which had a State plan amendment 
    approved as of May 14, 1993, such a State satisfies this clause for 
    purposes of clause (ii) if the Secretary determines that the State 
    plan amendment provides for consumer protection standards which are 
    no less stringent than the consumer protection standards which 
    applied under such State plan amendment as of December 31, 2005.
        ``(v) The regulations of the Secretary required under clause 
    (iii)(VI) shall be promulgated after consultation with the National 
    Association of Insurance Commissioners, issuers of long-term care 
    insurance policies, States with experience with long-term care 
    insurance partnership plans, other States, and representatives of 
    consumers of long-term care insurance policies, and shall specify 
    the type and format of the data and information to be reported and 
    the frequency with which such reports are to be made. The 
    Secretary, as appropriate, shall provide copies of the reports 
    provided in accordance with that clause to the State involved.
        ``(vi) The Secretary, in consultation with other appropriate 
    Federal agencies, issuers of long-term care insurance, the National 
    Association of Insurance Commissioners, State insurance 
    commissioners, States with experience with long-term care insurance 
    partnership plans, other States, and representatives of consumers 
    of long-term care insurance policies, shall develop recommendations 
    for Congress to authorize and fund a uniform minimum data set to be 
    reported electronically by all issuers of long-term care insurance 
    policies under qualified State long-term care insurance 
    partnerships to a secure, centralized electronic query and report-
    generating mechanism that the State, the Secretary, and other 
    Federal agencies can access.''; and
            (B) by adding at the end the following:
    ``(5)(A) For purposes of clause (iii)(III), the model regulations 
and the requirements of the model Act specified in this paragraph are:
        ``(i) In the case of the model regulation, the following 
    requirements:
            ``(I) Section 6A (relating to guaranteed renewal or 
        noncancellability), other than paragraph (5) thereof, 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) other than paragraph (7) thereof.
            ``(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 
        sections 8F, 8G, 8H, and 8I thereof.
            ``(VIII) Section 9 (relating to required disclosure of 
        rating practices to consumer).
            ``(IX) Section 11 (relating to prohibitions against post-
        claims underwriting).
            ``(X) Section 12 (relating to minimum standards).
            ``(XI) Section 14 (relating to application forms and 
        replacement coverage).
            ``(XII) Section 15 (relating to reporting requirements).
            ``(XIII) Section 22 (relating to filing requirements for 
        marketing).
            ``(XIV) Section 23 (relating to standards for marketing), 
        including inaccurate completion of medical histories, other 
        than paragraphs (1), (6), and (9) of section 23C.
            ``(XV) Section 24 (relating to suitability).
            ``(XVI) Section 25 (relating to prohibition against 
        preexisting conditions and probationary periods in replacement 
        policies or certificates).
            ``(XVII) The provisions of section 26 relating to 
        contingent nonforfeiture benefits, if the policyholder declines 
        the offer of a nonforfeiture provision described in paragraph 
        (4).
            ``(XVIII) Section 29 (relating to standard format outline 
        of coverage).
            ``(XIX) Section 30 (relating to requirement to deliver 
        shopper's guide).
        ``(ii) In the case of the model Act, the following:
            ``(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.
            ``(IV) Section 6F (relating to right to return).
            ``(V) Section 6G (relating to outline of coverage).
            ``(VI) Section 6H (relating to requirements for 
        certificates under group plans).
            ``(VII) Section 6J (relating to policy summary).
            ``(VIII) Section 6K (relating to monthly reports on 
        accelerated death benefits).
            ``(IX) Section 7 (relating to incontestability period).
    ``(B) For purposes of this paragraph and paragraph (1)(C)--
        ``(i) 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 October 
    2000);
        ``(ii) any provision of the model regulation or model Act 
    listed under subparagraph (A) shall be treated as including any 
    other provision of such regulation or Act necessary to implement 
    the provision; and
        ``(iii) with respect to a long-term care insurance policy 
    issued in a State, the policy shall be deemed to meet applicable 
    requirements of the model regulation or the model Act if the State 
    plan amendment under paragraph (1)(C)(iii) provides that the State 
    insurance commissioner for the State certifies (in a manner 
    satisfactory to the Secretary) that the policy meets such 
    requirements.
    ``(C) Not later than 12 months after the National Association of 
Insurance Commissioners issues a revision, update, or other 
modification of a model regulation or model Act provision specified in 
subparagraph (A), or of any provision of such regulation or Act that is 
substantively related to a provision specified in such subparagraph, 
the Secretary shall review the changes made to the provision, determine 
whether incorporating such changes into the corresponding provision 
specified in such subparagraph would improve qualified State long-term 
care insurance partnerships, and if so, shall incorporate the changes 
into such provision.''.
        (2) State reporting requirements.--Nothing in clauses (iii)(VI) 
    and (v) of section 1917(b)(1)(C) of the Social Security Act (as 
    added by paragraph (1)) shall be construed as prohibiting a State 
    from requiring an issuer of a long-term care insurance policy sold 
    in the State (regardless of whether the policy is issued under a 
    qualified State long-term care insurance partnership under section 
    1917(b)(1)(C)(iii) of such Act) to require the issuer to report 
    information or data to the State that is in addition to the 
    information or data required under such clauses.
        (3) Effective date.--A State plan amendment that provides for a 
    qualified State long-term care insurance partnership under the 
    amendments made by paragraph (1) may provide that such amendment is 
    effective for long-term care insurance policies issued on or after 
    a date, specified in the amendment, that is not earlier than the 
    first day of the first calendar quarter in which the plan amendment 
    was submitted to the Secretary of Health and Human Services.
    (b) Standards for Reciprocal Recognition Among Partnership 
States.--In order to permit portability in long-term care insurance 
policies purchased under State long-term care insurance partnerships, 
the Secretary of Health and Human Services shall develop, not later 
than January 1, 2007, and in consultation with the National Association 
of Insurance Commissioners, issuers of long-term care insurance 
policies, States with experience with long-term care insurance 
partnership plans, other States, and representatives of consumers of 
long-term care insurance policies, standards for uniform reciprocal 
recognition of such policies among States with qualified State long-
term care insurance partnerships under which--
        (1) benefits paid under such policies will be treated the same 
    by all such States; and
        (2) States with such partnerships shall be subject to such 
    standards unless the State notifies the Secretary in writing of the 
    State's election to be exempt from such standards.
    (c) Annual Reports to Congress.--
        (1) In general.--The Secretary of Health and Human Services 
    shall annually report to Congress on the long-term care insurance 
    partnerships established in accordance with section 
    1917(b)(1)(C)(ii) of the Social Security Act (42 U.S.C. 
    1396p(b)(1)(C)(ii)) (as amended by subsection (a)(1)). Such reports 
    shall include analyses of the extent to which such partnerships 
    expand or limit access of individuals to long-term care and the 
    impact of such partnerships on Federal and State expenditures under 
    the Medicare and Medicaid programs. Nothing in this section shall 
    be construed as requiring the Secretary to conduct an independent 
    review of each long-term care insurance policy offered under or in 
    connection with such a partnership.
        (2) Appropriation.--Out of any funds in the Treasury not 
    otherwise appropriated, there is appropriated to the Secretary of 
    Health and Human Services, $1,000,000 for the period of fiscal 
    years 2006 through 2010 to carry out paragraph (1).
    (d) National Clearinghouse for Long-Term Care Information.--
        (1) Establishment.--The Secretary of Health and Human Services 
    shall establish a National Clearinghouse for Long-Term Care 
    Information. The Clearinghouse may be established through a 
    contract or interagency agreement.
        (2) Duties.--
            (A) In general.--The National Clearinghouse for Long-Term 
        Care Information shall--
                (i) educate consumers with respect to the availability 
            and limitations of coverage for long-term care under the 
            Medicaid program and provide contact information for 
            obtaining State-specific information on long-term care 
            coverage, including eligibility and estate recovery 
            requirements under State Medicaid programs;
                (ii) provide objective information to assist consumers 
            with the decisionmaking process for determining whether to 
            purchase long-term care insurance or to pursue other 
            private market alternatives for purchasing long-term care 
            and provide contact information for additional objective 
            resources on planning for long-term care needs; and
                (iii) maintain a list of States with State long-term 
            care insurance partnerships under the Medicaid program that 
            provide reciprocal recognition of long-term care insurance 
            policies issued under such partnerships.
            (B) Requirement.--In providing information to consumers on 
        long-term care in accordance with this subsection, the National 
        Clearinghouse for Long-Term Care Information shall not advocate 
        in favor of a specific long-term care insurance provider or a 
        specific long-term care insurance policy.
        (3) Appropriation.--Out of any funds in the Treasury not 
    otherwise appropriated, there is appropriated to carry out this 
    subsection, $3,000,000 for each of fiscal years 2006 through 2010.

       CHAPTER 3--ELIMINATING FRAUD, WASTE, AND ABUSE IN MEDICAID

SEC. 6031. ENCOURAGING THE ENACTMENT OF STATE FALSE CLAIMS ACTS.

    (a) In General.--Title XIX of the Social Security Act (42 U.S.C. 
1396 et seq.) is amended by inserting after section 1908A the 
following:


   ``STATE FALSE CLAIMS ACT REQUIREMENTS FOR INCREASED STATE SHARE OF 
                               RECOVERIES

    ``Sec. 1909. (a) In General.--Notwithstanding section 1905(b), if a 
State has in effect a law relating to false or fraudulent claims that 
meets the requirements of subsection (b), the Federal medical 
assistance percentage with respect to any amounts recovered under a 
State action brought under such law, shall be decreased by 10 
percentage points.
    ``(b) Requirements.--For purposes of subsection (a), the 
requirements of this subsection are that the Inspector General of the 
Department of Health and Human Services, in consultation with the 
Attorney General, determines that the State has in effect a law that 
meets the following requirements:
        ``(1) The law establishes liability to the State for false or 
    fraudulent claims described in section 3729 of title 31, United 
    States Code, with respect to any expenditure described in section 
    1903(a).
        ``(2) The law contains provisions that are at least as 
    effective in rewarding and facilitating qui tam actions for false 
    or fraudulent claims as those described in sections 3730 through 
    3732 of title 31, United States Code.
        ``(3) The law contains a requirement for filing an action under 
    seal for 60 days with review by the State Attorney General.
        ``(4) The law contains a civil penalty that is not less than 
    the amount of the civil penalty authorized under section 3729 of 
    title 31, United States Code.
    ``(c) Deemed Compliance.--A State that, as of January 1, 2007, has 
a law in effect that meets the requirements of subsection (b) shall be 
deemed to be in compliance with such requirements for so long as the 
law continues to meet such requirements.
    ``(d) No Preclusion of Broader Laws.--Nothing in this section shall 
be construed as prohibiting a State that has in effect a law that 
establishes liability to the State for false or fraudulent claims 
described in section 3729 of title 31, United States Code, with respect 
to programs in addition to the State program under this title, or with 
respect to expenditures in addition to expenditures described in 
section 1903(a), from being considered to be in compliance with the 
requirements of subsection (a) so long as the law meets such 
requirements.''.
    (b) Effective Date.--Except as provided in section 6035(e), the 
amendments made by this section take effect on January 1, 2007.

SEC. 6032. EMPLOYEE EDUCATION ABOUT FALSE CLAIMS RECOVERY.

    (a) In General.--Section 1902(a) of the Social Security Act (42 
U.S.C. 1396a(a)) is amended--
        (1) in paragraph (66), by striking ``and'' at the end;
        (2) in paragraph (67) by striking the period at the end and 
    inserting ``; and''; and
        (3) by inserting after paragraph (67) the following:
        ``(68) provide that any entity that receives or makes annual 
    payments under the State plan of at least $5,000,000, as a 
    condition of receiving such payments, shall--
            ``(A) establish written policies for all employees of the 
        entity (including management), and of any contractor or agent 
        of the entity, that provide detailed information about the 
        False Claims Act established under sections 3729 through 3733 
        of title 31, United States Code, administrative remedies for 
        false claims and statements established under chapter 38 of 
        title 31, United States Code, any State laws pertaining to 
        civil or criminal penalties for false claims and statements, 
        and whistleblower protections under such laws, with respect to 
        the role of such laws in preventing and detecting fraud, waste, 
        and abuse in Federal health care programs (as defined in 
        section 1128B(f));
            ``(B) include as part of such written policies, detailed 
        provisions regarding the entity's policies and procedures for 
        detecting and preventing fraud, waste, and abuse; and
            ``(C) include in any employee handbook for the entity, a 
        specific discussion of the laws described in subparagraph (A), 
        the rights of employees to be protected as whistleblowers, and 
        the entity's policies and procedures for detecting and 
        preventing fraud, waste, and abuse.''.
    (b) Effective Date.--Except as provided in section 6035(e), the 
amendments made by subsection (a) take effect on January 1, 2007.

SEC. 6033. PROHIBITION ON RESTOCKING AND DOUBLE BILLING OF PRESCRIPTION 
              DRUGS.

    (a) In General.--Section 1903(i)(10) of the Social Security Act (42 
U.S.C. 1396b(i)), as amended by section 6002(b), is amended--
        (1) in subparagraph (B), by striking ``and'' at the end;
        (2) in subparagraph (C), by striking ``; or'' at the end and 
    inserting ``, and''; and
        (3) by adding at the end the following:
        ``(D) with respect to any amount expended for reimbursement to 
    a pharmacy under this title for the ingredient cost of a covered 
    outpatient drug for which the pharmacy has already received payment 
    under this title (other than with respect to a reasonable 
    restocking fee for such drug); or''.
    (b) Effective Date.--The amendments made by subsection (a) take 
effect on the first day of the first fiscal year quarter that begins 
after the date of enactment of this Act.

SEC. 6034. MEDICAID INTEGRITY PROGRAM.

    (a) Establishment of Medicaid Integrity Program.--Title XIX of the 
Social Security Act (42 U.S.C. 1396 et seq.) is amended--
        (1) by redesignating section 1936 as section 1937; and
        (2) by inserting after section 1935 the following:


                       ``MEDICAID INTEGRITY PROGRAM

    ``Sec. 1936. (a) In General.--There is hereby established the 
Medicaid Integrity Program (in this section referred to as the 
`Program') under which the Secretary shall promote the integrity of the 
program under this title by entering into contracts in accordance with 
this section with eligible entities to carry out the activities 
described in subsection (b).
    ``(b) Activities Described.--Activities described in this 
subsection are as follows:
        ``(1) Review of the actions of individuals or entities 
    furnishing items or services (whether on a fee-for-service, risk, 
    or other basis) for which payment may be made under a State plan 
    approved under this title (or under any waiver of such plan 
    approved under section 1115) to determine whether fraud, waste, or 
    abuse has occurred, is likely to occur, or whether such actions 
    have any potential for resulting in an expenditure of funds under 
    this title in a manner which is not intended under the provisions 
    of this title.
        ``(2) Audit of claims for payment for items or services 
    furnished, or administrative services rendered, under a State plan 
    under this title, including--
            ``(A) cost reports;
            ``(B) consulting contracts; and
            ``(C) risk contracts under section 1903(m).
        ``(3) Identification of overpayments to individuals or entities 
    receiving Federal funds under this title.
        ``(4) Education of providers of services, managed care 
    entities, beneficiaries, and other individuals with respect to 
    payment integrity and quality of care.
    ``(c) Eligible Entity and Contracting Requirements.--
        ``(1) In general.--An entity is eligible to enter into a 
    contract under the Program to carry out any of the activities 
    described in subsection (b) if the entity satisfies the 
    requirements of paragraphs (2) and (3).
        ``(2) Eligibility requirements.--The requirements of this 
    paragraph are the following:
            ``(A) The entity has demonstrated capability to carry out 
        the activities described in subsection (b).
            ``(B) In carrying out such activities, the entity agrees to 
        cooperate with the Inspector General of the Department of 
        Health and Human Services, the Attorney General, and other law 
        enforcement agencies, as appropriate, in the investigation and 
        deterrence of fraud and abuse in relation to this title and in 
        other cases arising out of such activities.
            ``(C) The entity complies with such conflict of interest 
        standards as are generally applicable to Federal acquisition 
        and procurement.
            ``(D) The entity meets such other requirements as the 
        Secretary may impose.
        ``(3) Contracting requirements.--The entity has contracted with 
    the Secretary in accordance with such procedures as the Secretary 
    shall by regulation establish, except that such procedures shall 
    include the following:
            ``(A) Procedures for identifying, evaluating, and resolving 
        organizational conflicts of interest that are generally 
        applicable to Federal acquisition and procurement.
            ``(B) Competitive procedures to be used--
                ``(i) when entering into new contracts under this 
            section;
                ``(ii) when entering into contracts that may result in 
            the elimination of responsibilities under section 202(b) of 
            the Health Insurance Portability and Accountability Act of 
            1996; and
                ``(iii) at any other time considered appropriate by the 
            Secretary.
            ``(C) Procedures under which a contract under this section 
        may be renewed without regard to any provision of law requiring 
        competition if the contractor has met or exceeded the 
        performance requirements established in the current contract.
    The Secretary may enter into such contracts without regard to final 
    rules having been promulgated.
        ``(4) Limitation on contractor liability.--The Secretary shall 
    by regulation provide for the limitation of a contractor's 
    liability for actions taken to carry out a contract under the 
    Program, and such regulation shall, to the extent the Secretary 
    finds appropriate, employ the same or comparable standards and 
    other substantive and procedural provisions as are contained in 
    section 1157.
    ``(d) Comprehensive Plan for Program Integrity.--
        ``(1) 5-year plan.--With respect to the 5-fiscal year period 
    beginning with fiscal year 2006, and each such 5-fiscal year period 
    that begins thereafter, the Secretary shall establish a 
    comprehensive plan for ensuring the integrity of the program 
    established under this title by combatting fraud, waste, and abuse.
        ``(2) Consultation.--Each 5-fiscal year plan established under 
    paragraph (1) shall be developed by the Secretary in consultation 
    with the Attorney General, the Director of the Federal Bureau of 
    Investigation, the Comptroller General of the United States, the 
    Inspector General of the Department of Health and Human Services, 
    and State officials with responsibility for controlling provider 
    fraud and abuse under State plans under this title.
    ``(e) Appropriation.--
        ``(1) In general.--Out of any money in the Treasury of the 
    United States not otherwise appropriated, there are appropriated to 
    carry out the Medicaid Integrity Program under this section, 
    without further appropriation--
            ``(A) for fiscal year 2006, $5,000,000;
            ``(B) for each of fiscal years 2007 and 2008, $50,000,000; 
        and
            ``(C) for each fiscal year thereafter, $75,000,000.
        ``(2) Availability.--Amounts appropriated pursuant to paragraph 
    (1) shall remain available until expended.
        ``(3) Increase in cms staffing devoted to protecting medicaid 
    program integrity.--From the amounts appropriated under paragraph 
    (1), the Secretary shall increase by 100 the number of full-time 
    equivalent employees whose duties consist solely of protecting the 
    integrity of the Medicaid program established under this section by 
    providing effective support and assistance to States to combat 
    provider fraud and abuse.
        ``(4) Annual report.--Not later than 180 days after the end of 
    each fiscal year (beginning with fiscal year 2006), the Secretary 
    shall submit a report to Congress which identifies--
            ``(A) the use of funds appropriated pursuant to paragraph 
        (1); and
            ``(B) the effectiveness of the use of such funds.''.
    (b) State Requirement To Cooperate With Integrity Program 
Efforts.--Section 1902(a) of such Act (42 U.S.C. 1396a(a)), as amended 
by section 6033(a), is amended--
        (1) in paragraph (67), by striking ``and'' at the end;
        (2) in paragraph (68), by striking the period at the end and 
    inserting ``; and''; and
        (3) by inserting after paragraph (68), the following:
        ``(69) provide that the State must comply with any requirements 
    determined by the Secretary to be necessary for carrying out the 
    Medicaid Integrity Program established under section 1936.''.
    (c) Increased Funding for Medicaid Fraud and Abuse Control 
Activities.--
        (1) In general.--Out of any money in the Treasury of the United 
    States not otherwise appropriated, there are appropriated to the 
    Office of the Inspector General of the Department of Health and 
    Human Services, without further appropriation, $25,000,000 for each 
    of fiscal years 2006 through 2010, for activities of such Office 
    with respect to the Medicaid program under title XIX of the Social 
    Security Act (42 U.S.C. 1396 et seq.).
        (2) Availability; amounts in addition to other amounts 
    appropriated for such activities.--Amounts appropriated pursuant to 
    paragraph (1) shall--
            (A) remain available until expended; and
            (B) be in addition to any other amounts appropriated or 
        made available to the Office of the Inspector General of the 
        Department of Health and Human Services for activities of such 
        Office with respect to the Medicaid program.
        (3) Annual report.--Not later than 180 days after the end of 
    each fiscal year (beginning with fiscal year 2006), the Inspector 
    General of the Department of Health and Human Services shall submit 
    a report to Congress which identifies--
            (A) the use of funds appropriated pursuant to paragraph 
        (1); and
            (B) the effectiveness of the use of such funds.
    (d) National Expansion of the Medicare-Medicaid (Medi-Medi) Data 
Match Pilot Program.--
        (1) Requirement of the medicare integrity program.--Section 
    1893 of the Social Security Act (42 U.S.C. 1395ddd) is amended--
            (A) in subsection (b), by adding at the end the following:
        ``(6) The Medicare-Medicaid Data Match Program in accordance 
    with subsection (g).''; and
            (B) by adding at the end the following:
    ``(g) Medicare-Medicaid Data Match Program.--
        ``(1) Expansion of program.--
            ``(A) In general.--The Secretary shall enter into contracts 
        with eligible entities for the purpose of ensuring that, 
        beginning with 2006, the Medicare-Medicaid Data Match Program 
        (commonly referred to as the `Medi-Medi Program') is conducted 
        with respect to the program established under this title and 
        State Medicaid programs under title XIX for the purpose of--
                ``(i) identifying program vulnerabilities in the 
            program established under this title and the Medicaid 
            program established under title XIX through the use of 
            computer algorithms to look for payment anomalies 
            (including billing or billing patterns identified with 
            respect to service, time, or patient that appear to be 
            suspect or otherwise implausible);
                ``(ii) working with States, the Attorney General, and 
            the Inspector General of the Department of Health and Human 
            Services to coordinate appropriate actions to protect the 
            Federal and State share of expenditures under the Medicaid 
            program under title XIX, as well as the program established 
            under this title; and
                ``(iii) increasing the effectiveness and efficiency of 
            both such programs through cost avoidance, savings, and 
            recoupments of fraudulent, wasteful, or abusive 
            expenditures.
            ``(B) Reporting requirements.--The Secretary shall make 
        available in a timely manner any data and statistical 
        information collected by the Medi-Medi Program to the Attorney 
        General, the Director of the Federal Bureau of Investigation, 
        the Inspector General of the Department of Health and Human 
        Services, and the States (including a Medicaid fraud and abuse 
        control unit described in section 1903(q)). Such information 
        shall be disseminated no less frequently than quarterly.
        ``(2) Limited waiver authority.--The Secretary shall waive only 
    such requirements of this section and of titles XI and XIX as are 
    necessary to carry out paragraph (1).''.
        (2) Funding.--Section 1817(k)(4) of such Act (42 U.S.C. 
    1395i(k)(4)), as amended by section 5204 of this Act, is amended--
            (A) in subparagraph (A), by striking ``subparagraph (B)'' 
        and inserting ``subparagraphs (B), (C), and (D)''; and
            (B) by adding at the end the following:
            ``(D) Expansion of the medicare-medicaid data match 
        program.--The amount appropriated under subparagraph (A) for a 
        fiscal year is further increased as follows for purposes of 
        carrying out section 1893(b)(6) for the respective fiscal year:
                ``(i) $12,000,000 for fiscal year 2006.
                ``(ii) $24,000,000 for fiscal year 2007.
                ``(iii) $36,000,000 for fiscal year 2008.
                ``(iv) $48,000,000 for fiscal year 2009.
                ``(v) $60,000,000 for fiscal year 2010 and each fiscal 
            year thereafter.''.
    (e) Delayed Effective Date for Chapter.--Except as otherwise 
provided in this chapter, in the case of a State plan under title XIX 
of the Social Security Act which the Secretary determines requires 
State legislation in order for the plan to meet the additional 
requirements imposed by the amendments made by a provision of this 
chapter, the State plan shall not be regarded as failing to comply with 
the requirements of such Act solely on the basis of its failure to meet 
these additional requirements before the first day of the first 
calendar quarter beginning after the close of the first regular session 
of the State legislature that begins after the date of enactment of 
this Act. For purposes of the previous sentence, in the case of a State 
that has a 2-year legislative session, each year of the session shall 
be considered to be a separate regular session of the State 
legislature.

SEC. 6035. ENHANCING THIRD PARTY IDENTIFICATION AND PAYMENT.

    (a) Clarification of Third Parties Legally Responsible for Payment 
of a Claim for a Health Care Item or Service.--Section 1902(a)(25) of 
the Social Security Act (42 U.S.C. 1396a(a)(25)) is amended--
        (1) in subparagraph (A), in the matter preceding clause (i)--
            (A) by inserting ``, self-insured plans'' after ``health 
        insurers''; and
            (B) by striking ``and health maintenance organizations'' 
        and inserting ``managed care organizations, pharmacy benefit 
        managers, or other parties that are, by statute, contract, or 
        agreement, legally responsible for payment of a claim for a 
        health care item or service''; and
        (2) in subparagraph (G)--
            (A) by inserting ``a self-insured plan,'' after ``1974,''; 
        and
            (B) by striking ``and a health maintenance organization'' 
        and inserting ``a managed care organization, a pharmacy benefit 
        manager, or other party that is, by statute, contract, or 
        agreement, legally responsible for payment of a claim for a 
        health care item or service''.
     (b) Requirement for Third Parties To Provide the State With 
Coverage Eligibility and Claims Data.--Section 1902(a)(25) of such Act 
(42 U.S.C. 1396a(a)(25)) is amended--
        (1) in subparagraph (G), by striking ``and'' at the end;
        (2) in subparagraph (H), by adding ``and'' after the semicolon 
    at the end; and
        (3) by inserting after subparagraph (H), the following:
            ``(I) that the State shall provide assurances satisfactory 
        to the Secretary that the State has in effect laws requiring 
        health insurers, including self-insured plans, group health 
        plans (as defined in section 607(1) of the Employee Retirement 
        Income Security Act of 1974), service benefit plans, managed 
        care organizations, pharmacy benefit managers, or other parties 
        that are, by statute, contract, or agreement, legally 
        responsible for payment of a claim for a health care item or 
        service, as a condition of doing business in the State, to--
                ``(i) provide, with respect to individuals who are 
            eligible for, or are provided, medical assistance under the 
            State plan, upon the request of the State, information to 
            determine during what period the individual or their 
            spouses or their dependents may be (or may have been) 
            covered by a health insurer and the nature of the coverage 
            that is or was provided by the health insurer (including 
            the name, address, and identifying number of the plan) in a 
            manner prescribed by the Secretary;
                ``(ii) accept the State's right of recovery and the 
            assignment to the State of any right of an individual or 
            other entity to payment from the party for an item or 
            service for which payment has been made under the State 
            plan;
                ``(iii) respond to any inquiry by the State regarding a 
            claim for payment for any health care item or service that 
            is submitted not later than 3 years after the date of the 
            provision of such health care item or service; and
                ``(iv) agree not to deny a claim submitted by the State 
            solely on the basis of the date of submission of the claim, 
            the type or format of the claim form, or a failure to 
            present proper documentation at the point-of-sale that is 
            the basis of the claim, if--

                    ``(I) the claim is submitted by the State within 
                the 3-year period beginning on the date on which the 
                item or service was furnished; and
                    ``(II) any action by the State to enforce its 
                rights with respect to such claim is commenced within 6 
                years of the State's submission of such claim;''.

    (c) Effective Date.--Except as provided in section 6035(e), the 
amendments made by this section take effect on January 1, 2006.

SEC. 6036. IMPROVED ENFORCEMENT OF DOCUMENTATION REQUIREMENTS.

    (a) In General.--Section 1903 of the Social Security Act (42 U.S.C. 
1396b) is amended--
        (1) in subsection (i), as amended by section 104 of Public Law 
    109-91--
            (A) by striking ``or'' at the end of paragraph (20);
            (B) by striking the period at the end of paragraph (21) and 
        inserting ``; or''; and
            (C) by inserting after paragraph (21) the following new 
        paragraph:
        ``(22) with respect to amounts expended for medical assistance 
    for an individual who declares under section 1137(d)(1)(A) to be a 
    citizen or national of the United States for purposes of 
    establishing eligibility for benefits under this title, unless the 
    requirement of subsection (x) is met.''; and
        (2) by adding at the end the following new subsection:
    ``(x)(1) For purposes of subsection (i)(23), the requirement of 
this subsection is, with respect to an individual declaring to be a 
citizen or national of the United States, that, subject to paragraph 
(2), there is presented satisfactory documentary evidence of 
citizenship or nationality (as defined in paragraph (3)) of the 
individual.
    ``(2) The requirement of paragraph (1) shall not apply to an alien 
who is eligible for medical assistance under this title--
        ``(A) and is entitled to or enrolled for benefits under any 
    part of title XVIII;
        ``(B) on the basis of receiving supplemental security income 
    benefits under title XVI; or
        ``(C) on such other basis as the Secretary may specify under 
    which satisfactory documentary evidence of citizenship or 
    nationality had been previously presented.
    ``(3)(A) For purposes of this subsection, the term `satisfactory 
documentary evidence of citizenship or nationality' means--
        ``(i) any document described in subparagraph (B); or
        ``(ii) a document described in subparagraph (C) and a document 
    described in subparagraph (D).
    ``(B) The following are documents described in this subparagraph:
        ``(i) A United States passport.
        ``(ii) Form N-550 or N-570 (Certificate of Naturalization).
        ``(iii) Form N-560 or N-561 (Certificate of United States 
    Citizenship).
        ``(iv) A valid State-issued driver's license or other identity 
    document described in section 274A(b)(1)(D) of the Immigration and 
    Nationality Act, but only if the State issuing the license or such 
    document requires proof of United States citizenship before 
    issuance of such license or document or obtains a social security 
    number from the applicant and verifies before certification that 
    such number is valid and assigned to the applicant who is a 
    citizen.
        ``(v) Such other document as the Secretary may specify, by 
    regulation, that provides proof of United States citizenship or 
    nationality and that provides a reliable means of documentation of 
    personal identity.
    ``(C) The following are documents described in this subparagraph:
        ``(i) A certificate of birth in the United States.
        ``(ii) Form FS-545 or Form DS-1350 (Certification of Birth 
    Abroad).
        ``(iii) Form I-97 (United States Citizen Identification Card).
        ``(iv) Form FS-240 (Report of Birth Abroad of a Citizen of the 
    United States).
        ``(v) Such other document (not described in subparagraph 
    (B)(iv)) as the Secretary may specify that provides proof of United 
    States citizenship or nationality.
    ``(D) The following are documents described in this subparagraph:
        ``(i) Any identity document described in section 274A(b)(1)(D) 
    of the Immigration and Nationality Act.
        ``(ii) Any other documentation of personal identity of such 
    other type as the Secretary finds, by regulation, provides a 
    reliable means of identification.
    ``(E) A reference in this paragraph to a form includes a reference 
to any successor form.''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
apply to determinations of initial eligibility for medical assistance 
made on or after July 1, 2006, and to redeterminations of eligibility 
made on or after such date in the case of individuals for whom the 
requirement of section 1903(z) of the Social Security Act, as added by 
such amendments, was not previously met.
    (c) Implementation Requirement.--As soon as practicable after the 
date of enactment of this Act, the Secretary of Health and Human 
Services shall establish an outreach program that is designed to 
educate individuals who are likely to be affected by the requirements 
of subsections (i)(23) and (x) of section 1903 of the Social Security 
Act (as added by subsection (a)) about such requirements and how they 
may be satisfied.

          CHAPTER 4--FLEXIBILITY IN COST SHARING AND BENEFITS

SEC. 6041. STATE OPTION FOR ALTERNATIVE MEDICAID PREMIUMS AND COST 
              SHARING.

    (a) In General.--Title XIX of the Social Security Act is amended by 
inserting after section 1916 the following new section:


         ``State option for alternative premiums and cost sharing

    ``Sec. 1916A. (a) State Flexibility.--
        ``(1) In general.--Notwithstanding sections 1916 and 
    1902(a)(10)(B), a State, at its option and through a State plan 
    amendment, may impose premiums and cost sharing for any group of 
    individuals (as specified by the State) and for any type of 
    services (other than drugs for which cost sharing may be imposed 
    under subsection (c)), and may vary such premiums and cost sharing 
    among such groups or types, consistent with the limitations 
    established under this section. Nothing in this section shall be 
    construed as superseding (or preventing the application of) section 
    1916(g).
        ``(2) Definitions.--In this section:
            ``(A) Premium.--The term `premium' includes any enrollment 
        fee or similar charge.
            ``(B) Cost sharing.--The term `cost sharing' includes any 
        deduction, copayment, or similar charge.
    ``(b) Limitations on Exercise of Authority.--
        ``(1) Individuals with family income between 100 and 150 
    percent of the poverty line.--In the case of an individual whose 
    family income exceeds 100 percent, but does not exceed 150 percent, 
    of the poverty line applicable to a family of the size involved, 
    subject to subsections (c)(2) and (e)(2)(A)--
            ``(A) no premium may be imposed under the plan; and
            ``(B) with respect to cost sharing--
                ``(i) the cost sharing imposed under subsection (a) 
            with respect to any item or service may not exceed 10 
            percent of the cost of such item or service; and
                ``(ii) the total aggregate amount of cost sharing 
            imposed under this section (including any cost sharing 
            imposed under subsection (c) or (e)) for all individuals in 
            the family may not exceed 5 percent of the family income of 
            the family involved, as applied on a quarterly or monthly 
            basis (as specified by the State).
        ``(2) Individuals with family income above 150 percent of the 
    poverty line.--In the case of an individual whose family income 
    exceeds 150 percent of the poverty line applicable to a family of 
    the size involved, subject to subsections (c)(2) and (e)(2)(A)--
            ``(A) the total aggregate amount of premiums and cost 
        sharing imposed under this section (including any cost sharing 
        imposed under subsection (c) or (e)) for all individuals in the 
        family may not exceed 5 percent of the family income of the 
        family involved, as applied on a quarterly or monthly basis (as 
        specified by the State); and
            ``(B) with respect to cost sharing, the cost sharing 
        imposed with respect to any item or service under subsection 
        (a) may not exceed 20 percent of the cost of such item or 
        service.
        ``(3) Additional limitations.--
            ``(A) Premiums.--No premiums shall be imposed under this 
        section with respect to the following:
                ``(i) Individuals under 18 years of age that are 
            required to be provided medical assistance under section 
            1902(a)(10)(A)(i), and including individuals with respect 
            to whom aid or assistance is made available under part B of 
            title IV to children in foster care and individuals with 
            respect to whom adoption or foster care assistance is made 
            available under part E of such title, without regard to 
            age.
                ``(ii) Pregnant women.
                ``(iii) Any terminally ill individual who is receiving 
            hospice care (as defined in section 1905(o)).
                ``(iv) Any individual who is an inpatient in a 
            hospital, nursing facility, intermediate care facility for 
            the mentally retarded, or other medical institution, if 
            such individual is required, as a condition of receiving 
            services in such institution under the State plan, to spend 
            for costs of medical care all but a minimal amount of the 
            individual's income required for personal needs.
                ``(v) Women who are receiving medical assistance by 
            virtue of the application of sections 
            1902(a)(10)(A)(ii)(XVIII) and 1902(aa).
            ``(B) Cost sharing.--Subject to the succeeding provisions 
        of this section, no cost sharing shall be imposed under 
        subsection (a) with respect to the following:
                ``(i) Services furnished to individuals under 18 years 
            of age that are required to be provided medical assistance 
            under section 1902(a)(10)(A)(i), and including services 
            furnished to individuals with respect to whom aid or 
            assistance is made available under part B of title IV to 
            children in foster care and individuals with respect to 
            whom adoption or foster care assistance is made available 
            under part E of such title, without regard to age.
                ``(ii) Preventive services (such as well baby and well 
            child care and immunizations) provided to children under 18 
            years of age regardless of family income.
                ``(iii) Services furnished to pregnant women, if such 
            services relate to the pregnancy or to any other medical 
            condition which may complicate the pregnancy.
                ``(iv) Services furnished to a terminally ill 
            individual who is receiving hospice care (as defined in 
            section 1905(o)).
                ``(v) Services furnished to any individual who is an 
            inpatient in a hospital, nursing facility, intermediate 
            care facility for the mentally retarded, or other medical 
            institution, if such individual is required, as a condition 
            of receiving services in such institution under the State 
            plan, to spend for costs of medical care all but a minimal 
            amount of the individual's income required for personal 
            needs.
                ``(vi) Emergency services (as defined by the Secretary 
            for purposes of section 1916(a)(2)(D)).
                ``(vii) Family planning services and supplies described 
            in section 1905(a)(4)(C).
                ``(viii) Services furnished to women who are receiving 
            medical assistance by virtue of the application of sections 
            1902(a)(10)(A)(ii)(XVIII) and 1902(aa).
            ``(C) Construction.--Nothing in this paragraph shall be 
        construed as preventing a State from exempting additional 
        classes of individuals from premiums under this section or from 
        exempting additional individuals or services from cost sharing 
        under subsection (a).
        ``(4) Determinations of family income.--In applying this 
    subsection, family income shall be determined in a manner specified 
    by the State for purposes of this subsection, including the use of 
    such disregards as the State may provide. Family income shall be 
    determined for such period and at such periodicity as the State may 
    provide under this title.
        ``(5) Poverty line defined.--For purposes of this section, the 
    term `poverty line' has the meaning given such term in section 
    673(2) of the Community Services Block Grant Act (42 U.S.C. 
    9902(2)), including any revision required by such section.
        ``(6) Construction.--Nothing in this section shall be 
    construed--
            ``(A) as preventing a State from further limiting the 
        premiums and cost sharing imposed under this section beyond the 
        limitations provided under this section;
            ``(B) as affecting the authority of the Secretary through 
        waiver to modify limitations on premiums and cost sharing under 
        this section; or
            ``(C) as affecting any such waiver of requirements in 
        effect under this title before the date of the enactment of 
        this section with regard to the imposition of premiums and cost 
        sharing.
    ``(d) Enforceability of Premiums and Other Cost Sharing.--
        ``(1) Premiums.--Notwithstanding section 1916(c)(3) and section 
    1902(a)(10)(B), a State may, at its option, condition the provision 
    of medical assistance for an individual upon prepayment of a 
    premium authorized to be imposed under this section, or may 
    terminate eligibility for such medical assistance on the basis of 
    failure to pay such a premium but shall not terminate eligibility 
    of an individual for medical assistance under this title on the 
    basis of failure to pay any such premium until such failure 
    continues for a period of not less than 60 days. A State may apply 
    the previous sentence for some or all groups of beneficiaries as 
    specified by the State and may waive payment of any such premium in 
    any case where the State determines that requiring such payment 
    would create an undue hardship.
        ``(2) Cost sharing.--Notwithstanding section 1916(e) or any 
    other provision of law, a State may permit a provider participating 
    under the State plan to require, as a condition for the provision 
    of care, items, or services to an individual entitled to medical 
    assistance under this title for such care, items, or services, the 
    payment of any cost sharing authorized to be imposed under this 
    section with respect to such care, items, or services. Nothing in 
    this paragraph shall be construed as preventing a provider from 
    reducing or waiving the application of such cost sharing on a case-
    by-case basis.''.
    (b) Indexing Nominal Cost Sharing and Conforming Amendment.--
Section 1916 of such Act (42 U.S.C. 1396o) is amended--
        (1) in subsection (f), by inserting ``and section 1916A'' after 
    ``(b)(3)''; and
        (2) by adding at the end the following new subsection:
    ``(h) In applying this section and subsections (c) and (e) of 
section 1916A, with respect to cost sharing that is `nominal' in 
amount, the Secretary shall increase such `nominal' amounts for each 
year (beginning with 2006) by the annual percentage increase in the 
medical care component of the consumer price index for all urban 
consumers (U.S. city average) as rounded up in an appropriate 
manner.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to cost sharing imposed for items and services furnished on or 
after March 31, 2006.

SEC. 6042. SPECIAL RULES FOR COST SHARING FOR PRESCRIPTION DRUGS.

    (a) In General.--Section 1916A of the Social Security Act, as 
inserted by section 6041(a), is amended by inserting after subsection 
(b) the following new subsection:
    ``(c) Special Rules for Cost Sharing for Prescription Drugs.--
        ``(1) In general.--In order to encourage beneficiaries to use 
    drugs (in this subsection referred to as `preferred drugs') 
    identified by the State as the least (or less) costly effective 
    prescription drugs within a class of drugs (as defined by the 
    State), with respect to one or more groups of beneficiaries 
    specified by the State, subject to paragraph (2), the State may--
            ``(A) provide cost sharing (instead of the level of cost 
        sharing otherwise permitted under section 1916, but subject to 
        paragraphs (2) and (3)) with respect to drugs that are not 
        preferred drugs within a class; and
            ``(B) waive or reduce the cost sharing otherwise applicable 
        for preferred drugs within such class and shall not apply any 
        such cost sharing for such preferred drugs for individuals for 
        whom cost sharing may not otherwise be imposed under subsection 
        (b)(3)(B).
        ``(2) Limitations.--
            ``(A) By income group.--In no case may the cost sharing 
        under paragraph (1)(A) with respect to a non-preferred drug 
        exceed--
                ``(i) in the case of an individual whose family income 
            does not exceed 150 percent of the poverty line applicable 
            to a family of the size involved, the amount of nominal 
            cost sharing (as otherwise determined under section 1916); 
            or
                ``(ii) in the case of an individual whose family income 
            exceeds 150 percent of the poverty line applicable to a 
            family of the size involved, 20 percent of the cost of the 
            drug.
            ``(B) Limitation to nominal for exempt populations.--In the 
        case of an individual who is otherwise not subject to cost 
        sharing due to the application of subsection (b)(3)(B), any 
        cost sharing under paragraph (1)(A) with respect to a non-
        preferred drug may not exceed a nominal amount (as otherwise 
        determined under section 1916).
            ``(C) Continued application of aggregate cap.--In addition 
        to the limitations imposed under subparagraphs (A) and (B), any 
        cost sharing under paragraph (1)(A) continues to be subject to 
        the aggregate cap on cost sharing applied under paragraph (1) 
        or (2) of subsection (b), as the case may be.
        ``(3) Waiver.--In carrying out paragraph (1), a State shall 
    provide for the application of cost sharing levels applicable to a 
    preferred drug in the case of a drug that is not a preferred drug 
    if the prescribing physician determines that the preferred drug for 
    treatment of the same condition either would not be as effective 
    for the individual or would have adverse effects for the individual 
    or both.
        ``(4) Exclusion authority.--Nothing in this subsection shall be 
    construed as preventing a State from excluding specified drugs or 
    classes of drugs from the application of paragraph (1).''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to cost sharing imposed for items and services furnished on or 
after March 31, 2006.

SEC. 6043. EMERGENCY ROOM COPAYMENTS FOR NON-EMERGENCY CARE.

    (a) In General.--Section 1916A of the Social Security Act, as 
inserted by section 6041 and as amended by section 6042, is further 
amended by adding at the end the following new subsection:
    ``(e) State Option for Permitting Hospitals To Impose Cost Sharing 
for Non-Emergency Care Furnished in an Emergency Department.--
        ``(1) In general.--Notwithstanding section 1916 and section 
    1902(a)(1) or the previous provisions of this section, but subject 
    to the limitations of paragraph (2), a State may, by amendment to 
    its State plan under this title, permit a hospital to impose cost 
    sharing for non-emergency services furnished to an individual 
    (within one or more groups of individuals specified by the State) 
    in the hospital emergency department under this subsection if the 
    following conditions are met:
            ``(A) Access to non-emergency room provider.--The 
        individual has actually available and accessible (as such terms 
        are applied by the Secretary under section 1916(b)(3)) an 
        alternate non-emergency services provider with respect to such 
        services.
            ``(B) Notice.--The hospital must inform the beneficiary 
        after receiving an appropriate medical screening examination 
        under section 1867 and after a determination has been made that 
        the individual does not have an emergency medical condition, 
        but before providing the non-emergency services, of the 
        following:
                ``(i) The hospital may require the payment of the State 
            specified cost sharing before the service can be provided.
                ``(ii) The name and location of an alternate non-
            emergency services provider (described in subparagraph (A)) 
            that is actually available and accessible (as described in 
            such subparagraph).
                ``(iii) The fact that such alternate provider can 
            provide the services without the imposition of cost sharing 
            described in clause (i).
                ``(iv) The hospital provides a referral to coordinate 
            scheduling of this treatment.
        Nothing in this subsection shall be construed as preventing a 
        State from applying (or waiving) cost sharing otherwise 
        permissible under this section to services described in clause 
        (iii).
        ``(2) Limitations.--
            ``(A) For poorest beneficiaries.--In the case of an 
        individual described in subsection (b)(1), the cost sharing 
        imposed under this subsection may not exceed twice the amount 
        determined to be nominal under section 1916, subject to the 
        percent of income limitation otherwise applicable under 
        subsection (b)(1).
            ``(B) Application to exempt populations.--In the case of an 
        individual who is otherwise not subject to cost sharing under 
        subsection (b)(3), a State may impose cost sharing under 
        paragraph (1) for care in an amount that does not exceed a 
        nominal amount (as otherwise determined under section 1916) so 
        long as no cost sharing is imposed to receive such care through 
        an outpatient department or other alternative health care 
        provider in the geographic area of the hospital emergency 
        department involved.
            ``(C) Continued application of aggregate cap; relation to 
        other cost sharing.--In addition to the limitations imposed 
        under subparagraphs (A) and (B), any cost sharing under 
        paragraph (1) is subject to the aggregate cap on cost sharing 
        applied under paragraph (1) or (2) of subsection (b), as the 
        case may be. Cost sharing imposed for services under this 
        subsection shall be instead of any cost sharing that may be 
        imposed for such services under subsection (a).
        ``(3) Construction.--Nothing in this section shall be 
    construed--
            ``(A) to limit a hospital's obligations with respect to 
        screening and stabilizing treatment of an emergency medical 
        condition under section 1867; or
            ``(B) to modify any obligations under either State or 
        Federal standards relating to the application of a prudent-
        layperson standard with respect to payment or coverage of 
        emergency services by any managed care organization.
        ``(4) Definitions.--For purposes of this subsection:
            ``(A) Non-emergency services.--The term `non-emergency 
        services' means any care or services furnished in an emergency 
        department of a hospital that the physician determines do not 
        constitute an appropriate medical screening examination or 
        stabilizing examination and treatment required to be provided 
        by the hospital under section 1867.
            ``(B) Alternate non-emergency services provider.--The term 
        `alternative non-emergency services provider' means, with 
        respect to non-emergency services for the diagnosis or 
        treatment of a condition, a health care provider, such as a 
        physician's office, health care clinic, community health 
        center, hospital outpatient department, or similar health care 
        provider, that can provide clinically appropriate services for 
        the diagnosis or treatment of a condition contemporaneously 
        with the provision of the non-emergency services that would be 
        provided in an emergency department of a hospital for the 
        diagnosis or treatment of a condition, and that is 
        participating in the program under this title.''.
    (b) Grant Funds for Establishment of Alternate Non-Emergency 
Services Providers.--Section 1903 of the Social Security Act (42 U.S.C. 
1396b), as amended by section 6037(a)(2), is amended by adding at the 
end the following new subsection:
    ``(y) Payments for Establishment of Alternate Non-Emergency 
Services Providers.--
        ``(1) Payments.--In addition to the payments otherwise provided 
    under subsection (a), subject to paragraph (2), the Secretary shall 
    provide for payments to States under such subsection for the 
    establishment of alternate non-emergency service providers (as 
    defined in section 1916A(e)(5)(B)), or networks of such providers.
        ``(2) Limitation.--The total amount of payments under this 
    subsection shall not exceed $50,000,000 during the 4-year period 
    beginning with 2006. This subsection constitutes budget authority 
    in advance of appropriations Acts and represents the obligation of 
    the Secretary to provide for the payment of amounts provided under 
    this subsection.
        ``(3) Preference.--In providing for payments to States under 
    this subsection, the Secretary shall provide preference to States 
    that establish, or provide for, alternate non-emergency services 
    providers or networks of such providers that--
            ``(A) serve rural or underserved areas where beneficiaries 
        under this title may not have regular access to providers of 
        primary care services; or
            ``(B) are in partnership with local community hospitals.
        ``(4) Form and manner of payment.--Payment to a State under 
    this subsection shall be made only upon the filing of such 
    application in such form and in such manner as the Secretary shall 
    specify. Payment to a State under this subsection shall be made in 
    the same manner as other payments under section 1903(a).''.
    (c) Effective Date.--The amendments made by this section shall 
apply to non-emergency services furnished on or after January 1, 2007.

SEC. 6044. USE OF BENCHMARK BENEFIT PACKAGES.

    (a) In General.--Title XIX of the Social Security Act, as amended 
by section 6035, is amended by redesignating section 1937 as section 
1938 and by inserting after section 1936 the following new section:


                 ``State flexibility in benefit packages

    ``Sec. 1937. (a) State Option of Providing Benchmark Benefits.--
        ``(1) Authority.--
            ``(A) In general.--Notwithstanding any other provision of 
        this title, a State, at its option as a State plan amendment, 
        may provide for medical assistance under this title to 
        individuals within one or more groups of individuals specified 
        by the State through enrollment in coverage that provides--
                ``(i) benchmark coverage described in subsection (b)(1) 
            or benchmark equivalent coverage described in subsection 
            (b)(2); and
                ``(ii) for any child under 19 years of age who is 
            covered under the State plan under section 1902(a)(10)(A), 
            wrap-around benefits to the benchmark coverage or benchmark 
            equivalent coverage consisting of early and periodic 
            screening, diagnostic, and treatment services defined in 
            section 1905(r).
            ``(B) Limitation.--The State may only exercise the option 
        under subparagraph (A) for an individual eligible under an 
        eligibility category that had been established under the State 
        plan on or before the date of the enactment of this section.
            ``(C) Option of wrap-around benefits.--In the case of 
        coverage described in subparagraph (A), a State, at its option, 
        may provide such wrap-around or additional benefits as the 
        State may specify.
            ``(D) Treatment as medical assistance.--Payment of premiums 
        for such coverage under this subsection shall be treated as 
        payment of other insurance premiums described in the third 
        sentence of section 1905(a).
        ``(2) Application.--
            ``(A) In general.--Except as provided in subparagraph (B), 
        a State may require that a full-benefit eligible individual (as 
        defined in subparagraph (C)) within a group obtain benefits 
        under this title through enrollment in coverage described in 
        paragraph (1)(A). A State may apply the previous sentence to 
        individuals within 1 or more groups of such individuals.
            ``(B) Limitation on application.--A State may not require 
        under subparagraph (A) an individual to obtain benefits through 
        enrollment described in paragraph (1)(A) if the individual is 
        within one of the following categories of individuals:
                ``(i) Mandatory pregnant women.--The individual is a 
            pregnant woman who is required to be covered under the 
            State plan under section 1902(a)(10)(A)(i).
                ``(ii) Blind or disabled individuals.--The individual 
            qualifies for medical assistance under the State plan on 
            the basis of being blind or disabled (or being treated as 
            being blind or disabled) without regard to whether the 
            individual is eligible for supplemental security income 
            benefits under title XVI on the basis of being blind or 
            disabled and including an individual who is eligible for 
            medical assistance on the basis of section 1902(e)(3).
                ``(iii) Dual eligibles.--The individual is entitled to 
            benefits under any part of title XVIII.
                ``(iv) Terminally ill hospice patients.--The individual 
            is terminally ill and is receiving benefits for hospice 
            care under this title.
                ``(v) Eligible on basis of institutionalization.--The 
            individual is an inpatient in a hospital, nursing facility, 
            intermediate care facility for the mentally retarded, or 
            other medical institution, and is required, as a condition 
            of receiving services in such institution under the State 
            plan, to spend for costs of medical care all but a minimal 
            amount of the individual's income required for personal 
            needs.
                ``(vi) Medically frail and special medical needs 
            individuals.--The individual is medically frail or 
            otherwise an individual with special medical needs (as 
            identified in accordance with regulations of the 
            Secretary).
                ``(vii) Beneficiaries qualifying for long-term care 
            services.--The individual qualifies based on medical 
            condition for medical assistance for long-term care 
            services described in section 1917(c)(1)(C).
                ``(viii) Children in foster care receiving child 
            welfare services and children receiving foster care or 
            adoption assistance.--The individual is an individual with 
            respect to whom aid or assistance is made available under 
            part B of title IV to children in foster care and 
            individuals with respect to whom adoption or foster care 
            assistance is made available under part E of such title, 
            without regard to age.
                ``(ix) TANF and section 1931 parents.--The individual 
            qualifies for medical assistance on the basis of 
            eligibility to receive assistance under a State plan funded 
            under part A of title IV (as in effect on or after the 
            welfare reform effective date defined in section 1931(i)).
                ``(x) Women in the breast or cervical cancer program.--
            The individual is a woman who is receiving medical 
            assistance by virtue of the application of sections 
            1902(a)(10)(A)(ii)(XVIII) and 1902(aa).
                ``(xi) Limited services beneficiaries.--The 
            individual--

                    ``(I) qualifies for medical assistance on the basis 
                of section 1902(a)(10)(A)(ii)(XII); or
                    ``(II) is not a qualified alien (as defined in 
                section 431 of the Personal Responsibility and Work 
                Opportunity Reconciliation Act of 1996) and receives 
                care and services necessary for the treatment of an 
                emergency medical condition in accordance with section 
                1903(v).

            ``(C) Full-benefit eligible individuals.--
                ``(i) In general.--For purposes of this paragraph, 
            subject to clause (ii), the term `full-benefit eligible 
            individual' means for a State for a month an individual who 
            is determined eligible by the State for medical assistance 
            for all services defined in section 1905(a) which are 
            covered under the State plan under this title for such 
            month under section 1902(a)(10)(A) or under any other 
            category of eligibility for medical assistance for all such 
            services under this title, as determined by the Secretary.
                ``(ii) Exclusion of medically needy and spend-down 
            populations.--Such term shall not include an individual 
            determined to be eligible by the State for medical 
            assistance under section 1902(a)(10)(C) or by reason of 
            section 1902(f) or otherwise eligible based on a reduction 
            of income based on costs incurred for medical or other 
            remedial care.
    ``(b) Benchmark Benefit Packages.--
        ``(1) In general.--For purposes of subsection (a)(1), each of 
    the following coverages shall be considered to be benchmark 
    coverage:
            ``(A) FEHBP-equivalent health insurance coverage.--The 
        standard Blue Cross/Blue Shield preferred provider option 
        service benefit plan, described in and offered under section 
        8903(1) of title 5, United States Code.
            ``(B) State employee coverage.--A health benefits coverage 
        plan that is offered and generally available to State employees 
        in the State involved.
            ``(C) Coverage offered through hmo.--The health insurance 
        coverage plan that--
                ``(i) is offered by a health maintenance organization 
            (as defined in section 2791(b)(3) of the Public Health 
            Service Act), and
                ``(ii) has the largest insured commercial, non-medicaid 
            enrollment of covered lives of such coverage plans offered 
            by such a health maintenance organization in the State 
            involved.
            ``(D) Secretary-approved coverage.--Any other health 
        benefits coverage that the Secretary determines, upon 
        application by a State, provides appropriate coverage for the 
        population proposed to be provided such coverage.
        ``(2) Benchmark-equivalent coverage.--For purposes of 
    subsection (a)(1), coverage that meets the following requirement 
    shall be considered to be benchmark-equivalent coverage:
            ``(A) Inclusion of basic services.--The coverage includes 
        benefits for items and services within each of the following 
        categories of basic services:
                ``(i) Inpatient and outpatient hospital services.
                ``(ii) Physicians' surgical and medical services.
                ``(iii) Laboratory and x-ray services.
                ``(iv) Well-baby and well-child care, including age-
            appropriate immunizations.
                ``(v) Other appropriate preventive services, as 
            designated by the Secretary.
            ``(B) Aggregate actuarial value equivalent to benchmark 
        package.--The coverage has an aggregate actuarial value that is 
        at least actuarially equivalent to one of the benchmark benefit 
        packages described in paragraph (1).
            ``(C) Substantial actuarial value for additional services 
        included in benchmark package.--With respect to each of the 
        following categories of additional services for which coverage 
        is provided under the benchmark benefit package used under 
        subparagraph (B), the coverage has an actuarial value that is 
        equal to at least 75 percent of the actuarial value of the 
        coverage of that category of services in such package:
                ``(i) Coverage of prescription drugs.
                ``(ii) Mental health services.
                ``(iii) Vision services.
                ``(iv) Hearing services.
        ``(3) Determination of actuarial value.--The actuarial value of 
    coverage of benchmark benefit packages shall be set forth in an 
    actuarial opinion in an actuarial report that has been prepared--
            ``(A) by an individual who is a member of the American 
        Academy of Actuaries;
            ``(B) using generally accepted actuarial principles and 
        methodologies;
            ``(C) using a standardized set of utilization and price 
        factors;
            ``(D) using a standardized population that is 
        representative of the population involved;
            ``(E) applying the same principles and factors in comparing 
        the value of different coverage (or categories of services);
            ``(F) without taking into account any differences in 
        coverage based on the method of delivery or means of cost 
        control or utilization used; and
            ``(G) taking into account the ability of a State to reduce 
        benefits by taking into account the increase in actuarial value 
        of benefits coverage offered under this title that results from 
        the limitations on cost sharing under such coverage.
    The actuary preparing the opinion shall select and specify in the 
    memorandum the standardized set and population to be used under 
    subparagraphs (C) and (D).
        ``(4) Coverage of rural health clinic and fqhc services.--
    Notwithstanding the previous provisions of this section, a State 
    may not provide for medical assistance through enrollment of an 
    individual with benchmark coverage or benchmark equivalent coverage 
    under this section unless--
            ``(A) the individual has access, through such coverage or 
        otherwise, to services described in subparagraphs (B) and (C) 
        of section 1905(a)(2); and
            ``(B) payment for such services is made in accordance with 
        the requirements of section 1902(bb).''.
    (b) Effective Date.--The amendment made by subsection (a) takes 
effect on March 31, 2006.

               CHAPTER 5--STATE FINANCING UNDER MEDICAID

SEC. 6051. MANAGED CARE ORGANIZATION PROVIDER TAX REFORM.

    (a) In General.--Section 1903(w)(7)(A)(viii) of the Social Security 
Act (42 U.S.C. 1396b(w)(7)(A)(viii)) is amended to read as follows:
            ``(viii) Services of managed care organizations (including 
        health maintenance organizations, preferred provider 
        organizations, and such other similar organizations as the 
        Secretary may specify by regulation).''.
    (b) Effective Date.--
        (1) In general.--Subject to paragraph (2), the amendment made 
    by subsection (a) shall be effective as of the date of the 
    enactment of this Act.
        (2) Delay in effective date.--
            (A) In general.--Subject to subparagraph (B), in the case 
        of a State specified in subparagraph (B), the amendment made by 
        subsection (a) shall be effective as of October 1, 2009.
            (B) Specified states.--For purposes of subparagraph (A), 
        the States specified in this subparagraph are States that have 
        enacted a law providing for a tax on the services of a Medicaid 
        managed care organization with a contract under section 1903(m) 
        of the Social Security Act as of December 8, 2005.
    (c) Clarification Regarding Non-Regulation of Transfers.--
        (1) In general.--Nothing in section 1903(w) of the Social 
    Security Act (42 U.S.C. 1396b(w)) shall be construed by the 
    Secretary of Health and Human Services as prohibiting a State's use 
    of funds as the non-Federal share of expenditures under title XIX 
    of such Act where such funds are transferred from or certified by a 
    publicly-owned regional medical center located in another State and 
    described in paragraph (2), so long as the Secretary determines 
    that such use of funds is proper and in the interest of the program 
    under title XIX.
        (2) Center described.--A center described in this paragraph is 
    a publicly-owned regional medical center that--
            (A) provides level 1 trauma and burn care services;
            (B) provides level 3 neonatal care services;
            (C) is obligated to serve all patients, regardless of State 
        of origin;
            (D) is located within a Standard Metropolitan Statistical 
        Area (SMSA) that includes at least 3 States, including the 
        States described in paragraph (1);
            (E) serves as a tertiary care provider for patients 
        residing within a 125-mile radius; and
            (F) meets the criteria for a disproportionate share 
        hospital under section 1923 of such Act in at least one State 
        other than the one in which the center is located.
        (3) Effective period.--This subsection shall apply through 
    December 31, 2006.

SEC. 6052. REFORMS OF CASE MANAGEMENT AND TARGETED CASE MANAGEMENT.

    (a) In General.--Section 1915(g) of the Social Security Act (42 
U.S.C. 1396n(g)(2)) is amended by striking paragraph (2) and inserting 
the following:
    ``(2) For purposes of this subsection:
        ``(A)(i) The term `case management services' means services 
    which will assist individuals eligible under the plan in gaining 
    access to needed medical, social, educational, and other services.
        ``(ii) Such term includes the following:
            ``(I) Assessment of an eligible individual to determine 
        service needs, including activities that focus on needs 
        identification, to determine the need for any medical, 
        educational, social, or other services. Such assessment 
        activities include the following:
                ``(aa) Taking client history.
                ``(bb) Identifying the needs of the individual, and 
            completing related documentation.
                ``(cc) Gathering information from other sources such as 
            family members, medical providers, social workers, and 
            educators, if necessary, to form a complete assessment of 
            the eligible individual.
            ``(II) Development of a specific care plan based on the 
        information collected through an assessment, that specifies the 
        goals and actions to address the medical, social, educational, 
        and other services needed by the eligible individual, including 
        activities such as ensuring the active participation of the 
        eligible individual and working with the individual (or the 
        individual's authorized health care decision maker) and others 
        to develop such goals and identify a course of action to 
        respond to the assessed needs of the eligible individual.
            ``(III) Referral and related activities to help an 
        individual obtain needed services, including activities that 
        help link eligible individuals with medical, social, 
        educational providers or other programs and services that are 
        capable of providing needed services, such as making referrals 
        to providers for needed services and scheduling appointments 
        for the individual.
            ``(IV) Monitoring and followup activities, including 
        activities and contacts that are necessary to ensure the care 
        plan is effectively implemented and adequately addressing the 
        needs of the eligible individual, and which may be with the 
        individual, family members, providers, or other entities and 
        conducted as frequently as necessary to help determine such 
        matters as--
                ``(aa) whether services are being furnished in 
            accordance with an individual's care plan;
                ``(bb) whether the services in the care plan are 
            adequate; and
                ``(cc) whether there are changes in the needs or status 
            of the eligible individual, and if so, making necessary 
            adjustments in the care plan and service arrangements with 
            providers.
        ``(iii) Such term does not include the direct delivery of an 
    underlying medical, educational, social, or other service to which 
    an eligible individual has been referred, including, with respect 
    to the direct delivery of foster care services, services such as 
    (but not limited to) the following:
            ``(I) Research gathering and completion of documentation 
        required by the foster care program.
            ``(II) Assessing adoption placements.
            ``(III) Recruiting or interviewing potential foster care 
        parents.
            ``(IV) Serving legal papers.
            ``(V) Home investigations.
            ``(VI) Providing transportation.
            ``(VII) Administering foster care subsidies.
            ``(VIII) Making placement arrangements.
        ``(B) The term `targeted case management services' are case 
    management services that are furnished without regard to the 
    requirements of section 1902(a)(1) and section 1902(a)(10)(B) to 
    specific classes of individuals or to individuals who reside in 
    specified areas.
    ``(3) With respect to contacts with individuals who are not 
eligible for medical assistance under the State plan or, in the case of 
targeted case management services, individuals who are eligible for 
such assistance but are not part of the target population specified in 
the State plan, such contacts--
        ``(A) are considered an allowable case management activity, 
    when the purpose of the contact is directly related to the 
    management of the eligible individual's care; and
        ``(B) are not considered an allowable case management activity 
    if such contacts relate directly to the identification and 
    management of the noneligible or nontargeted individual's needs and 
    care.
    ``(4)(A) In accordance with section 1902(a)(25), Federal financial 
participation only is available under this title for case management 
services or targeted case management services if there are no other 
third parties liable to pay for such services, including as 
reimbursement under a medical, social, educational, or other program.
    ``(B) A State shall allocate the costs of any part of such services 
which are reimbursable under another federally funded program in 
accordance with OMB Circular A-87 (or any related or successor guidance 
or regulations regarding allocation of costs among federally funded 
programs) under an approved cost allocation program.
    ``(5) Nothing in this subsection shall be construed as affecting 
the application of rules with respect to third party liability under 
programs, or activities carried out under title XXVI of the Public 
Health Service Act or by the Indian Health Service.''.
    (b) Regulations.--The Secretary shall promulgate regulations to 
carry out the amendment made by subsection (a) which may be effective 
and final immediately on an interim basis as of the date of publication 
of the interim final regulation. If the Secretary provides for an 
interim final regulation, the Secretary shall provide for a period of 
public comments on such regulation after the date of publication. The 
Secretary may change or revise such regulation after completion of the 
period of public comment.
    (c) Effective Date.--The amendment made by subsection (a) shall 
take effect on January 1, 2006.

SEC. 6053. ADDITIONAL FMAP ADJUSTMENTS.

    (a) Hold Harmless for Certain Decrease.--Notwithstanding the first 
sentence of section 1905(b) of the Social Security Act (42 U.S.C. 
1396d(b)), if, for purposes of titles XIX and XXI of the Social 
Security Act (42 U.S.C. 1396 et seq., 1397aa et seq.), the Federal 
medical assistance percentage determined for the State specified in 
section 4725(a) of Public Law 105-33 for fiscal year 2006 or fiscal 
year 2007 is less than the Federal medical assistance percentage 
determined for such State for fiscal year 2005, the Federal medical 
assistance percentage determined for such State for fiscal year 2005 
shall be substituted for the Federal medical assistance percentage 
otherwise determined for such State for fiscal year 2006 or fiscal year 
2007, as the case may be.
    (b) Hold Harmless for Katrina Impact.--Notwithstanding any other 
provision of law, for purposes of titles XIX and XXI of the Social 
Security Act, the Secretary of Health and Human Services, in computing 
the Federal medical assistance percentage under section 1905(b) of such 
Act (42 U.S.C. 1396d(b)) for any year after 2006 for a State that the 
Secretary determines has a significant number of evacuees who were 
evacuated to, and live in, the State as a result of Hurricane Katrina 
as of October 1, 2005, shall disregard such evacuees (and income 
attributable to such evacuees) from such computation.

SEC. 6054. DSH ALLOTMENT FOR THE DISTRICT OF COLUMBIA.

    (a) In General.--For purposes of determining the DSH allotment for 
the District of Columbia under section 1923 of the Social Security Act 
(42 U.S.C. 1396r-4) for fiscal year 2006 and each subsequent fiscal 
year, the table in subsection (f)(2) of such section is amended under 
each of the columns for fiscal year 2000, fiscal year 2001, and fiscal 
year 2002, in the entry for the District of Columbia by striking ``32'' 
and inserting ``49''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
take effect as if enacted on October 1, 2005, and shall only apply to 
disproportionate share hospital adjustment expenditures applicable to 
fiscal year 2006 and subsequent fiscal years made on or after that 
date.

SEC. 6055. INCREASE IN MEDICAID PAYMENTS TO INSULAR AREAS.

    Section 1108(g) of the Social Security Act (42 U.S.C. 1308(g)) is 
amended--
        (1) in paragraph (2), by inserting ``and subject to paragraph 
    (3)'' after ``subsection (f)''; and
        (2) by adding at the end the following new paragraph:
        ``(3) Fiscal years 2006 and 2007 for certain insular areas.--
    The amounts otherwise determined under this subsection for Puerto 
    Rico, the Virgin Islands, Guam, the Northern Mariana Islands, and 
    American Samoa for fiscal year 2006 and fiscal year 2007 shall be 
    increased by the following amounts:
            ``(A) For Puerto Rico, $12,000,000 for fiscal year 2006 and 
        $12,000,000 for fiscal year 2007.
            ``(B) For the Virgin Islands, $2,500,000 for fiscal year 
        2006 and $5,000,000 for fiscal year 2007.
            ``(C) For Guam, $2,500,000 for fiscal year 2006 and 
        $5,000,000 for fiscal year 2007.
            ``(D) For the Northern Mariana Islands, $1,000,000 for 
        fiscal year 2006 and $2,000,000 for fiscal year 2007.
            ``(E) For American Samoa, $2,000,000 for fiscal year 2006 
        and $4,000,000 for fiscal year 2007.
    Such amounts shall not be taken into account in applying paragraph 
    (2) for fiscal year 2007 but shall be taken into account in 
    applying such paragraph for fiscal year 2008 and subsequent fiscal 
    years.''.

                      CHAPTER 6--OTHER PROVISIONS

                  Subchapter A--Family Opportunity Act

SEC. 6061. SHORT TITLE OF SUBCHAPTER.

    This subchapter may be cited as the ``Family Opportunity Act of 
2005'' or the ``Dylan Lee James Act''.

SEC. 6062. OPPORTUNITY FOR FAMILIES OF DISABLED CHILDREN TO PURCHASE 
              MEDICAID COVERAGE FOR SUCH CHILDREN.

    (a) State Option To Allow Families of Disabled Children To Purchase 
Medicaid Coverage for Such Children.--
        (1) In general.--Section 1902 of the Social Security Act (42 
    U.S.C. 1396a) is amended--
            (A) in subsection (a)(10)(A)(ii)--
                (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 new subclause:

                    ``(XIX) who are disabled children described in 
                subsection (cc)(1);''; and

            (B) by adding at the end the following new subsection:
    ``(cc)(1) Individuals described in this paragraph are individuals--
        ``(A) who are children who have not attained 19 years of age 
    and are born--
            ``(i) on or after January 1, 2001 (or, at the option of a 
        State, on or after an earlier date), in the case of the second, 
        third, and fourth quarters of fiscal year 2007;
            ``(ii) on or after October 1, 1995 (or, at the option of a 
        State, on or after an earlier date), in the case of each 
        quarter of fiscal year 2008; and
            ``(iii) after October 1, 1989, in the case of each quarter 
        of fiscal year 2009 and each quarter of any fiscal year 
        thereafter;
        ``(B) who would be considered disabled under section 
    1614(a)(3)(C) (as determined under title XVI for children but 
    without regard to any income or asset eligibility requirements that 
    apply under such title with respect to children); and
        ``(C) whose family income does not exceed such income level as 
    the State establishes and does not exceed--
            ``(i) 300 percent of the poverty line (as defined in 
        section 2110(c)(5)) applicable to a family of the size 
        involved; or
            ``(ii) such higher percent of such poverty line as a State 
        may establish, except that--
                ``(I) any medical assistance provided to an individual 
            whose family income exceeds 300 percent of such poverty 
            line may only be provided with State funds; and
                ``(II) no Federal financial participation shall be 
            provided under section 1903(a) for any medical assistance 
            provided to such an individual.''.
        (2) Interaction with employer-sponsored family coverage.--
    Section 1902(cc) of such Act (42 U.S.C. 1396a(cc)), as added by 
    paragraph (1)(B), is amended by adding at the end the following new 
    paragraph:
    ``(2)(A) If an employer of a parent of an individual described in 
paragraph (1) offers family coverage under a group health plan (as 
defined in section 2791(a) of the Public Health Service Act), the State 
shall--
        ``(i) notwithstanding section 1906, require such parent to 
    apply for, enroll in, and pay premiums for such coverage as a 
    condition of such parent's child being or remaining eligible for 
    medical assistance under subsection (a)(10)(A)(ii)(XIX) if the 
    parent is determined eligible for such coverage and the employer 
    contributes at least 50 percent of the total cost of annual 
    premiums for such coverage; and
        ``(ii) if such coverage is obtained--
            ``(I) subject to paragraph (2) of section 1916(h), reduce 
        the premium imposed by the State under that section in an 
        amount that reasonably reflects the premium contribution made 
        by the parent for private coverage on behalf of a child with a 
        disability; and
            ``(II) treat such coverage as a third party liability under 
        subsection (a)(25).
    ``(B) In the case of a parent to which subparagraph (A) applies, a 
State, notwithstanding section 1906 but subject to paragraph 
(1)(C)(ii), may provide for payment of any portion of the annual 
premium for such family coverage that the parent is required to pay. 
Any payments made by the State under this subparagraph shall be 
considered, for purposes of section 1903(a), to be payments for medical 
assistance.''.
    (b) State Option To Impose Income-Related Premiums.--Section 1916 
of such Act (42 U.S.C. 1396o) is amended--
        (1) in subsection (a), by striking ``subsection (g)'' and 
    inserting ``subsections (g) and (i)''; and
        (2) by adding at the end, as amended by section 6041(b)(2), the 
    following new subsection:
    ``(i)(1) With respect to disabled children provided medical 
assistance under section 1902(a)(10)(A)(ii)(XIX), subject to paragraph 
(2), a State may (in a uniform manner for such children) require the 
families of such children to pay monthly premiums set on a sliding 
scale based on family income.
    ``(2) A premium requirement imposed under paragraph (1) may only 
apply to the extent that--
        ``(A) in the case of a disabled child described in that 
    paragraph whose family income--
            ``(i) does not exceed 200 percent of the poverty line, the 
        aggregate amount of such premium and any premium that the 
        parent is required to pay for family coverage under section 
        1902(cc)(2)(A)(i) and other cost-sharing charges do not exceed 
        5 percent of the family's income; and
            ``(ii) exceeds 200, but does not exceed 300, percent of the 
        poverty line, the aggregate amount of such premium and any 
        premium that the parent is required to pay for family coverage 
        under section 1902(cc)(2)(A)(i) and other cost-sharing charges 
        do not exceed 7.5 percent of the family's income; and
        ``(B) the requirement is imposed consistent with section 
    1902(cc)(2)(A)(ii)(I).
    ``(3) A State shall not require prepayment of a premium imposed 
pursuant to paragraph (1) and shall not terminate eligibility of a 
child under section 1902(a)(10)(A)(ii)(XIX) for medical assistance 
under this title on the basis of failure to pay any such premium until 
such failure continues for a period of at least 60 days from the date 
on which the premium became past due. The State may waive payment of 
any such premium in any case where the State determines that requiring 
such payment would create an undue hardship.''.
    (c) Conforming Amendments.--(1) Section 1903(f)(4) of such Act (42 
U.S.C. 1396b(f)(4)) is amended in the matter preceding subparagraph 
(A), by inserting ``1902(a)(10)(A)(ii)(XIX),'' after 
``1902(a)(10)(A)(ii)(XVIII),''.
    (2) Section 1905(u)(2)(B) of such Act (42 U.S.C. 1396d(u)(2)(B)) is 
amended by adding at the end the following sentence: ``Such term 
excludes any child eligible for medical assistance only by reason of 
section 1902(a)(10)(A)(ii)(XIX).''.
    (d) Effective Date.--The amendments made by this section shall 
apply to medical assistance for items and services furnished on or 
after January 1, 2007.

SEC. 6063. DEMONSTRATION PROJECTS REGARDING HOME AND COMMUNITY-BASED 
              ALTERNATIVES TO PSYCHIATRIC RESIDENTIAL TREATMENT 
              FACILITIES FOR CHILDREN.

    (a) In General.--The Secretary is authorized to conduct, during 
each of fiscal years 2007 through 2011, demonstration projects (each in 
the section referred to as a ``demonstration project'') in accordance 
with this section under which up to 10 States (as defined for purposes 
of title XIX of the Social Security Act) are awarded grants, on a 
competitive basis, to test the effectiveness in improving or 
maintaining a child's functional level and cost-effectiveness of 
providing coverage of home and community-based alternatives to 
psychiatric residential treatment for children enrolled in the Medicaid 
program under title XIX of such Act.
    (b) Application of Terms and Conditions.--
        (1) In general.--Subject to the provisions of this section, for 
    the purposes of the demonstration projects, and only with respect 
    to children enrolled under such demonstration projects, a 
    psychiatric residential treatment facility (as defined in section 
    483.352 of title 42 of the Code of Federal Regulations) shall be 
    deemed to be a facility specified in section 1915(c) of the Social 
    Security Act (42 U.S.C. 1396n(c)), and to be included in each 
    reference in such section 1915(c) to hospitals, nursing facilities, 
    and intermediate care facilities for the mentally retarded.
        (2) State option to assure continuity of medicaid coverage.--
    Upon the termination of a demonstration project under this section, 
    the State that conducted the project may elect, only with respect 
    to a child who is enrolled in such project on the termination date, 
    to continue to provide medical assistance for coverage of home and 
    community-based alternatives to psychiatric residential treatment 
    for the child in accordance with section 1915(c) of the Social 
    Security Act (42 U.S.C. 1396n(c)), as modified through the 
    application of paragraph (1). Expenditures incurred for providing 
    such medical assistance shall be treated as a home and community-
    based waiver program under section 1915(c) of the Social Security 
    Act (42 U.S.C. 1396n(c)) for purposes of payment under section 1903 
    of such Act (42 U.S.C. 1396b).
    (c) Terms of Demonstration Projects.--
        (1) In general.--Except as otherwise provided in this section, 
    a demonstration project shall be subject to the same terms and 
    conditions as apply to a waiver under section 1915(c) of the Social 
    Security Act (42 U.S.C. 1396n(c)), including the waiver of certain 
    requirements under the first sentence of paragraph (3) of such 
    section but not applying the second sentence of such paragraph.
        (2) Budget neutrality.--In conducting the demonstration 
    projects under this section, the Secretary shall ensure that the 
    aggregate payments made by the Secretary under title XIX of the 
    Social Security Act (42 U.S.C. 1396 et seq.) do not exceed the 
    amount which the Secretary estimates would have been paid under 
    that title if the demonstration projects under this section had not 
    been implemented.
        (3) Evaluation.--The application for a demonstration project 
    shall include an assurance to provide for such interim and final 
    evaluations of the demonstration project by independent third 
    parties, and for such interim and final reports to the Secretary, 
    as the Secretary may require.
    (d) Payments to States; Limitations to Scope and Funding.--
        (1) In general.--Subject to paragraph (2), a demonstration 
    project approved by the Secretary under this section shall be 
    treated as a home and community-based waiver program under section 
    1915(c) of the Social Security Act (42 U.S.C. 1396n(c)) for 
    purposes of payment under section 1903 of such Act (42 U.S.C. 
    1396b).
        (2) Limitation.--In no case may the amount of payments made by 
    the Secretary under this section for State demonstration projects 
    for a fiscal year exceed the amount available under subsection 
    (f)(2)(A) for such fiscal year.
    (e) Secretary's Evaluation and Report.--The Secretary shall conduct 
an interim and final evaluation of State demonstration projects under 
this section and shall report to the President and Congress the 
conclusions of such evaluations within 12 months of completing such 
evaluations.
    (f) Funding.--
        (1) In general.--For the purpose of carrying out this section, 
    there are appropriated, from amounts in the Treasury not otherwise 
    appropriated, for fiscal years 2007 through 2011, a total of 
    $218,000,000, of which--
            (A) the amount specified in paragraph (2) shall be 
        available for each of fiscal years 2007 through 2011; and
            (B) a total of $1,000,000 shall be available to the 
        Secretary for the evaluations and report under subsection (e).
        (2) Fiscal year limit.--
            (A) In general.--For purposes of paragraph (1), the amount 
        specified in this paragraph for a fiscal year is the amount 
        specified in subparagraph (B) for the fiscal year plus the 
        difference, if any, between the total amount available under 
        this paragraph for prior fiscal years and the total amount 
        previously expended under paragraph (1)(A) for such prior 
        fiscal years.
            (B) Fiscal year amounts.--The amount specified in this 
        subparagraph for--
                (i) fiscal year 2007 is $21,000,000;
                (ii) fiscal year 2008 is $37,000,000;
                (iii) fiscal year 2009 is $49,000,000;
                (iv) fiscal year 2010 is $53,000,000; and
                (v) fiscal year 2011 is $57,000,000.

SEC. 6064. DEVELOPMENT AND SUPPORT OF FAMILY-TO-FAMILY HEALTH 
              INFORMATION CENTERS.

    Section 501 of the Social Security Act (42 U.S.C. 701) is amended 
by adding at the end the following new subsection:
    ``(c)(1)(A) For the purpose of enabling the Secretary (through 
grants, contracts, or otherwise) to provide for special projects of 
regional and national significance for the development and support of 
family-to-family health information centers described in paragraph (2), 
there is appropriated to the Secretary, out of any money in the 
Treasury not otherwise appropriated--
        ``(i) $3,000,000 for fiscal year 2007;
        ``(ii) $4,000,000 for fiscal year 2008; and
        ``(iii) $5,000,000 for fiscal year 2009.
    ``(B) Funds appropriated or authorized to be appropriated under 
subparagraph (A) shall--
        ``(i) be in addition to amounts appropriated under subsection 
    (a) and retained under section 502(a)(1) for the purpose of 
    carrying out activities described in subsection (a)(2); and
        ``(ii) remain available until expended.
    ``(2) The family-to-family health information centers described in 
this paragraph are centers that--
        ``(A) assist families of children with disabilities or special 
    health care needs to make informed choices about health care in 
    order to promote good treatment decisions, cost-effectiveness, and 
    improved health outcomes for such children;
        ``(B) provide information regarding the health care needs of, 
    and resources available for, such children;
        ``(C) identify successful health delivery models for such 
    children;
        ``(D) develop with representatives of health care providers, 
    managed care organizations, health care purchasers, and appropriate 
    State agencies, a model for collaboration between families of such 
    children and health professionals;
        ``(E) provide training and guidance regarding caring for such 
    children;
        ``(F) conduct outreach activities to the families of such 
    children, health professionals, schools, and other appropriate 
    entities and individuals; and
        ``(G) are staffed--
            ``(i) by such families who have expertise in Federal and 
        State public and private health care systems; and
            ``(ii) by health professionals.
    ``(3) The Secretary shall develop family-to-family health 
information centers described in paragraph (2) in accordance with the 
following:
        ``(A) With respect to fiscal year 2007, such centers shall be 
    developed in not less than 25 States.
        ``(B) With respect to fiscal year 2008, such centers shall be 
    developed in not less than 40 States.
        ``(C) With respect to fiscal year 2009 and each fiscal year 
    thereafter, such centers shall be developed in all States.
    ``(4) The provisions of this title that are applicable to the funds 
made available to the Secretary under section 502(a)(1) apply in the 
same manner to funds made available to the Secretary under paragraph 
(1)(A).
    ``(5) For purposes of this subsection, the term `State' means each 
of the 50 States and the District of Columbia.''.

SEC. 6065. RESTORATION OF MEDICAID ELIGIBILITY FOR CERTAIN SSI 
              BENEFICIARIES.

    (a) In General.--Section 1902(a)(10)(A)(i)(II) of the Social 
Security Act (42 U.S.C. 1396a(a)(10)(A)(i)(II)) is amended--
        (1) by inserting ``(aa)'' after ``(II)'';
        (2) by striking ``) and'' and inserting ``and'';
        (3) by striking ``section or who are'' and inserting 
    ``section), (bb) who are''; and
        (4) by inserting before the comma at the end the following: ``, 
    or (cc) who are under 21 years of age and with respect to whom 
    supplemental security income benefits would be paid under title XVI 
    if subparagraphs (A) and (B) of section 1611(c)(7) were applied 
    without regard to the phrase `the first day of the month 
    following'''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
apply to medical assistance for items and services furnished on or 
after the date that is 1 year after the date of enactment of this Act.

    Subchapter B--Money Follows the Person Rebalancing Demonstration

SEC. 6071. MONEY FOLLOWS THE PERSON REBALANCING DEMONSTRATION.

    (a) Program Purpose and Authority.--The Secretary is authorized to 
award, on a competitive basis, grants to States in accordance with this 
section for demonstration projects (each in this section referred to as 
an ``MFP demonstration project'') designed to achieve the following 
objectives with respect to institutional and home and community-based 
long-term care services under State Medicaid programs:
        (1) Rebalancing.--Increase the use of home and community-based, 
    rather than institutional, long-term care services.
        (2) Money follows the person.--Eliminate barriers or 
    mechanisms, whether in the State law, the State Medicaid plan, the 
    State budget, or otherwise, that prevent or restrict the flexible 
    use of Medicaid funds to enable Medicaid-eligible individuals to 
    receive support for appropriate and necessary long-term services in 
    the settings of their choice.
        (3) Continuity of service.--Increase the ability of the State 
    Medicaid program to assure continued provision of home and 
    community-based long-term care services to eligible individuals who 
    choose to transition from an institutional to a community setting.
        (4) Quality assurance and quality improvement.--Ensure that 
    procedures are in place (at least comparable to those required 
    under the qualified HCB program) to provide quality assurance for 
    eligible individuals receiving Medicaid home and community-based 
    long-term care services and to provide for continuous quality 
    improvement in such services.
    (b) Definitions.--For purposes of this section:
        (1) Home and community-based long-term care services.--The term 
    ``home and community-based long-term care services'' means, with 
    respect to a State Medicaid program, home and community-based 
    services (including home health and personal care services) that 
    are provided under the State's qualified HCB program or that could 
    be provided under such a program but are otherwise provided under 
    the Medicaid program.
        (2) Eligible individual.--The term ``eligible individual'' 
    means, with respect to an MFP demonstration project of a State, an 
    individual in the State--
            (A) who, immediately before beginning participation in the 
        MFP demonstration project--
                (i) resides (and has resided, for a period of not less 
            than 6 months or for such longer minimum period, not to 
            exceed 2 years, as may be specified by the State) in an 
            inpatient facility;
                (ii) is receiving Medicaid benefits for inpatient 
            services furnished by such inpatient facility; and
                (iii) with respect to whom a determination has been 
            made that, but for the provision of home and community-
            based long-term care services, the individual would 
            continue to require the level of care provided in an 
            inpatient facility and, in any case in which the State 
            applies a more stringent level of care standard as a result 
            of implementing the State plan option permitted under 
            section 1915(i) of the Social Security Act, the individual 
            must continue to require at least the level of care which 
            had resulted in admission to the institution; and
            (B) who resides in a qualified residence beginning on the 
        initial date of participation in the demonstration project.
        (3) Inpatient facility.--The term ``inpatient facility'' means 
    a hospital, nursing facility, or intermediate care facility for the 
    mentally retarded. Such term includes an institution for mental 
    diseases, but only, with respect to a State, to the extent medical 
    assistance is available under the State Medicaid plan for services 
    provided by such institution.
        (4) Medicaid.--The term ``Medicaid'' means, with respect to a 
    State, the State program under title XIX of the Social Security Act 
    (including any waiver or demonstration under such title or under 
    section 1115 of such Act relating to such title).
        (5) Qualified hcb program.--The term ``qualified HCB program'' 
    means a program providing home and community-based long-term care 
    services operating under Medicaid, whether or not operating under 
    waiver authority.
        (6) Qualified residence.--The term ``qualified residence'' 
    means, with respect to an eligible individual--
            (A) a home owned or leased by the individual or the 
        individual's family member;
            (B) an apartment with an individual lease, with lockable 
        access and egress, and which includes living, sleeping, 
        bathing, and cooking areas over which the individual or the 
        individual's family has domain and control; and
            (C) a residence, in a community-based residential setting, 
        in which no more than 4 unrelated individuals reside.
        (7) Qualified expenditures.--The term ``qualified 
    expenditures'' means expenditures by the State under its MFP 
    demonstration project for home and community-based long-term care 
    services for an eligible individual participating in the MFP 
    demonstration project, but only with respect to services furnished 
    during the 12-month period beginning on the date the individual is 
    discharged from an inpatient facility referred to in paragraph 
    (2)(A)(i).
        (8) Self-directed services.--The term ``self-directed'' means, 
    with respect to home and community-based long-term care services 
    for an eligible individual, such services for the individual which 
    are planned and purchased under the direction and control of such 
    individual or the individual's authorized representative (as 
    defined by the Secretary), including the amount, duration, scope, 
    provider, and location of such services, under the State Medicaid 
    program consistent with the following requirements:
            (A) Assessment.--There is an assessment of the needs, 
        capabilities, and preferences of the individual with respect to 
        such services.
            (B) Service plan.--Based on such assessment, there is 
        developed jointly with such individual or the individual's 
        authorized representative a plan for such services for such 
        individual that is approved by the State and that--
                (i) specifies those services, if any, which the 
            individual or the individual's authorized representative 
            would be responsible for directing;
                (ii) identifies the methods by which the individual or 
            the individual's authorized representative or an agency 
            designated by an individual or representative will select, 
            manage, and dismiss providers of such services;
                (iii) specifies the role of family members and others 
            whose participation is sought by the individual or the 
            individual's authorized representative with respect to such 
            services;
                (iv) is developed through a person-centered process 
            that--

                    (I) is directed by the individual or the 
                individual's authorized representative;
                    (II) builds upon the individual's capacity to 
                engage in activities that promote community life and 
                that respects the individual's preferences, choices, 
                and abilities; and
                    (III) involves families, friends, and professionals 
                as desired or required by the individual or the 
                individual's authorized representative;

                (v) includes appropriate risk management techniques 
            that recognize the roles and sharing of responsibilities in 
            obtaining services in a self-directed manner and assure the 
            appropriateness of such plan based upon the resources and 
            capabilities of the individual or the individual's 
            authorized representative; and
                (vi) may include an individualized budget which 
            identifies the dollar value of the services and supports 
            under the control and direction of the individual or the 
            individual's authorized representative.
            (C) Budget process.--With respect to individualized budgets 
        described in subparagraph (B)(vi), the State application under 
        subsection (c)--
                (i) describes the method for calculating the dollar 
            values in such budgets based on reliable costs and service 
            utilization;
                (ii) defines a process for making adjustments in such 
            dollar values to reflect changes in individual assessments 
            and service plans; and
                (iii) provides a procedure to evaluate expenditures 
            under such budgets.
        (9) State.--The term ``State'' has the meaning given such term 
    for purposes of title XIX of the Social Security Act.
    (c) State Application.--A State seeking approval of an MFP 
demonstration project shall submit to the Secretary, at such time and 
in such format as the Secretary requires, an application meeting the 
following requirements and containing such additional information, 
provisions, and assurances, as the Secretary may require:
        (1) Assurance of a public development process.--The application 
    contains an assurance that the State has engaged, and will continue 
    to engage, in a public process for the design, development, and 
    evaluation of the MFP demonstration project that allows for input 
    from eligible individuals, the families of such individuals, 
    authorized representatives of such individuals, providers, and 
    other interested parties.
        (2) Operation in connection with qualified hcb program to 
    assure continuity of services.--The State will conduct the MFP 
    demonstration project for eligible individuals in conjunction with 
    the operation of a qualified HCB program that is in operation (or 
    approved) in the State for such individuals in a manner that 
    assures continuity of Medicaid coverage for such individuals so 
    long as such individuals continue to be eligible for medical 
    assistance.
        (3) Demonstration project period.--The application shall 
    specify the period of the MFP demonstration project, which shall 
    include at least 2 consecutive fiscal years in the 5-fiscal-year 
    period beginning with fiscal year 2007.
        (4) Service area.--The application shall specify the service 
    area or areas of the MFP demonstration project, which may be a 
    statewide area or 1 or more geographic areas of the State.
        (5) Targeted groups and numbers of individuals served.--The 
    application shall specify--
            (A) the target groups of eligible individuals to be 
        assisted to transition from an inpatient facility to a 
        qualified residence during each fiscal year of the MFP 
        demonstration project;
            (B) the projected numbers of eligible individuals in each 
        targeted group of eligible individuals to be so assisted during 
        each such year; and
            (C) the estimated total annual qualified expenditures for 
        each fiscal year of the MFP demonstration project.
        (6) Individual choice, continuity of care.--The application 
    shall contain assurances that--
            (A) each eligible individual or the individual's authorized 
        representative will be provided the opportunity to make an 
        informed choice regarding whether to participate in the MFP 
        demonstration project;
            (B) each eligible individual or the individual's authorized 
        representative will choose the qualified residence in which the 
        individual will reside and the setting in which the individual 
        will receive home and community-based long-term care services;
            (C) the State will continue to make available, so long as 
        the State operates its qualified HCB program consistent with 
        applicable requirements, home and community-based long-term 
        care services to each individual who completes participation in 
        the MFP demonstration project for as long as the individual 
        remains eligible for medical assistance for such services under 
        such qualified HCB program (including meeting a requirement 
        relating to requiring a level of care provided in an inpatient 
        facility and continuing to require such services, and, if the 
        State applies a more stringent level of care standard as a 
        result of implementing the State plan option permitted under 
        section 1915(i) of the Social Security Act, meeting the 
        requirement for at least the level of care which had resulted 
        in the individual's admission to the institution).
        (7) Rebalancing.--The application shall--
            (A) provide such information as the Secretary may require 
        concerning the dollar amounts of State Medicaid expenditures 
        for the fiscal year, immediately preceding the first fiscal 
        year of the State's MFP demonstration project, for long-term 
        care services and the percentage of such expenditures that were 
        for institutional long-term care services or were for home and 
        community-based long-term care services;
            (B)(i) specify the methods to be used by the State to 
        increase, for each fiscal year during the MFP demonstration 
        project, the dollar amount of such total expenditures for home 
        and community-based long-term care services and the percentage 
        of such total expenditures for long-term care services that are 
        for home and community-based long-term care services; and
            (ii) describe the extent to which the MFP demonstration 
        project will contribute to accomplishment of objectives 
        described in subsection (a).
        (8) Money follows the person.--The application shall describe 
    the methods to be used by the State to eliminate any legal, 
    budgetary, or other barriers to flexibility in the availability of 
    Medicaid funds to pay for long-term care services for eligible 
    individuals participating in the project in the appropriate 
    settings of their choice, including costs to transition from an 
    institutional setting to a qualified residence.
        (9) Maintenance of effort and cost-effectiveness.--The 
    application shall contain or be accompanied by such information and 
    assurances as may be required to satisfy the Secretary that--
            (A) total expenditures under the State Medicaid program for 
        home and community-based long-term care services will not be 
        less for any fiscal year during the MFP demonstration project 
        than for the greater of such expenditures for--
                (i) fiscal year 2005; or
                (ii) any succeeding fiscal year before the first year 
            of the MFP demonstration project; and
            (B) in the case of a qualified HCB program operating under 
        a waiver under subsection (c) or (d) of section 1915 of the 
        Social Security Act (42 U.S.C. 1396n), but for the amount 
        awarded under a grant under this section, the State program 
        would continue to meet the cost-effectiveness requirements of 
        subsection (c)(2)(D) of such section or comparable requirements 
        under subsection (d)(5) of such section, respectively.
        (10) Waiver requests.--The application shall contain or be 
    accompanied by requests for any modification or adjustment of 
    waivers of Medicaid requirements described in subsection (d)(3), 
    including adjustments to the maximum numbers of individuals 
    included and package of benefits, including one-time transitional 
    services, provided.
        (11) Quality assurance and quality improvement.--The 
    application shall include--
            (A) a plan satisfactory to the Secretary for quality 
        assurance and quality improvement for home and community-based 
        long-term care services under the State Medicaid program, 
        including a plan to assure the health and welfare of 
        individuals participating in the MFP demonstration project; and
            (B) an assurance that the State will cooperate in carrying 
        out activities under subsection (f) to develop and implement 
        continuous quality assurance and quality improvement systems 
        for home and community-based long-term care services.
        (12) Optional program for self-directed services.--If the State 
    elects to provide for any home and community-based long-term care 
    services as self-directed services (as defined in subsection 
    (b)(8)) under the MFP demonstration project, the application shall 
    provide the following:
            (A) Meeting requirements.--A description of how the project 
        will meet the applicable requirements of such subsection for 
        the provision of self-directed services.
            (B) Voluntary election.--A description of how eligible 
        individuals will be provided with the opportunity to make an 
        informed election to receive self-directed services under the 
        project and after the end of the project.
            (C) State support in service plan development.--
        Satisfactory assurances that the State will provide support to 
        eligible individuals who self-direct in developing and 
        implementing their service plans.
            (D) Oversight of receipt of services.--Satisfactory 
        assurances that the State will provide oversight of eligible 
        individual's receipt of such self-directed services, including 
        steps to assure the quality of services provided and that the 
        provision of such services are consistent with the service plan 
        under such subsection.
    Nothing in this section shall be construed as requiring a State to 
    make an election under the project to provide for home and 
    community-based long-term care services as self-directed services, 
    or as requiring an individual to elect to receive self-directed 
    services under the project.
        (13) Reports and evaluation.--The application shall provide 
    that--
            (A) the State will furnish to the Secretary such reports 
        concerning the MFP demonstration project, on such timetable, in 
        such uniform format, and containing such information as the 
        Secretary may require, as will allow for reliable comparisons 
        of MFP demonstration projects across States; and
            (B) the State will participate in and cooperate with the 
        evaluation of the MFP demonstration project.
    (d) Secretary's Award of Competitive Grants.--
        (1) In general.--The Secretary shall award grants under this 
    section on a competitive basis to States selected from among those 
    with applications meeting the requirements of subsection (c), in 
    accordance with the provisions of this subsection.
        (2) Selection and modification of state applications.--In 
    selecting State applications for the awarding of such a grant, the 
    Secretary--
            (A) shall take into consideration the manner in which, and 
        extent to which, the State proposes to achieve the objectives 
        specified in subsection (a);
            (B) shall seek to achieve an appropriate national balance 
        in the numbers of eligible individuals, within different target 
        groups of eligible individuals, who are assisted to transition 
        to qualified residences under MFP demonstration projects, and 
        in the geographic distribution of States operating MFP 
        demonstration projects;
            (C) shall give preference to State applications proposing--
                (i) to provide transition assistance to eligible 
            individuals within multiple target groups; and
                (ii) to provide eligible individuals with the 
            opportunity to receive home and community-based long-term 
            care services as self-directed services, as defined in 
            subsection (b)(8); and
            (D) shall take such objectives into consideration in 
        setting the annual amounts of State grant awards under this 
        section.
        (3) Waiver authority.--The Secretary is authorized to waive the 
    following provisions of title XIX of the Social Security Act, to 
    the extent necessary to enable a State initiative to meet the 
    requirements and accomplish the purposes of this section:
            (A) Statewideness.--Section 1902(a)(1), in order to permit 
        implementation of a State initiative in a selected area or 
        areas of the State.
            (B) Comparability.--Section 1902(a)(10)(B), in order to 
        permit a State initiative to assist a selected category or 
        categories of individuals described in subsection (b)(2)(A).
            (C) Income and resources eligibility.--Section 
        1902(a)(10)(C)(i)(III), in order to permit a State to apply 
        institutional eligibility rules to individuals transitioning to 
        community-based care.
            (D) Provider agreements.--Section 1902(a)(27), in order to 
        permit a State to implement self-directed services in a cost-
        effective manner.
        (4) Conditional approval of outyear grant.--In awarding grants 
    under this section, the Secretary shall condition the grant for the 
    second and any subsequent fiscal years of the grant period on the 
    following:
            (A) Numerical benchmarks.--The State must demonstrate to 
        the satisfaction of the Secretary that it is meeting numerical 
        benchmarks specified in the grant agreement for--
                (i) increasing State Medicaid support for home and 
            community-based long-term care services under subsection 
            (c)(5); and
                (ii) numbers of eligible individuals assisted to 
            transition to qualified residences.
            (B) Quality of care.--The State must demonstrate to the 
        satisfaction of the Secretary that it is meeting the 
        requirements under subsection (c)(11) to assure the health and 
        welfare of MFP demonstration project participants.
    (e) Payments to States; Carryover of Unused Grant Amounts.--
        (1) Payments.--For each calendar quarter in a fiscal year 
    during the period a State is awarded a grant under subsection (d), 
    the Secretary shall pay to the State from its grant award for such 
    fiscal year an amount equal to the lesser of--
            (A) the MFP-enhanced FMAP (as defined in paragraph (5)) of 
        the amount of qualified expenditures made during such quarter; 
        or
            (B) the total amount remaining in such grant award for such 
        fiscal year (taking into account the application of paragraph 
        (2)).
        (2) Carryover of unused amounts.--Any portion of a State grant 
    award for a fiscal year under this section remaining at the end of 
    such fiscal year shall remain available to the State for the next 4 
    fiscal years, subject to paragraph (3).
        (3) Reawarding of certain unused amounts.--In the case of a 
    State that the Secretary determines pursuant to subsection (d)(4) 
    has failed to meet the conditions for continuation of a MFP 
    demonstration project under this section in a succeeding year or 
    years, the Secretary shall rescind the grant awards for such 
    succeeding year or years, together with any unspent portion of an 
    award for prior years, and shall add such amounts to the 
    appropriation for the immediately succeeding fiscal year for grants 
    under this section.
        (4) Preventing duplication of payment.--The payment under a MFP 
    demonstration project with respect to qualified expenditures shall 
    be in lieu of any payment with respect to such expenditures that 
    could otherwise be paid under Medicaid, including under section 
    1903(a) of the Social Security Act. Nothing in the previous 
    sentence shall be construed as preventing the payment under 
    Medicaid for such expenditures in a grant year after amounts 
    available to pay for such expenditures under the MFP demonstration 
    project have been exhausted.
        (5) MFP-enhanced fmap.--For purposes of paragraph (1)(A), the 
    ``MFP-enhanced FMAP'', for a State for a fiscal year, is equal to 
    the Federal medical assistance percentage (as defined in the first 
    sentence of section 1905(b)) for the State increased by a number of 
    percentage points equal to 50 percent of the number of percentage 
    points by which (A) such Federal medical assistance percentage for 
    the State, is less than (B) 100 percent; but in no case shall the 
    MFP-enhanced FMAP for a State exceed 90 percent.
    (f) Quality Assurance and Improvement; Technical Assistance; 
Oversight.--
        (1) In general.--The Secretary, either directly or by grant or 
    contract, shall provide for technical assistance to, and oversight 
    of, States for purposes of upgrading quality assurance and quality 
    improvement systems under Medicaid home and community-based 
    waivers, including--
            (A) dissemination of information on promising practices;
            (B) guidance on system design elements addressing the 
        unique needs of participating beneficiaries;
            (C) ongoing consultation on quality, including assistance 
        in developing necessary tools, resources, and monitoring 
        systems; and
            (D) guidance on remedying programmatic and systemic 
        problems.
        (2) Funding.--From the amounts appropriated under subsection 
    (h)(1) for the portion of fiscal year 2007 that begins on January 
    1, 2007, and ends on September 30, 2007, and for fiscal year 2008, 
    not more than $2,400,000 shall be available to the Secretary to 
    carry out this subsection during the period that begins on January 
    1, 2007, and ends on September 30, 2011.
    (g) Research and Evaluation.--
        (1) In general.--The Secretary, directly or through grant or 
    contract, shall provide for research on, and a national evaluation 
    of, the program under this section, including assistance to the 
    Secretary in preparing the final report required under paragraph 
    (2). The evaluation shall include an analysis of projected and 
    actual savings related to the transition of individuals to 
    qualified residences in each State conducting an MFP demonstration 
    project.
        (2) Final report.--The Secretary shall make a final report to 
    the President and Congress, not later than September 30, 2011, 
    reflecting the evaluation described in paragraph (1) and providing 
    findings and conclusions on the conduct and effectiveness of MFP 
    demonstration projects.
        (3) Funding.--From the amounts appropriated under subsection 
    (h)(1) for each of fiscal years 2008 through 2011, not more than 
    $1,100,000 per year shall be available to the Secretary to carry 
    out this subsection.
    (h) Appropriations.--
        (1) In general.--There are appropriated, from any funds in the 
    Treasury not otherwise appropriated, for grants to carry out this 
    section--
            (A) $250,000,000 for the portion of fiscal year 2007 
        beginning on January 1, 2007, and ending on September 30, 2007;
            (B) $300,000,000 for fiscal year 2008;
            (C) $350,000,000 for fiscal year 2009;
            (D) $400,000,000 for fiscal year 2010; and
            (E) $450,000,000 for fiscal year 2011.
        (2) Availability.--Amounts made available under paragraph (1) 
    for a fiscal year shall remain available for the awarding of grants 
    to States by not later than September 30, 2011.

                      Subchapter C--Miscellaneous

SEC. 6081. MEDICAID TRANSFORMATION GRANTS.

    (a) In General.--Section 1903 of the Social Security Act (42 U.S.C. 
1396b), as amended by sections 6037(a)(2) and 6043(b), is amended by 
adding at the end the following new subsection:
    ``(z) Medicaid Transformation Payments.--
        ``(1) In general.--In addition to the payments provided under 
    subsection (a), subject to paragraph (4), the Secretary shall 
    provide for payments to States for the adoption of innovative 
    methods to improve the effectiveness and efficiency in providing 
    medical assistance under this title.
        ``(2) Permissible uses of funds.--The following are examples of 
    innovative methods for which funds provided under this subsection 
    may be used:
            ``(A) Methods for reducing patient error rates through the 
        implementation and use of electronic health records, electronic 
        clinical decision support tools, or e-prescribing programs.
            ``(B) Methods for improving rates of collection from 
        estates of amounts owed under this title.
            ``(C) Methods for reducing waste, fraud, and abuse under 
        the program under this title, such as reducing improper payment 
        rates as measured by annual payment error rate measurement 
        (PERM) project rates.
            ``(D) Implementation of a medication risk management 
        program as part of a drug use review program under section 
        1927(g).
            ``(E) Methods in reducing, in clinically appropriate ways, 
        expenditures under this title for covered outpatient drugs, 
        particularly in the categories of greatest drug utilization, by 
        increasing the utilization of generic drugs through the use of 
        education programs and other incentives to promote greater use 
        of generic drugs.
            ``(F) Methods for improving access to primary and specialty 
        physician care for the uninsured using integrated university-
        based hospital and clinic systems.
        ``(3) Application; terms and conditions.--
            ``(A) In general.--No payments shall be made to a State 
        under this subsection unless the State applies to the Secretary 
        for such payments in a form, manner, and time specified by the 
        Secretary.
            ``(B) Terms and conditions.--Such payments are made under 
        such terms and conditions consistent with this subsection as 
        the Secretary prescribes.
            ``(C) Annual report.--Payment to a State under this 
        subsection is conditioned on the State submitting to the 
        Secretary an annual report on the programs supported by such 
        payment. Such report shall include information on--
                ``(i) the specific uses of such payment;
                ``(ii) an assessment of quality improvements and 
            clinical outcomes under such programs; and
                ``(iii) estimates of cost savings resulting from such 
            programs.
        ``(4) Funding.--
            ``(A) Limitation on funds.--The total amount of payments 
        under this subsection shall be equal to, and shall not exceed--
                ``(i) $75,000,000 for fiscal year 2007; and
                ``(ii) $75,000,000 for fiscal year 2008.
        This subsection constitutes budget authority in advance of 
        appropriations Acts and represents the obligation of the 
        Secretary to provide for the payment of amounts provided under 
        this subsection.
            ``(B) Allocation of funds.--The Secretary shall specify a 
        method for allocating the funds made available under this 
        subsection among States. Such method shall provide preference 
        for States that design programs that target health providers 
        that treat significant numbers of Medicaid beneficiaries. Such 
        method shall provide that not less than 25 percent of such 
        funds shall be allocated among States the population of which 
        (as determined according to data collected by the United States 
        Census Bureau) as of July 1, 2004, was more than 105 percent of 
        the population of the respective State (as so determined) as of 
        April 1, 2000.
            ``(C) Form and manner of payment.--Payment to a State under 
        this subsection shall be made in the same manner as other 
        payments under section 1903(a). There is no requirement for 
        State matching funds to receive payments under this subsection.
        ``(5) Medication risk management program.--
            ``(A) In general.--For purposes of this subsection, the 
        term `medication risk management program' means a program for 
        targeted beneficiaries that ensures that covered outpatient 
        drugs are appropriately used to optimize therapeutic outcomes 
        through improved medication use and to reduce the risk of 
        adverse events.
            ``(B) Elements.--Such program may include the following 
        elements:
                ``(i) The use of established principles and standards 
            for drug utilization review and best practices to analyze 
            prescription drug claims of targeted beneficiaries and 
            identify outlier physicians.
                ``(ii) On an ongoing basis provide outlier physicians--

                    ``(I) a comprehensive pharmacy claims history for 
                each targeted beneficiary under their care;
                    ``(II) information regarding the frequency and cost 
                of relapses and hospitalizations of targeted 
                beneficiaries under the physician's care; and
                    ``(III) applicable best practice guidelines and 
                empirical references.

                ``(iii) Monitor outlier physician's prescribing, such 
            as failure to refill, dosage strengths, and provide 
            incentives and information to encourage the adoption of 
            best clinical practices.
            ``(C) Targeted beneficiaries.--For purposes of this 
        paragraph, the term `targeted beneficiaries' means Medicaid 
        eligible beneficiaries who are identified as having high 
        prescription drug costs and medical costs, such as individuals 
        with behavioral disorders or multiple chronic diseases who are 
        taking multiple medications.''.

SEC. 6082. HEALTH OPPORTUNITY ACCOUNTS.

    Title XIX of the Social Security Act, as amended by sections 6035 
and 6044, is amended--
        (1) by redesignating section 1938 as section 1939; and
        (2) by inserting after section 1937 the following new section:


                      ``health opportunity accounts

    ``Sec. 1938. (a) Authority.--
        ``(1) In general.--Notwithstanding any other provision of this 
    title, the Secretary shall establish a demonstration program under 
    which States may provide under their State plans under this title 
    (including such a plan operating under a statewide waiver under 
    section 1115) in accordance with this section for the provision of 
    alternative benefits consistent with subsection (c) for eligible 
    population groups in one or more geographic areas of the State 
    specified by the State. An amendment under the previous sentence is 
    referred to in this section as a `State demonstration program'.
        ``(2) Initial demonstration.--
            ``(A) In general.--The demonstration program under this 
        section shall begin on January 1, 2007. During the first 5 
        years of such program, the Secretary shall not approve more 
        than 10 States to conduct demonstration programs under this 
        section, with each State demonstration program covering 1 or 
        more geographic areas specified by the State. After such 5-year 
        period--
                ``(i) unless the Secretary finds, taking into account 
            cost-effectiveness, quality of care, and other criteria 
            that the Secretary specifies, that a State demonstration 
            program previously implemented has been unsuccessful, such 
            a demonstration program may be extended or made permanent 
            in the State; and
                ``(ii) unless the Secretary finds, taking into account 
            cost-effectiveness, quality of care, and other criteria 
            that the Secretary specifies, that all State demonstration 
            programs previously implemented were unsuccessful, other 
            States may implement State demonstration programs.
            ``(B) GAO report.--
                ``(i) In general.--Not later than 3 months after the 
            end of the 5-year period described in subparagraph (A), the 
            Comptroller General of the United States shall submit a 
            report to Congress evaluating the demonstration programs 
            conducted under this section during such period.
                ``(ii) Appropriation.--Out of any funds in the Treasury 
            not otherwise appropriated, there is appropriated to the 
            Comptroller General of the United States, $550,000 for the 
            period of fiscal years 2007 through 2010 to carry out 
            clause (i).
        ``(3) Approval.--The Secretary shall not approve a State 
    demonstration program under paragraph (1) unless the program 
    includes the following:
            ``(A) Creating patient awareness of the high cost of 
        medical care.
            ``(B) Providing incentives to patients to seek preventive 
        care services.
            ``(C) Reducing inappropriate use of health care services.
            ``(D) Enabling patients to take responsibility for health 
        outcomes.
            ``(E) Providing enrollment counselors and ongoing education 
        activities.
            ``(F) Providing transactions involving health opportunity 
        accounts to be conducted electronically and without cash.
            ``(G) Providing access to negotiated provider payment rates 
        consistent with this section.
    Nothing in this section shall be construed as preventing a State 
    demonstration program from providing incentives for patients 
    obtaining appropriate preventive care (as defined for purposes of 
    section 223(c)(2)(C) of the Internal Revenue Code of 1986), such as 
    additional account contributions for an individual demonstrating 
    healthy prevention practices.
        ``(4) No requirement for statewideness.--Nothing in this 
    section or any other provision of law shall be construed to require 
    that a State must provide for the implementation of a State 
    demonstration program on a Statewide basis.
    ``(b) Eligible Population Groups.--
        ``(1) In general.--A State demonstration program under this 
    section shall specify the eligible population groups consistent 
    with paragraphs (2) and (3).
        ``(2) Eligibility limitations during initial demonstration 
    period.--During the initial 5 years of the demonstration program 
    under this section, a State demonstration program shall not apply 
    to any of the following individuals:
            ``(A) Individuals who are 65 years of age or older.
            ``(B) Individuals who are disabled, regardless of whether 
        or not their eligibility for medical assistance under this 
        title is based on such disability.
            ``(C) Individuals who are eligible for medical assistance 
        under this title only because they are (or were within the 
        previous 60 days) pregnant.
            ``(D) Individuals who have been eligible for medical 
        assistance for a continuous period of less than 3 months.
        ``(3) Additional limitations.--A State demonstration program 
    shall not apply to any individual within a category of individuals 
    described in section 1937(a)(2)(B).
        ``(4) Limitations.--
            ``(A) State option.--This subsection shall not be construed 
        as preventing a State from further limiting eligibility.
            ``(B) On enrollees in medicaid managed care 
        organizations.--Insofar as the State provides for eligibility 
        of individuals who are enrolled in Medicaid managed care 
        organizations, such individuals may participate in the State 
        demonstration program only if the State provides assurances 
        satisfactory to the Secretary that the following conditions are 
        met with respect to any such organization:
                ``(i) In no case may the number of such individuals 
            enrolled in the organization who participate in the program 
            exceed 5 percent of the total number of individuals 
            enrolled in such organization.
                ``(ii) The proportion of enrollees in the organization 
            who so participate is not significantly disproportionate to 
            the proportion of such enrollees in other such 
            organizations who participate.
                ``(iii) The State has provided for an appropriate 
            adjustment in the per capita payments to the organization 
            to account for such participation, taking into account 
            differences in the likely use of health services between 
            enrollees who so participate and enrollees who do not so 
            participate.
        ``(5) Voluntary participation.--An eligible individual shall be 
    enrolled in a State demonstration program only if the individual 
    voluntarily enrolls. Except in such hardship cases as the Secretary 
    shall specify, such an enrollment shall be effective for a period 
    of 12 months, but may be extended for additional periods of 12 
    months each with the consent of the individual.
        ``(6) 1-year moratorium for reenrollment.--An eligible 
    individual who, for any reason, is disenrolled from a State 
    demonstration program conducted under this section shall not be 
    permitted to reenroll in such program before the end of the 1-year 
    period that begins on the effective date of such disenrollment.
    ``(c) Alternative Benefits.--
        ``(1) In general.--The alternative benefits provided under this 
    section shall consist, consistent with this subsection, of at 
    least--
            ``(A) coverage for medical expenses in a year for items and 
        services for which benefits are otherwise provided under this 
        title after an annual deductible described in paragraph (2) has 
        been met; and
            ``(B) contribution into a health opportunity account.
    Nothing in subparagraph (A) shall be construed as preventing a 
    State from providing for coverage of preventive care (referred to 
    in subsection (a)(3)) within the alternative benefits without 
    regard to the annual deductible.
        ``(2) Annual deductible.--The amount of the annual deductible 
    described in paragraph (1)(A) shall be at least 100 percent, but no 
    more than 110 percent, of the annualized amount of contributions to 
    the health opportunity account under subsection (d)(2)(A)(i), 
    determined without regard to any limitation described in subsection 
    (d)(2)(C)(i)(II).
        ``(3) Access to negotiated provider payment rates.--
            ``(A) Fee-for-service enrollees.--In the case of an 
        individual who is participating in a State demonstration 
        program and who is not enrolled with a Medicaid managed care 
        organization, the State shall provide that the individual may 
        obtain demonstration program Medicaid services from--
                ``(i) any participating provider under this title at 
            the same payment rates that would be applicable to such 
            services if the deductible described in paragraph (1)(A) 
            was not applicable; or
                ``(ii) any other provider at payment rates that do not 
            exceed 125 percent of the payment rate that would be 
            applicable to such services furnished by a participating 
            provider under this title if the deductible described in 
            paragraph (1)(A) was not applicable.
            ``(B) Treatment under medicaid managed care plans.--In the 
        case of an individual who is participating in a State 
        demonstration program and is enrolled with a Medicaid managed 
        care organization, the State shall enter into an arrangement 
        with the organization under which the individual may obtain 
        demonstration program Medicaid services from any provider 
        described in clause (ii) of subparagraph (A) at payment rates 
        that do not exceed the payment rates that may be imposed under 
        that clause.
            ``(C) Computation.--The payment rates described in 
        subparagraphs (A) and (B) shall be computed without regard to 
        any cost sharing that would be otherwise applicable under 
        sections 1916 and 1916A.
            ``(D) Definitions.--For purposes of this paragraph:
                ``(i) The term `demonstration program Medicaid 
            services' means, with respect to an individual 
            participating in a State demonstration program, services 
            for which the individual would be provided medical 
            assistance under this title but for the application of the 
            deductible described in paragraph (1)(A).
                ``(ii) The term `participating provider' means--

                    ``(I) with respect to an individual described in 
                subparagraph (A), a health care provider that has 
                entered into a participation agreement with the State 
                for the provision of services to individuals entitled 
                to benefits under the State plan; or
                    ``(II) with respect to an individual described in 
                subparagraph (B) who is enrolled in a Medicaid managed 
                care organization, a health care provider that has 
                entered into an arrangement for the provision of 
                services to enrollees of the organization under this 
                title.

        ``(4) No effect on subsequent benefits.--Except as provided 
    under paragraphs (1) and (2), alternative benefits for an eligible 
    individual shall consist of the benefits otherwise provided to the 
    individual, including cost sharing relating to such benefits.
        ``(5) Overriding cost sharing and comparability requirements 
    for alternative benefits.--The provisions of this title relating to 
    cost sharing for benefits (including sections 1916 and 1916A) shall 
    not apply with respect to benefits to which the annual deductible 
    under paragraph (1)(A) applies. The provisions of section 
    1902(a)(10)(B) (relating to comparability) shall not apply with 
    respect to the provision of alternative benefits (as described in 
    this subsection).
        ``(6) Treatment as medical assistance.--Subject to 
    subparagraphs (D) and (E) of subsection (d)(2), payments for 
    alternative benefits under this section (including contributions 
    into a health opportunity account) shall be treated as medical 
    assistance for purposes of section 1903(a).
        ``(7) Use of tiered deductible and cost sharing.--
            ``(A) In general.--A State--
                ``(i) may vary the amount of the annual deductible 
            applied under paragraph (1)(A) based on the income of the 
            family involved so long as it does not favor families with 
            higher income over those with lower income; and
                ``(ii) may vary the amount of the maximum out-of-pocket 
            cost sharing (as defined in subparagraph (B)) based on the 
            income of the family involved so long as it does not favor 
            families with higher income over those with lower income.
            ``(B) Maximum out-of-pocket cost sharing.--For purposes of 
        subparagraph (A)(ii), the term `maximum out-of-pocket cost 
        sharing' means, for an individual or family, the amount by 
        which the annual deductible level applied under paragraph 
        (1)(A) to the individual or family exceeds the balance in the 
        health opportunity account for the individual or family.
        ``(8) Contributions by employers.--Nothing in this section 
    shall be construed as preventing an employer from providing health 
    benefits coverage consisting of the coverage described in paragraph 
    (1)(A) to individuals who are provided alternative benefits under 
    this section.
    ``(d) Health Opportunity Account.--
        ``(1) In general.--For purposes of this section, the term 
    `health opportunity account' means an account that meets the 
    requirements of this subsection.
        ``(2) Contributions.--
            ``(A) In general.--No contribution may be made into a 
        health opportunity account except--
                ``(i) contributions by the State under this title; and
                ``(ii) contributions by other persons and entities, 
            such as charitable organizations, as permitted under 
            section 1903(w).
            ``(B) State contribution.--A State shall specify the 
        contribution amount that shall be deposited under subparagraph 
        (A)(i) into a health opportunity account.
            ``(C) Limitation on annual state contribution provided and 
        permitting imposition of maximum account balance.--
                ``(i) In general.--A State--

                    ``(I) may impose limitations on the maximum 
                contributions that may be deposited under subparagraph 
                (A)(i) into a health opportunity account in a year;
                    ``(II) may limit contributions into such an account 
                once the balance in the account reaches a level 
                specified by the State; and
                    ``(III) subject to clauses (ii) and (iii) and 
                subparagraph (D)(i), may not provide contributions 
                described in subparagraph (A)(i) to a health 
                opportunity account on behalf of an individual or 
                family to the extent the amount of such contributions 
                (including both State and Federal shares) exceeds, on 
                an annual basis, $2,500 for each individual (or family 
                member) who is an adult and $1,000 for each individual 
                (or family member) who is a child.

                ``(ii) Indexing of dollar limitations.--For each year 
            after 2006, the dollar amounts specified in clause (i)(III) 
            shall be annually increased by the Secretary by a 
            percentage that reflects the annual percentage increase in 
            the medical care component of the consumer price index for 
            all urban consumers.
                ``(iii) Budget neutral adjustment.--A State may provide 
            for dollar limitations in excess of those specified in 
            clause (i)(III) (as increased under clause (ii)) for 
            specified individuals if the State provides assurances 
            satisfactory to the Secretary that contributions otherwise 
            made to other individuals will be reduced in a manner so as 
            to provide for aggregate contributions that do not exceed 
            the aggregate contributions that would otherwise be 
            permitted under this subparagraph.
            ``(D) Limitations on federal matching.--
                ``(i) State contribution.--A State may contribute under 
            subparagraph (A)(i) amounts to a health opportunity account 
            in excess of the limitations provided under subparagraph 
            (C)(i)(III), but no Federal financial participation shall 
            be provided under section 1903(a) with respect to 
            contributions in excess of such limitations.
                ``(ii) No ffp for private contributions.--No Federal 
            financial participation shall be provided under section 
            1903(a) with respect to any contributions described in 
            subparagraph (A)(ii) to a health opportunity account.
            ``(E) Application of different matching rates.--The 
        Secretary shall provide a method under which, for expenditures 
        made from a health opportunity account for medical care for 
        which the Federal matching rate under section 1903(a) exceeds 
        the Federal medical assistance percentage, a State may obtain 
        payment under such section at such higher matching rate for 
        such expenditures.
        ``(3) Use.--
            ``(A) General uses.--
                ``(i) In general.--Subject to the succeeding provisions 
            of this paragraph, amounts in a health opportunity account 
            may be used for payment of such health care expenditures as 
            the State specifies.
                ``(ii) General limitation.--Subject to subparagraph 
            (B)(ii), in no case shall such account be used for payment 
            for health care expenditures that are not payment of 
            medical care (as defined by section 213(d) of the Internal 
            Revenue Code of 1986).
                ``(iii) State restrictions.--In applying clause (i), a 
            State may restrict payment for--

                    ``(I) providers of items and services to providers 
                that are licensed or otherwise authorized under State 
                law to provide the item or service and may deny payment 
                for such a provider on the basis that the provider has 
                been found, whether with respect to this title or any 
                other health benefit program, to have failed to meet 
                quality standards or to have committed 1 or more acts 
                of fraud or abuse; and
                    ``(II) items and services insofar as the State 
                finds they are not medically appropriate or necessary.

                ``(iv) Electronic withdrawals.--The State demonstration 
            program shall provide for a method whereby withdrawals may 
            be made from the account for such purposes using an 
            electronic system and shall not permit withdrawals from the 
            account in cash.
            ``(B) Maintenance of health opportunity account after 
        becoming ineligible for public benefit.--
                ``(i) In general.--Notwithstanding any other provision 
            of law, if an account holder of a health opportunity 
            account becomes ineligible for benefits under this title 
            because of an increase in income or assets--

                    ``(I) no additional contribution shall be made into 
                the account under paragraph (2)(A)(i);
                    ``(II) subject to clause (iii), the balance in the 
                account shall be reduced by 25 percent; and
                    ``(III) subject to the succeeding provisions of 
                this subparagraph, the account shall remain available 
                to the account holder for 3 years after the date on 
                which the individual becomes ineligible for such 
                benefits for withdrawals under the same terms and 
                conditions as if the account holder remained eligible 
                for such benefits, and such withdrawals shall be 
                treated as medical assistance in accordance with 
                subsection (c)(6).

                ``(ii) Special rules.--Withdrawals under this 
            subparagraph from an account--

                    ``(I) shall be available for the purchase of health 
                insurance coverage; and
                    ``(II) may, subject to clause (iv), be made 
                available (at the option of the State) for such 
                additional expenditures (such as job training and 
                tuition expenses) specified by the State (and approved 
                by the Secretary) as the State may specify.

                ``(iii) Exception from 25 percent savings to government 
            for private contributions.--Clause (i)(II) shall not apply 
            to the portion of the account that is attributable to 
            contributions described in paragraph (2)(A)(ii). For 
            purposes of accounting for such contributions, withdrawals 
            from a health opportunity account shall first be attributed 
            to contributions described in paragraph (2)(A)(i).
                ``(iv) Condition for non-health withdrawals.--No 
            withdrawal may be made from an account under clause 
            (ii)(II) unless the account holder has participated in the 
            program under this section for at least 1 year.
                ``(v) No requirement for continuation of coverage.--An 
            account holder of a health opportunity account, after 
            becoming ineligible for medical assistance under this 
            title, is not required to purchase high-deductible or other 
            insurance as a condition of maintaining or using the 
            account.
        ``(4) Administration.--A State may coordinate administration of 
    health opportunity accounts through the use of a third party 
    administrator and reasonable expenditures for the use of such 
    administrator shall be reimbursable to the State in the same manner 
    as other administrative expenditures under section 1903(a)(7).
        ``(5) Treatment.--Amounts in, or contributed to, a health 
    opportunity account shall not be counted as income or assets for 
    purposes of determining eligibility for benefits under this title.
        ``(6) Unauthorized withdrawals.--A State may establish 
    procedures--
            ``(A) to penalize or remove an individual from the health 
        opportunity account based on nonqualified withdrawals by the 
        individual from such an account; and
            ``(B) to recoup costs that derive from such nonqualified 
        withdrawals.''.

SEC. 6083. STATE OPTION TO ESTABLISH NON-EMERGENCY MEDICAL 
              TRANSPORTATION PROGRAM.

    (a) In General.--Section 1902(a) of the Social Security Act (42 
U.S.C. 1396a(a)), as amended by sections 6033(a) and 6035(b), is 
amended--
        (1) in paragraph (68), by striking ``and'' at the end;
        (2) in paragraph (69) by striking the period at the end and 
    inserting ``; and''; and
        (3) by inserting after paragraph (69) the following:
        ``(70) at the option of the State and notwithstanding 
    paragraphs (1), (10)(B), and (23), provide for the establishment of 
    a non-emergency medical transportation brokerage program in order 
    to more cost-effectively provide transportation for individuals 
    eligible for medical assistance under the State plan who need 
    access to medical care or services and have no other means of 
    transportation which--
            ``(A) may include a wheelchair van, taxi, stretcher car, 
        bus passes and tickets, secured transportation, and such other 
        transportation as the Secretary determines appropriate; and
            ``(B) may be conducted under contract with a broker who--
                ``(i) is selected through a competitive bidding process 
            based on the State's evaluation of the broker's experience, 
            performance, references, resources, qualifications, and 
            costs;
                ``(ii) has oversight procedures to monitor beneficiary 
            access and complaints and ensure that transport personnel 
            are licensed, qualified, competent, and courteous;
                ``(iii) is subject to regular auditing and oversight by 
            the State in order to ensure the quality of the 
            transportation services provided and the adequacy of 
            beneficiary access to medical care and services; and
                ``(iv) complies with such requirements related to 
            prohibitions on referrals and conflict of interest as the 
            Secretary shall establish (based on the prohibitions on 
            physician referrals under section 1877 and such other 
            prohibitions and requirements as the Secretary determines 
            to be appropriate).''.
    (b) Effective Date.--The amendments made by subsection (a) take 
effect on the date of the enactment of this Act.

SEC. 6084. EXTENSION OF TRANSITIONAL MEDICAL ASSISTANCE (TMA) AND 
              ABSTINENCE EDUCATION PROGRAM.

    Effective as if enacted on December 31, 2005, activities authorized 
by sections 510 and 1925 of the Social Security Act shall continue 
through December 31, 2006, in the manner authorized for fiscal year 
2005, notwithstanding section 1902(e)(1)(A) of such Act, and out of any 
money in the Treasury of the United States not otherwise appropriated, 
there are hereby appropriated such sums as may be necessary for such 
purpose. Grants and payments may be made pursuant to this authority 
through the first quarter of fiscal year 2007 at the level provided for 
such activities through the first quarter of fiscal year 2006.

SEC. 6085. EMERGENCY SERVICES FURNISHED BY NON-CONTRACT PROVIDERS FOR 
              MEDICAID MANAGED CARE ENROLLEES.

    (a) In General.--Section 1932(b)(2) of the Social Security Act (42 
U.S.C. 1396u-2(b)(2)) is amended by adding at the end the following new 
subparagraph:
            ``(D) Emergency services furnished by non-contract 
        providers.--Any provider of emergency services that does not 
        have in effect a contract with a Medicaid managed care entity 
        that establishes payment amounts for services furnished to a 
        beneficiary enrolled in the entity's Medicaid managed care plan 
        must accept as payment in full no more than the amounts (less 
        any payments for indirect costs of medical education and direct 
        costs of graduate medical education) that it could collect if 
        the beneficiary received medical assistance under this title 
        other than through enrollment in such an entity. In a State 
        where rates paid to hospitals under the State plan are 
        negotiated by contract and not publicly released, the payment 
        amount applicable under this subparagraph shall be the average 
        contract rate that would apply under the State plan for general 
        acute care hospitals or the average contract rate that would 
        apply under such plan for tertiary hospitals.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
take effect on January 1, 2007.

SEC. 6086. EXPANDED ACCESS TO HOME AND COMMUNITY-BASED SERVICES FOR THE 
              ELDERLY AND DISABLED.

    (a) Home and Community-Based Services as an Optional Benefit for 
Elderly and Disabled Individuals.--Section 1915 of the Social Security 
Act (42 U.S.C. 1396n) is amended by adding at the end the following new 
subsection:
    ``(i) State Plan Amendment Option To Provide Home and Community-
Based Services for Elderly and Disabled Individuals.--
        ``(1) In general.--Subject to the succeeding provisions of this 
    subsection, a State may provide through a State plan amendment for 
    the provision of medical assistance for home and community-based 
    services (within the scope of services described in paragraph 
    (4)(B) of subsection (c) for which the Secretary has the authority 
    to approve a waiver and not including room and board or such other 
    services requested by the State as the Secretary may approve) for 
    individuals eligible for medical assistance under the State plan 
    whose income does not exceed 150 percent of the poverty line (as 
    defined in section 2110(c)(5)), without determining that but for 
    the provision of such services the individuals would require the 
    level of care provided in a hospital or a nursing facility or 
    intermediate care facility for the mentally retarded, but only if 
    the State meets the following requirements:
            ``(A) Needs-based criteria for eligibility for, and receipt 
        of, home and community-based services.--The State establishes 
        needs-based criteria for determining an individual's 
        eligibility under the State plan for medical assistance for 
        such home and community-based services, and if the individual 
        is eligible for such services, the specific home and community-
        based services that the individual will receive.
            ``(B) Establishment of more stringent needs-based 
        eligibility criteria for institutionalized care.--The State 
        establishes needs-based criteria for determining whether an 
        individual requires the level of care provided in a hospital, a 
        nursing facility, or an intermediate care facility for the 
        mentally retarded under the State plan or under any waiver of 
        such plan that are more stringent than the needs-based criteria 
        established under subparagraph (A) for determining eligibility 
        for home and community-based services.
            ``(C) Projection of number of individuals to be provided 
        home and community-based services.--
                ``(i) In general.--The State submits to the Secretary, 
            in such form and manner, and upon such frequency as the 
            Secretary shall specify, the projected number of 
            individuals to be provided home and community-based 
            services.
                ``(ii) Authority to limit number of eligible 
            individuals.--A State may limit the number of individuals 
            who are eligible for such services and may establish 
            waiting lists for the receipt of such services.
            ``(D) Criteria based on individual assessment.--
                ``(i) In general.--The criteria established by the 
            State for purposes of subparagraphs (A) and (B) requires an 
            assessment of an individual's support needs and 
            capabilities, and may take into account the inability of 
            the individual to perform 2 or more activities of daily 
            living (as defined in section 7702B(c)(2)(B) of the 
            Internal Revenue Code of 1986) or the need for significant 
            assistance to perform such activities, and such other risk 
            factors as the State determines to be appropriate.
                ``(ii) Adjustment authority.--The State plan amendment 
            provides the State with the option to modify the criteria 
            established under subparagraph (A) (without having to 
            obtain prior approval from the Secretary) in the event that 
            the enrollment of individuals eligible for home and 
            community-based services exceeds the projected enrollment 
            submitted for purposes of subparagraph (C), but only if--

                    ``(I) the State provides at least 60 days notice to 
                the Secretary and the public of the proposed 
                modification;
                    ``(II) the State deems an individual receiving home 
                and community-based services on the basis of the most 
                recent version of the criteria in effect prior to the 
                effective date of the modification to be eligible for 
                such services for a period of at least 12 months 
                beginning on the date the individual first received 
                medical assistance for such services; and
                    ``(III) after the effective date of such 
                modification, the State, at a minimum, applies the 
                criteria for determining whether an individual requires 
                the level of care provided in a hospital, a nursing 
                facility, or an intermediate care facility for the 
                mentally retarded under the State plan or under any 
                waiver of such plan which applied prior to the 
                application of the more stringent criteria developed 
                under subparagraph (B).

            ``(E) Independent evaluation and assessment.--
                ``(i) Eligibility determination.--The State uses an 
            independent evaluation for making the determinations 
            described in subparagraphs (A) and (B).
                ``(ii) Assessment.--In the case of an individual who is 
            determined to be eligible for home and community-based 
            services, the State uses an independent assessment, based 
            on the needs of the individual to--

                    ``(I) determine a necessary level of services and 
                supports to be provided, consistent with an 
                individual's physical and mental capacity;
                    ``(II) prevent the provision of unnecessary or 
                inappropriate care; and
                    ``(III) establish an individualized care plan for 
                the individual in accordance with subparagraph (G).

            ``(F) Assessment.--The independent assessment required 
        under subparagraph (E)(ii) shall include the following:
                ``(i) An objective evaluation of an individual's 
            inability to perform 2 or more activities of daily living 
            (as defined in section 7702B(c)(2)(B) of the Internal 
            Revenue Code of 1986) or the need for significant 
            assistance to perform such activities.
                ``(ii) A face-to-face evaluation of the individual by 
            an individual trained in the assessment and evaluation of 
            individuals whose physical or mental conditions trigger a 
            potential need for home and community-based services.
                ``(iii) Where appropriate, consultation with the 
            individual's family, spouse, guardian, or other responsible 
            individual.
                ``(iv) Consultation with appropriate treating and 
            consulting health and support professionals caring for the 
            individual.
                ``(v) An examination of the individual's relevant 
            history, medical records, and care and support needs, 
            guided by best practices and research on effective 
            strategies that result in improved health and quality of 
            life outcomes.
                ``(vi) If the State offers individuals the option to 
            self-direct the purchase of, or control the receipt of, 
            home and community-based service, an evaluation of the 
            ability of the individual or the individual's 
            representative to self-direct the purchase of, or control 
            the receipt of, such services if the individual so elects.
            ``(G) Individualized care plan.--
                ``(i) In general.--In the case of an individual who is 
            determined to be eligible for home and community-based 
            services, the State uses the independent assessment 
            required under subparagraph (E)(ii) to establish a written 
            individualized care plan for the individual.
                ``(ii) Plan requirements.--The State ensures that the 
            individualized care plan for an individual--

                    ``(I) is developed--

                        ``(aa) in consultation with the individual, the 
                    individual's treating physician, health care or 
                    support professional, or other appropriate 
                    individuals, as defined by the State, and, where 
                    appropriate the individual's family, caregiver, or 
                    representative; and
                        ``(bb) taking into account the extent of, and 
                    need for, any family or other supports for the 
                    individual;

                    ``(II) identifies the necessary home and community-
                based services to be furnished to the individual (or, 
                if the individual elects to self-direct the purchase 
                of, or control the receipt of, such services, funded 
                for the individual); and
                    ``(III) is reviewed at least annually and as needed 
                when there is a significant change in the individual's 
                circumstances.

                ``(iii) State option to offer election for self-
            directed services.--

                    ``(I) Individual choice.--At the option of the 
                State, the State may allow an individual or the 
                individual's representative to elect to receive self-
                directed home and community-based services in a manner 
                which gives them the most control over such services 
                consistent with the individual's abilities and the 
                requirements of subclauses (II) and (III).
                    ``(II) Self-directed services.--The term `self-
                directed' means, with respect to the home and 
                community-based services offered under the State plan 
                amendment, such services for the individual which are 
                planned and purchased under the direction and control 
                of such individual or the individual's authorized 
                representative, including the amount, duration, scope, 
                provider, and location of such services, under the 
                State plan consistent with the following requirements:

                        ``(aa) Assessment.--There is an assessment of 
                    the needs, capabilities, and preferences of the 
                    individual with respect to such services.
                        ``(bb) Service plan.--Based on such assessment, 
                    there is developed jointly with such individual or 
                    the individual's authorized representative a plan 
                    for such services for such individual that is 
                    approved by the State and that satisfies the 
                    requirements of subclause (III).

                    ``(III) Plan requirements.--For purposes of 
                subclause (II)(bb), the requirements of this subclause 
                are that the plan--

                        ``(aa) specifies those services which the 
                    individual or the individual's authorized 
                    representative would be responsible for directing;
                        ``(bb) identifies the methods by which the 
                    individual or the individual's authorized 
                    representative will select, manage, and dismiss 
                    providers of such services;
                        ``(cc) specifies the role of family members and 
                    others whose participation is sought by the 
                    individual or the individual's authorized 
                    representative with respect to such services;
                        ``(dd) is developed through a person-centered 
                    process that is directed by the individual or the 
                    individual's authorized representative, builds upon 
                    the individual's capacity to engage in activities 
                    that promote community life and that respects the 
                    individual's preferences, choices, and abilities, 
                    and involves families, friends, and professionals 
                    as desired or required by the individual or the 
                    individual's authorized representative;
                        ``(ee) includes appropriate risk management 
                    techniques that recognize the roles and sharing of 
                    responsibilities in obtaining services in a self-
                    directed manner and assure the appropriateness of 
                    such plan based upon the resources and capabilities 
                    of the individual or the individual's authorized 
                    representative; and
                        ``(ff) may include an individualized budget 
                    which identifies the dollar value of the services 
                    and supports under the control and direction of the 
                    individual or the individual's authorized 
                    representative.

                    ``(IV) Budget process.--With respect to 
                individualized budgets described in subclause 
                (III)(ff), the State plan amendment--

                        ``(aa) describes the method for calculating the 
                    dollar values in such budgets based on reliable 
                    costs and service utilization;
                        ``(bb) defines a process for making adjustments 
                    in such dollar values to reflect changes in 
                    individual assessments and service plans; and
                        ``(cc) provides a procedure to evaluate 
                    expenditures under such budgets.
            ``(H) Quality assurance; conflict of interest standards.--
                ``(i) Quality assurance.--The State ensures that the 
            provision of home and community-based services meets 
            Federal and State guidelines for quality assurance.
                ``(ii) Conflict of interest standards.--The State 
            establishes standards for the conduct of the independent 
            evaluation and the independent assessment to safeguard 
            against conflicts of interest.
            ``(I) Redeterminations and appeals.--The State allows for 
        at least annual redeterminations of eligibility, and appeals in 
        accordance with the frequency of, and manner in which, 
        redeterminations and appeals of eligibility are made under the 
        State plan.
            ``(J) Presumptive eligibility for assessment.--The State, 
        at its option, elects to provide for a period of presumptive 
        eligibility (not to exceed a period of 60 days) only for those 
        individuals that the State has reason to believe may be 
        eligible for home and community-based services. Such 
        presumptive eligibility shall be limited to medical assistance 
        for carrying out the independent evaluation and assessment 
        under subparagraph (E) to determine an individual's eligibility 
        for such services and if the individual is so eligible, the 
        specific home and community-based services that the individual 
        will receive.
        ``(2) Definition of individual's representative.--In this 
    section, the term `individual's representative' means, with respect 
    to an individual, a parent, a family member, or a guardian of the 
    individual, an advocate for the individual, or any other individual 
    who is authorized to represent the individual.
        ``(3) Nonapplication.--A State may elect in the State plan 
    amendment approved under this section to not comply with the 
    requirements of section 1902(a)(1) (relating to statewideness) and 
    section 1902(a)(10)(C)(i)(III) (relating to income and resource 
    rules applicable in the community), but only for purposes of 
    provided home and community-based services in accordance with such 
    amendment. Any such election shall not be construed to apply to the 
    provision of services to an individual receiving medical assistance 
    in an institutionalized setting as a result of a determination that 
    the individual requires the level of care provided in a hospital or 
    a nursing facility or intermediate care facility for the mentally 
    retarded.
        ``(4) No effect on other waiver authority.--Nothing in this 
    subsection shall be construed as affecting the option of a State to 
    offer home and community-based services under a waiver under 
    subsections (c) or (d) of this section or under section 1115.
        ``(5) Continuation of federal financial participation for 
    medical assistance provided to individuals as of effective date of 
    state plan amendment.--Notwithstanding paragraph (1)(B), Federal 
    financial participation shall continue to be available for an 
    individual who is receiving medical assistance in an 
    institutionalized setting, or home and community-based services 
    provided under a waiver under this section or section 1115 that is 
    in effect as of the effective date of the State plan amendment 
    submitted under this subsection, as a result of a determination 
    that the individual requires the level of care provided in a 
    hospital or a nursing facility or intermediate care facility for 
    the mentally retarded, without regard to whether such individuals 
    satisfy the more stringent eligibility criteria established under 
    that paragraph, until such time as the individual is discharged 
    from the institution or waiver program or no longer requires such 
    level of care.''.
    (b) Quality of Care Measures.--
        (1) In general.--The Secretary, acting through the Director of 
    the Agency for Healthcare Research and Quality, shall consult with 
    consumers, health and social service providers and other 
    professionals knowledgeable about long-term care services and 
    supports to develop program performance indicators, client function 
    indicators, and measures of client satisfaction with respect to 
    home and community-based services offered under State Medicaid 
    programs.
        (2) Best practices.--The Secretary shall--
            (A) use the indicators and measures developed under 
        paragraph (1) to assess such home and community-based services, 
        the outcomes associated with the receipt of such services 
        (particularly with respect to the health and welfare of the 
        recipient of the services), and the overall system for 
        providing home and community-based services under the Medicaid 
        program under title XIX of the Social Security Act; and
            (B) make publicly available the best practices identified 
        through such assessment and a comparative analyses of the 
        system features of each State.
        (3) Appropriation.--Out of any funds in the Treasury not 
    otherwise appropriated, there is appropriated to the Secretary of 
    Health and Human Services, $1,000,000 for the period of fiscal 
    years 2006 through 2010 to carry out this subsection.
    (c) Effective Date.--The amendments made by subsections (a) and (b) 
take effect on January 1, 2007, and apply to expenditures for medical 
assistance for home and community-based services provided in accordance 
with section 1915(i) of the Social Security Act (as added by 
subsections (a) and (b)) on or after that date.

SEC. 6087. OPTIONAL CHOICE OF SELF-DIRECTED PERSONAL ASSISTANCE 
              SERVICES (CASH AND COUNSELING).

    (a) Exemption From Certain Requirements.--Section 1915 of the 
Social Security Act (42 U.S.C. 1396n), as amended by section 6086(a), 
is amended by adding at the end the following new subsection:
    ``(j)(1) A State may provide, as `medical assistance', payment for 
part or all of the cost of self-directed personal assistance services 
(other than room and board) under the plan which are provided pursuant 
to a written plan of care to individuals with respect to whom there has 
been a determination that, but for the provision of such services, the 
individuals would require and receive personal care services under the 
plan, or home and community-based services provided pursuant to a 
waiver under subsection (c). Self-directed personal assistance services 
may not be provided under this subsection to individuals who reside in 
a home or property that is owned, operated, or controlled by a provider 
of services, not related by blood or marriage.
    ``(2) The Secretary shall not grant approval for a State self-
directed personal assistance services program under this section unless 
the State provides assurances satisfactory to the Secretary of the 
following:
        ``(A) Necessary safeguards have been taken to protect the 
    health and welfare of individuals provided services under the 
    program, and to assure financial accountability for funds expended 
    with respect to such services.
        ``(B) The State will provide, with respect to individuals who--
            ``(i) are entitled to medical assistance for personal care 
        services under the plan, or receive home and community-based 
        services under a waiver granted under subsection (c);
            ``(ii) may require self-directed personal assistance 
        services; and
            ``(iii) may be eligible for self-directed personal 
        assistance services,
    an evaluation of the need for personal care under the plan, or 
    personal services under a waiver granted under subsection (c).
        ``(C) Such individuals who are determined to be likely to 
    require personal care under the plan, or home and community-based 
    services under a waiver granted under subsection (c) are informed 
    of the feasible alternatives, if available under the State's self-
    directed personal assistance services program, at the choice of 
    such individuals, to the provision of personal care services under 
    the plan, or personal assistance services under a waiver granted 
    under subsection (c).
        ``(D) The State will provide for a support system that ensures 
    participants in the self-directed personal assistance services 
    program are appropriately assessed and counseled prior to 
    enrollment and are able to manage their budgets. Additional 
    counseling and management support may be provided at the request of 
    the participant.
        ``(E) The State will provide to the Secretary an annual report 
    on the number of individuals served and total expenditures on their 
    behalf in the aggregate. The State shall also provide an evaluation 
    of overall impact on the health and welfare of participating 
    individuals compared to non-participants every three years.
    ``(3) A State may provide self-directed personal assistance 
services under the State plan without regard to the requirements of 
section 1902(a)(1) and may limit the population eligible to receive 
these services and limit the number of persons served without regard to 
section 1902(a)(10)(B).
    ``(4)(A) For purposes of this subsection, the term `self-directed 
personal assistance services' means personal care and related services, 
or home and community-based services otherwise available under the plan 
under this title or subsection (c), that are provided to an eligible 
participant under a self-directed personal assistance services program 
under this section, under which individuals, within an approved self-
directed services plan and budget, purchase personal assistance and 
related services, and permits participants to hire, fire, supervise, 
and manage the individuals providing such services.
    ``(B) At the election of the State--
        ``(i) a participant may choose to use any individual capable of 
    providing the assigned tasks including legally liable relatives as 
    paid providers of the services; and
        ``(ii) the individual may use the individual's budget to 
    acquire items that increase independence or substitute (such as a 
    microwave oven or an accessibility ramp) for human assistance, to 
    the extent that expenditures would otherwise be made for the human 
    assistance.
    ``(5) For purpose of this section, the term `approved self-directed 
services plan and budget' means, with respect to a participant, the 
establishment of a plan and budget for the provision of self-directed 
personal assistance services, consistent with the following 
requirements:
        ``(A) Self-direction.--The participant (or in the case of a 
    participant who is a minor child, the participant's parent or 
    guardian, or in the case of an incapacitated adult, another 
    individual recognized by State law to act on behalf of the 
    participant) exercises choice and control over the budget, 
    planning, and purchase of self-directed personal assistance 
    services, including the amount, duration, scope, provider, and 
    location of service provision.
        ``(B) Assessment of needs.--There is an assessment of the 
    needs, strengths, and preferences of the participants for such 
    services.
        ``(C) Service plan.--A plan for such services (and supports for 
    such services) for the participant has been developed and approved 
    by the State based on such assessment through a person-centered 
    process that--
            ``(i) builds upon the participant's capacity to engage in 
        activities that promote community life and that respects the 
        participant's preferences, choices, and abilities; and
            ``(ii) involves families, friends, and professionals in the 
        planning or delivery of services or supports as desired or 
        required by the participant.
        ``(D) Service budget.--A budget for such services and supports 
    for the participant has been developed and approved by the State 
    based on such assessment and plan and on a methodology that uses 
    valid, reliable cost data, is open to public inspection, and 
    includes a calculation of the expected cost of such services if 
    those services were not self-directed. The budget may not restrict 
    access to other medically necessary care and services furnished 
    under the plan and approved by the State but not included in the 
    budget.
        ``(E) Application of quality assurance and risk management.--
    There are appropriate quality assurance and risk management 
    techniques used in establishing and implementing such plan and 
    budget that recognize the roles and responsibilities in obtaining 
    services in a self-directed manner and assure the appropriateness 
    of such plan and budget based upon the participant's resources and 
    capabilities.
    ``(6) A State may employ a financial management entity to make 
payments to providers, track costs, and make reports under the program. 
Payment for the activities of the financial management entity shall be 
at the administrative rate established in section 1903(a).''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to services furnished on or after January 1, 2007.

                           Subtitle B--SCHIP

SEC. 6101. ADDITIONAL ALLOTMENTS TO ELIMINATE FISCAL YEAR 2006 FUNDING 
              SHORTFALLS.

    (a) 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 To Eliminate Funding Shortfalls.--
        ``(1) Appropriation; allotment authority.--For the purpose of 
    providing additional allotments to shortfall States described in 
    paragraph (2), there is appropriated, out of any money in the 
    Treasury not otherwise appropriated, $283,000,000 for fiscal year 
    2006.
        ``(2) Shortfall states described.--For purposes of paragraph 
    (1), a shortfall State described in this paragraph is a State with 
    a State child health plan approved under this title for which the 
    Secretary estimates, on the basis of the most recent data available 
    to the Secretary as of December 16, 2005, that the projected 
    expenditures under such plan for such State for fiscal year 2006 
    will exceed the sum of--
            ``(A) the amount of the State's allotments for each of 
        fiscal years 2004 and 2005 that will not be expended by the end 
        of fiscal year 2005;
            ``(B) the amount, if any, that is to be redistributed to 
        the State during fiscal year 2006 in accordance with subsection 
        (f); and
            ``(C) the amount of the State's allotment for fiscal year 
        2006.
        ``(3) Allotments.--In addition to the allotments provided under 
    subsections (b) and (c), subject to paragraph (4), of the amount 
    available for the additional allotments under paragraph (1) for 
    fiscal year 2006, the Secretary shall allot--
            ``(A) to each shortfall State described in paragraph (2) 
        such amount as the Secretary determines will eliminate the 
        estimated shortfall described in such paragraph for the State; 
        and
            ``(B) to each 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 amount appropriated under paragraph (1).
        ``(4) Use of additional allotment.--Additional allotments 
    provided under this subsection are only available for amounts 
    expended under a State plan approved under this title for child 
    health assistance for targeted low-income children.
        ``(5) 1-year availability; no redistribution of unexpended 
    additional allotments.--Notwithstanding subsections (e) and (f), 
    amounts allotted to a State pursuant to this subsection for fiscal 
    year 2006 shall only remain available for expenditure by the State 
    through September 30, 2006. Any amounts of such allotments that 
    remain unexpended as of such date shall not be subject to 
    redistribution under subsection (f) and shall revert to the 
    Treasury on October 1, 2006.''.
    (b) Conforming Amendments.--Section 2104 of the Social Security Act 
(42 U.S.C. 1397dd) is amended--
        (1) in subsection (a), by inserting ``subject to subsection 
    (d),'' after ``under this section,'';
        (2) in subsection (b)(1), by inserting ``and subsection (d)'' 
    after ``Subject to paragraph (4)''; and
        (3) in subsection (c)(1), by inserting ``subject to subsection 
    (d),'' after ``for a fiscal year,''.
    (c) Effective Date.--The amendments made by this section apply to 
items and services furnished on or after October 1, 2005, without 
regard to whether or not regulations implementing such amendments have 
been issued.

SEC. 6102. PROHIBITION AGAINST COVERING NONPREGNANT CHILDLESS ADULTS 
              WITH SCHIP FUNDS.

    (a) Prohibition on Use of SCHIP Funds.--Section 2107 of the Social 
Security Act (42 U.S.C. 1397gg) is amended by adding at the end the 
following:
    ``(f) Limitation of Waiver Authority.--Notwithstanding subsection 
(e)(2)(A) and section 1115(a), the Secretary may not approve a waiver, 
experimental, pilot, or demonstration project that would allow funds 
made available under this title to be used to provide child health 
assistance or other health benefits coverage to a nonpregnant childless 
adult. For purposes of the preceding sentence, a caretaker relative (as 
such term is defined for purposes of carrying out section 1931) shall 
not be considered a childless adult.''.
    (b) Conforming Amendments.--Section 2105(c)(1) of such Act (42 
U.S.C. 1397ee(c)(1)) is amended--
        (1) by inserting ``and may not include coverage of a 
    nonpregnant childless adult'' after ``section 2101)''; and
        (2) by adding at the end the following: ``For purposes of the 
    preceding sentence, a caretaker relative (as such term is defined 
    for purposes of carrying out section 1931) shall not be considered 
    a childless adult.''.
    (c) Rule of Construction.--Nothing in this section or the 
amendments made by this section shall be construed to--
        (1) authorize the waiver of any provision of title XIX or XXI 
    of the Social Security Act (42 U.S.C. 1396 et seq., 1397aa et seq.) 
    that is not otherwise authorized to be waived under such titles or 
    under title XI of such Act (42 U.S.C. 1301 et seq.) as of the date 
    of enactment of this Act;
        (2) imply congressional approval of any waiver, experimental, 
    pilot, or demonstration project affecting funds made available 
    under the State children's health insurance program under title XXI 
    of the Social Security Act (42 U.S.C. 1397aa et. seq.) or any 
    amendment to such a waiver or project that has been approved as of 
    such date of enactment; or
        (3) apply to any waiver, experimental, pilot, or demonstration 
    project that would allow funds made available under title XXI of 
    the Social Security Act (42 U.S.C. 1397aa et seq.) to be used to 
    provide child health assistance or other health benefits coverage 
    to a nonpregnant childless adult that is approved before the date 
    of enactment of this Act or to any extension, renewal, or amendment 
    of such a waiver or project that is approved on or after such date 
    of enactment.
    (d) Effective Date.--This section and the amendments made by this 
section shall take effect as if enacted on October 1, 2005, and shall 
apply to any waiver, experimental, pilot, or demonstration project that 
is approved on or after that date.

SEC. 6103. CONTINUED AUTHORITY FOR QUALIFYING STATES TO USE CERTAIN 
              FUNDS FOR MEDICAID EXPENDITURES.

    (a) In General.--Section 2105(g)(1)(A) of the Social Security Act 
(42 U.S.C. 1397ee(g)(1)(A)) is amended by striking ``or 2001'' and 
inserting ``2001, 2004, or 2005''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to expenditures made under title XIX of the Social Security Act 
(42 U.S.C. 1396 et seq.) on or after October 1, 2005.

                       Subtitle C--Katrina Relief

SEC. 6201. ADDITIONAL FEDERAL PAYMENTS UNDER HURRICANE-RELATED MULTI-
              STATE SECTION 1115 DEMONSTRATIONS.

    (a) In General.--The Secretary of Health and Human Services shall 
pay to each eligible State, from amounts appropriated pursuant to 
subsection (e), amounts for the following purposes:
        (1) Under the authority of an approved Multi-State Section 1115 
    Demonstration Project (in this section referred to as a ``section 
    1115 project'')--
            (A) with respect to evacuees receiving health care under 
        such project, for the non-Federal share of expenditures:
                (i) for medical assistance furnished under title XIX of 
            the Social Security Act, and
                (ii) for child health assistance furnished under title 
            XXI of such Act;
            (B) with respect to evacuees who do not have other coverage 
        for such assistance through insurance, including (but not 
        limited to) private insurance, under title XIX or title XXI of 
        the Social Security Act, or under State-funded health insurance 
        programs, for the total uncompensated care costs incurred for 
        medically necessary services and supplies or premium assistance 
        for such persons, and for those evacuees receiving medical 
        assistance under the project for the total uncompensated care 
        costs incurred for medically necessary services and supplies 
        beyond those included as medical assistance or child health 
        assistance under the State's approved plan under title XIX or 
        title XXI of the Social Security Act;
            (C) with respect to affected individuals receiving health 
        care under such project for the non-Federal share of the 
        following expenditures:
                (i) for medical assistance furnished under title XIX of 
            the Social Security Act, and
                (ii) for child health assistance furnished under title 
            XXI of such Act; and
            (D) with respect to affected individuals who do not have 
        other coverage for such assistance through insurance, including 
        (but not limited to) private insurance, under title XIX or 
        title XXI of the Social Security Act, or under State-funded 
        health insurance programs, for the total uncompensated care 
        costs incurred for medically necessary services and supplies or 
        premium assistance for such persons, and for those affected 
        individuals receiving medical assistance under the project for 
        the total uncompensated care costs incurred for medically 
        necessary services and supplies beyond those included as 
        medical assistance or child health assistance under the State's 
        approved plan under title XIX or title XXI of the Social 
        Security Act.
        (2) For reimbursement of the reasonable administrative costs 
    related to subparagraphs (A) through (D) of paragraph (1) as 
    determined by the Secretary.
        (3) Only with respect to affected counties or parishes, for 
    reimbursement with respect to individuals receiving medical 
    assistance under existing State plans approved by the Secretary of 
    Health and Human Services for the following non-Federal share of 
    expenditures:
            (A) For medical assistance furnished under title XIX of the 
        Social Security Act.
            (B) For child health assistance furnished under title XXI 
        of such Act.
        (4) For other purposes, if approved by the Secretary under the 
    Secretary's authority, to restore access to health care in impacted 
    communities.
    (b) Definitions.--For purposes of this section:
        (1) The term ``affected individual'' means an individual who 
    resided in an individual assistance designation county or parish 
    pursuant to section 408 of the Robert T. Stafford Disaster Relief 
    and Emergency Assistance Act, as declared by the President as a 
    result of Hurricane Katrina and continues to reside in the same 
    State that such county or parish is located in.
        (2) The term ``affected counties or parishes'' means a county 
    or parish described in paragraph (1).
        (3) The term ``evacuee'' means an affected individual who has 
    been displaced to another State.
        (4) The term ``eligible State'' means a State that has provided 
    care to affected individuals or evacuees under a section 1115 
    project.
    (c) Application to Matching Requirements.--The non-Federal share 
paid under this section shall not be regarded as Federal funds for 
purposes of Medicaid matching requirements, the effect of which is to 
provide fiscal relief to the State in which the Medicaid eligible 
individual originally resided.
    (d) Time Limits on Payments.--
        (1) No payments shall be made by the Secretary under subsection 
    (a)(1)(A) or (a)(1)(C), for costs of health care provided to an 
    eligible evacuee or affected individual for services for such 
    individual incurred after June 30, 2006.
        (2) No payments shall be made by the Secretary under subsection 
    (a)(1)(B) or (a)(1)(D) for costs of health care incurred after 
    January 31, 2006.
        (3) No payments may be made under subsection (a)(1)(B) or 
    (a)(1)(D) for an item or service that an evacuee or an affected 
    individual has received from an individual or organization as part 
    of a public or private hurricane relief effort.
    (e) Appropriations.--For the purpose of providing funds for 
payments under this section, in addition to any funds made available 
for the National Disaster Medical System under the Department of 
Homeland Security for health care costs related to Hurricane Katrina, 
including under a section 1115 project, there is appropriated out of 
any money in the Treasury not otherwise appropriated, $2,000,000,000, 
to remain available to the Secretary until expended. The total amount 
of payments made under subsection (a) may not exceed the total amount 
appropriated under this subsection.

SEC. 6202. STATE HIGH RISK HEALTH INSURANCE POOL FUNDING.

    (a) In General.--There are hereby authorized and appropriated for 
fiscal year 2006--
        (1) $75,000,000 for grants under subsection (b)(1) of section 
    2745 of the Public Health Service Act (42 U.S.C. 300gg-45); and
        (2) $15,000,000 for grants under subsection (a) of such 
    section.
    (b) Treatment.--The amount appropriated under--
        (1) paragraph (1) shall be treated as if it had been 
    appropriated under subsection (c)(2) of such section; and
        (2) paragraph (2) shall be treated as if it had been 
    appropriated under subsection (c)(1) of such section.
    (c) References.--Effective upon the enactment of the State High 
Risk Pool Funding Extension Act of 2005--
        (1) subsection (a)(1) shall be applied by substituting 
    ``subsections (b)(2) and (c)(3)'' for ``subsection ``(b)(1)'';
        (2) subsection (b)(1) shall be applied by substituting 
    ``(d)(1)(B)'' for ``(c)(2)''; and
        (3) subsection (b)(2) shall be applied by substituting 
    ``(d)(1)(A)'' for ``(c)(1)''.

SEC. 6203. IMPLEMENTATION FUNDING.

    For purposes of implementing the provisions of, and amendments made 
by, title V of this Act and this title--
        (1) the Secretary of Health and Human Services shall provide 
    for the transfer, in appropriate part from the Federal Hospital 
    Insurance Trust Fund established under section 1817 of the Social 
    Security Act (42 U.S.C. 1395i) and the Federal Supplementary 
    Medical Insurance Trust Fund established under section 1841 of such 
    Act (42 U.S.C. 1395t), of $30,000,000 to the Centers for Medicare & 
    Medicaid Services Program Management Account for fiscal year 2006; 
    and
        (2) out of any funds in the Treasury not otherwise 
    appropriated, there are appropriated to such Secretary for the 
    Centers for Medicare & Medicaid Services Program Management 
    Account, $30,000,000 for fiscal year 2006.

            TITLE VII--HUMAN RESOURCES AND OTHER PROVISIONS

SEC. 7001. REFERENCES.

    Except as otherwise expressly provided, wherever in this title an 
amendment or repeal is expressed in terms of an amendment to, or repeal 
of, a section or other provision, the amendment or repeal shall be 
considered to be made to a section or other provision of the Social 
Security Act.

                            Subtitle A--TANF

SEC. 7101. TEMPORARY ASSISTANCE FOR NEEDY FAMILIES AND RELATED PROGRAMS 
              FUNDING THROUGH SEPTEMBER 30, 2010.

    (a) In General.--Activities authorized by part A of title IV and 
section 1108(b) of the Social Security Act (adjusted, as applicable, by 
or under this subtitle, the amendments made by this subtitle, and the 
TANF Emergency Response and Recovery Act of 2005) shall continue 
through September 30, 2010, in the manner authorized for fiscal year 
2004, and out of any money in the Treasury of the United States not 
otherwise appropriated, there are hereby appropriated such sums as may 
be necessary for such purpose. Grants and payments may be made pursuant 
to this authority on a quarterly basis through fiscal year 2010 at the 
level provided for such activities for the corresponding quarter of 
fiscal year 2004 (or, as applicable, at such greater level as may 
result from the application of this subtitle, the amendments made by 
this subtitle, and the TANF Emergency Response and Recovery Act of 
2005), except that in the case of section 403(a)(3) of the Social 
Security Act, grants and payments may be made pursuant to this 
authority only through fiscal year 2008 and in the case of section 
403(a)(4) of the Social Security Act, no grants shall be made for any 
fiscal year occurring after fiscal year 2005.
    (b) Conforming Amendments.--Part A of title IV (42 U.S.C. 601 et 
seq.) is amended--
        (1) in section 403(a)(3)(H)(ii), by striking ``December, 31, 
    2005'' and inserting ``fiscal year 2008'';
        (2) in section 403(b)(3)(C)(ii), by striking ``2006'' and 
    inserting ``2010''; and
        (3) in section 409(a)(7)--
            (A) in subparagraph (A), by striking ``or 2007'' and 
        inserting ``2007, 2008, 2009, 2010, or 2011''; and
            (B) in subparagraph (B)(ii), by striking ``2006'' and 
        inserting ``2010''.
    (c) Extension of the National Random Sample Study of Child Welfare 
Through September 30, 2010.--Activities authorized by section 429A of 
the Social Security Act shall continue through September 30, 2010, in 
the manner authorized for fiscal year 2004, and out of any money in the 
Treasury of the United States not otherwise appropriated, there are 
hereby appropriated such sums as may be necessary for such purpose. 
Grants and payments may be made pursuant to this authority on a 
quarterly basis through fiscal year 2010 at the level provided for such 
activities for the corresponding quarter of fiscal year 2004.

SEC. 7102. IMPROVED CALCULATION OF WORK PARTICIPATION RATES AND PROGRAM 
              INTEGRITY.

    (a) Recalibration of Caseload Reduction Credit.--
        (1) In general.--Section 407(b)(3)(A) (42 U.S.C. 607(b)(3)(A)) 
    is amended--
            (A) in clause (i), by inserting ``or any other State 
        program funded with qualified State expenditures (as defined in 
        section 409(a)(7)(B)(i))'' after ``this part''; and
            (B) by striking clause (ii) and inserting the following:
                ``(ii) the average monthly number of families that 
            received assistance under any State program referred to in 
            clause (i) during fiscal year 2005.''.
        (2) Conforming amendment.--Section 407(b)(3)(B) (42 U.S.C. 
    607(b)(3)(B)) is amended by striking ``and eligibility criteria'' 
    and all that follows through the close parenthesis and inserting 
    ``and the eligibility criteria in effect during fiscal year 2005''.
    (b) Inclusion of Families Receiving Assistance Under Separate State 
Programs in Calculation of Participation Rates.--
        (1) Section 407 (42 U.S.C. 607) is amended in each of 
    subsections (a)(1), (a)(2), (b)(1)(B)(i), (c)(2)(A)(i), (e)(1), and 
    (e)(2), by inserting ``or any other State program funded with 
    qualified State expenditures (as defined in section 
    409(a)(7)(B)(i))'' after ``this part''.
        (2) Section 411(a)(1) (42 U.S.C. 611(a)(1)) is amended--
            (A) in subparagraph (A), by inserting ``or any other State 
        program funded with qualified State expenditures (as defined in 
        section 409(a)(7)(B)(i))'' before the colon; and
            (B) in subparagraph (B)(ii), by inserting ``and any other 
        State programs funded with qualified State expenditures (as 
        defined in section 409(a)(7)(B)(i))'' after ``this part''.
    (c) Improved Verification and Oversight of Work Participation.--
        (1) In general.--Section 407(i) (42 U.S.C. 607(i)) is amended 
    to read as follows:
    ``(i) Verification of Work and Work-Eligible Individuals in Order 
To Implement Reforms.--
        ``(1) Secretarial direction and oversight.--
            ``(A) Regulations for determining whether activities may be 
        counted as `work activities', how to count and verify reported 
        hours of work, and determining who is a work-eligible 
        individual.--
                ``(i) In general.--Not later than June 30, 2006, the 
            Secretary shall promulgate regulations to ensure consistent 
            measurement of work participation rates under State 
            programs funded under this part and State programs funded 
            with qualified State expenditures (as defined in section 
            409(a)(7)(B)(i)), which shall include information with 
            respect to--

                    ``(I) determining whether an activity of a 
                recipient of assistance may be treated as a work 
                activity under subsection (d);
                    ``(II) uniform methods for reporting hours of work 
                by a recipient of assistance;
                    ``(III) the type of documentation needed to verify 
                reported hours of work by a recipient of assistance; 
                and
                    ``(IV) the circumstances under which a parent who 
                resides with a child who is a recipient of assistance 
                should be included in the work participation rates.

                ``(ii) Issuance of regulations on an interim final 
            basis.--The regulations referred to in clause (i) may be 
            effective and final immediately on an interim basis as of 
            the date of publication of the regulations. If the 
            Secretary provides for an interim final regulation, the 
            Secretary shall provide for a period of public comment on 
            the regulation after the date of publication. The Secretary 
            may change or revise the regulation after the public 
            comment period.
            ``(B) Oversight of state procedures.--The Secretary shall 
        review the State procedures established in accordance with 
        paragraph (2) to ensure that such procedures are consistent 
        with the regulations promulgated under subparagraph (A) and are 
        adequate to ensure an accurate measurement of work 
        participation under the State programs funded under this part 
        and any other State programs funded with qualified State 
        expenditures (as so defined).
        ``(2) Requirement for states to establish and maintain work 
    participation verification procedures.--Not later than September 
    30, 2006, a State to which a grant is made under section 403 shall 
    establish procedures for determining, with respect to recipients of 
    assistance under the State program funded under this part or under 
    any State programs funded with qualified State expenditures (as so 
    defined), whether activities may be counted as work activities, how 
    to count and verify reported hours of work, and who is a work-
    eligible individual, in accordance with the regulations promulgated 
    pursuant to paragraph (1)(A)(i) and shall establish internal 
    controls to ensure compliance with the procedures.''.
        (2) State penalty for failure to establish or comply with work 
    participation verification procedures.--Section 409(a) (42 U.S.C. 
    609(a)) is amended by adding at the end the following:
        ``(15) Penalty for failure to establish or comply with work 
    participation verification procedures.--
            ``(A) In general.--If the Secretary determines that a State 
        to which a grant is made under section 403 in a fiscal year has 
        violated section 407(i)(2) during the fiscal year, the 
        Secretary shall reduce the grant payable to the State under 
        section 403(a)(1) for the immediately succeeding fiscal year by 
        an amount equal to not less than 1 percent and not more than 5 
        percent of the State family assistance grant.
            ``(B) Penalty based on severity of failure.--The Secretary 
        shall impose reductions under subparagraph (A) with respect to 
        a fiscal year based on the degree of noncompliance.''.
    (d) Effective Date.--The amendments made by subsections (a) and (b) 
shall take effect on October 1, 2006.

SEC. 7103. GRANTS FOR HEALTHY MARRIAGE PROMOTION AND RESPONSIBLE 
              FATHERHOOD.

    (a) Healthy Marriage and Family Funds.--Section 403(a)(2) (42 
U.S.C. 603(a)(2)) is amended to read as follows:
        ``(2) Healthy marriage promotion and responsible fatherhood 
    grants.--
            ``(A) In general.--
                ``(i) Use of funds.--Subject to subparagraphs (B) and 
            (C), the Secretary may use the funds made available under 
            subparagraph (D) for the purpose of conducting and 
            supporting research and demonstration projects by public or 
            private entities, and providing technical assistance to 
            States, Indian tribes and tribal organizations, and such 
            other entities as the Secretary may specify that are 
            receiving a grant under another provision of this part.
                ``(ii) Limitations.--The Secretary may not award funds 
            made available under this paragraph on a noncompetitive 
            basis, and may not provide any such funds to an entity for 
            the purpose of carrying out healthy marriage promotion 
            activities or for the purpose of carrying out activities 
            promoting responsible fatherhood unless the entity has 
            submitted to the Secretary an application which--

                    ``(I) describes--

                        ``(aa) how the programs or activities proposed 
                    in the application will address, as appropriate, 
                    issues of domestic violence; and
                        ``(bb) what the applicant will do, to the 
                    extent relevant, to ensure that participation in 
                    the programs or activities is voluntary, and to 
                    inform potential participants that their 
                    participation is voluntary; and

                    ``(II) contains a commitment by the entity--

                        ``(aa) to not use the funds for any other 
                    purpose; and
                        ``(bb) to consult with experts in domestic 
                    violence or relevant community domestic violence 
                    coalitions in developing the programs and 
                    activities.
                ``(iii) Healthy marriage promotion activities.--In 
            clause (ii), the term `healthy marriage promotion 
            activities' means the following:

                    ``(I) Public advertising campaigns on the value of 
                marriage and the skills needed to increase marital 
                stability and health.
                    ``(II) Education in high schools on the value of 
                marriage, relationship skills, and budgeting.
                    ``(III) Marriage education, marriage skills, and 
                relationship skills programs, that may include 
                parenting skills, financial management, conflict 
                resolution, and job and career advancement, for non-
                married pregnant women and non-married expectant 
                fathers.
                    ``(IV) Pre-marital education and marriage skills 
                training for engaged couples and for couples or 
                individuals interested in marriage.
                    ``(V) Marriage enhancement and marriage skills 
                training programs for married couples.
                    ``(VI) Divorce reduction programs that teach 
                relationship skills.
                    ``(VII) Marriage mentoring programs which use 
                married couples as role models and mentors in at-risk 
                communities.
                    ``(VIII) Programs to reduce the disincentives to 
                marriage in means-tested aid programs, if offered in 
                conjunction with any activity described in this 
                subparagraph.

            ``(B) Limitation on use of funds for demonstration projects 
        for coordination of provision of child welfare and tanf 
        services to tribal families at risk of child abuse or 
        neglect.--
                ``(i) In general.--Of the amounts made available under 
            subparagraph (D) for a fiscal year, the Secretary may not 
            award more than $2,000,000 on a competitive basis to fund 
            demonstration projects designed to test the effectiveness 
            of tribal governments or tribal consortia in coordinating 
            the provision to tribal families at risk of child abuse or 
            neglect of child welfare services and services under tribal 
            programs funded under this part.
                ``(ii) Limitation on use of funds.--A grant made 
            pursuant to clause (i) to such a project shall not be used 
            for any purpose other than--

                    ``(I) to improve case management for families 
                eligible for assistance from such a tribal program;
                    ``(II) for supportive services and assistance to 
                tribal children in out-of-home placements and the 
                tribal families caring for such children, including 
                families who adopt such children; and
                    ``(III) for prevention services and assistance to 
                tribal families at risk of child abuse and neglect.

                ``(iii) Reports.--The Secretary may require a recipient 
            of funds awarded under this subparagraph to provide the 
            Secretary with such information as the Secretary deems 
            relevant to enable the Secretary to facilitate and oversee 
            the administration of any project for which funds are 
            provided under this subparagraph.
            ``(C) Limitation on use of funds for activities promoting 
        responsible fatherhood.--
                ``(i) In general.--Of the amounts made available under 
            subparagraph (D) for a fiscal year, the Secretary may not 
            award more than $50,000,000 on a competitive basis to 
            States, territories, Indian tribes and tribal 
            organizations, and public and nonprofit community entities, 
            including religious organizations, for activities promoting 
            responsible fatherhood.
                ``(ii) Activities promoting responsible fatherhood.--In 
            this paragraph, the term `activities promoting responsible 
            fatherhood' means the following:

                    ``(I) Activities to promote marriage or sustain 
                marriage through activities such as counseling, 
                mentoring, disseminating information about the benefits 
                of marriage and 2-parent involvement for children, 
                enhancing relationship skills, education regarding how 
                to control aggressive behavior, disseminating 
                information on the causes of domestic violence and 
                child abuse, marriage preparation programs, premarital 
                counseling, marital inventories, skills-based marriage 
                education, financial planning seminars, including 
                improving a family's ability to effectively manage 
                family business affairs by means such as education, 
                counseling, or mentoring on matters related to family 
                finances, including household management, budgeting, 
                banking, and handling of financial transactions and 
                home maintenance, and divorce education and reduction 
                programs, including mediation and counseling.
                    ``(II) Activities to promote responsible parenting 
                through activities such as counseling, mentoring, and 
                mediation, disseminating information about good 
                parenting practices, skills-based parenting education, 
                encouraging child support payments, and other methods.
                    ``(III) Activities to foster economic stability by 
                helping fathers improve their economic status by 
                providing activities such as work first services, job 
                search, job training, subsidized employment, job 
                retention, job enhancement, and encouraging education, 
                including career-advancing education, dissemination of 
                employment materials, coordination with existing 
                employment services such as welfare-to-work programs, 
                referrals to local employment training initiatives, and 
                other methods.
                    ``(IV) Activities to promote responsible fatherhood 
                that are conducted through a contract with a nationally 
                recognized, nonprofit fatherhood promotion 
                organization, such as the development, promotion, and 
                distribution of a media campaign to encourage the 
                appropriate involvement of parents in the life of any 
                child and specifically the issue of responsible 
                fatherhood, and the development of a national 
                clearinghouse to assist States and communities in 
                efforts to promote and support marriage and responsible 
                fatherhood.

            ``(D) Appropriation.--Out of any money in the Treasury of 
        the United States not otherwise appropriated, there are 
        appropriated $150,000,000 for each of fiscal years 2006 through 
        2010, for expenditure in accordance with this paragraph.''.
    (b) Counting of Spending on Certain Pro-Family Activities.--Section 
409(a)(7)(B)(i) (42 U.S.C. 609(a)(7)(B)(i)) is amended by adding at the 
end the following:

                    ``(V) Counting of spending on certain pro-family 
                activities.--The term `qualified State expenditures' 
                includes the total expenditures by the State during the 
                fiscal year under all State programs for a purpose 
                described in paragraph (3) or (4) of section 401(a).''.

                         Subtitle B--Child Care

SEC. 7201. ENTITLEMENT FUNDING.

    Section 418(a)(3) (42 U.S.C. 618(a)(3)) is amended--
        (1) by striking ``and'' at the end of subparagraph (E);
        (2) by striking the period at the end of subparagraph (F) and 
    inserting a semicolon; and
        (3) by adding at the end the following:
            ``(G) $2,917,000,000 for each of fiscal years 2006 through 
        2010.''.

                       Subtitle C--Child Support

SEC. 7301. ASSIGNMENT AND DISTRIBUTION OF CHILD SUPPORT.

    (a) Modification of Rule Requiring Assignment of Support Rights as 
a Condition of Receiving TANF.--Section 408(a)(3) (42 U.S.C. 608(a)(3)) 
is amended to read as follows:
        ``(3) No assistance for families not assigning certain support 
    rights to the state.--A State to which a grant is made under 
    section 403 shall require, as a condition of paying assistance to a 
    family under the State program funded under this part, that a 
    member of the family assign to the State any right the family 
    member may have (on behalf of the family member or of any other 
    person for whom the family member has applied for or is receiving 
    such assistance) to support from any other person, not exceeding 
    the total amount of assistance so paid to the family, which accrues 
    during the period that the family receives assistance under the 
    program.''.
    (b) Increasing Child Support Payments to Families and Simplifying 
Child Support Distribution Rules.--
        (1) Distribution rules.--
            (A) In general.--Section 457(a) (42 U.S.C. 657(a)) is 
        amended to read as follows:
    ``(a) In General.--Subject to subsections (d) and (e), the amounts 
collected on behalf of a family as support by a State pursuant to a 
plan approved under this part shall be distributed as follows:
        ``(1) Families receiving assistance.--In the case of a family 
    receiving assistance from the State, the State shall--
            ``(A) pay to the Federal Government the Federal share of 
        the amount collected, subject to paragraph (3)(A);
            ``(B) retain, or pay to the family, the State share of the 
        amount collected, subject to paragraph (3)(B); and
            ``(C) pay to the family any remaining amount.
        ``(2) Families that formerly received assistance.--In the case 
    of a family that formerly received assistance from the State:
            ``(A) Current support.--To the extent that the amount 
        collected does not exceed the current support amount, the State 
        shall pay the amount to the family.
            ``(B) Arrearages.--Except as otherwise provided in an 
        election made under section 454(34), to the extent that the 
        amount collected exceeds the current support amount, the 
        State--
                ``(i) shall first pay to the family the excess amount, 
            to the extent necessary to satisfy support arrearages not 
            assigned pursuant to section 408(a)(3);
                ``(ii) if the amount collected exceeds the amount 
            required to be paid to the family under clause (i), shall--

                    ``(I) pay to the Federal Government the Federal 
                share of the excess amount described in this clause, 
                subject to paragraph (3)(A); and
                    ``(II) retain, or pay to the family, the State 
                share of the excess amount described in this clause, 
                subject to paragraph (3)(B); and

                ``(iii) shall pay to the family any remaining amount.
        ``(3) Limitations.--
            ``(A) Federal reimbursements.--The total of the amounts 
        paid by the State to the Federal Government under paragraphs 
        (1) and (2) of this subsection with respect to a family shall 
        not exceed the Federal share of the amount assigned with 
        respect to the family pursuant to section 408(a)(3).
            ``(B) State reimbursements.--The total of the amounts 
        retained by the State under paragraphs (1) and (2) of this 
        subsection with respect to a family shall not exceed the State 
        share of the amount assigned with respect to the family 
        pursuant to section 408(a)(3).
        ``(4) Families that never received assistance.--In the case of 
    any other family, the State shall distribute to the family the 
    portion of the amount so collected that remains after withholding 
    any fee pursuant to section 454(6)(B)(ii).
        ``(5) Families under certain agreements.--Notwithstanding 
    paragraphs (1) through (3), in the case of an amount collected for 
    a family in accordance with a cooperative agreement under section 
    454(33), the State shall distribute the amount collected pursuant 
    to the terms of the agreement.''.
            (B) State option to pass through additional support with 
        federal financial participation beginning with fiscal year 
        2009.--
                (i) In general.--Section 457(a) (42 U.S.C. 657(a)) is 
            amended by adding at the end the following:
        ``(7) State option to pass through additional support with 
    federal financial participation.--
            ``(A) Families that formerly received assistance.--
        Notwithstanding paragraph (2), a State shall not be required to 
        pay to the Federal Government the Federal share of an amount 
        collected on behalf of a family that formerly received 
        assistance from the State to the extent that the State pays the 
        amount to the family.
            ``(B) Families that currently receive assistance.--
                ``(i) In general.--Notwithstanding paragraph (1), in 
            the case of a family that receives assistance from the 
            State, a State shall not be required to pay to the Federal 
            Government the Federal share of the excepted portion (as 
            defined in clause (ii)) of any amount collected on behalf 
            of such family during a month to the extent that--

                    ``(I) the State pays the excepted portion to the 
                family; and
                    ``(II) the excepted portion is disregarded in 
                determining the amount and type of assistance provided 
                to the family under such program.

                ``(ii) Excepted portion defined.--For purposes of this 
            subparagraph, the term ``excepted portion'' means that 
            portion of the amount collected on behalf of a family 
            during a month that does not exceed $100 per month, or in 
            the case of a family that includes 2 or more children, that 
            does not exceed an amount established by the State that is 
            not more than $200 per month.''.
                (ii) Effective date.--The amendment made by clause (i) 
            shall take effect on October 1, 2008.
                (iii) Redesignation.--Effective October 1, 2009, 
            paragraph (7) of section 457(a) of the Social Security Act 
            (as added by clause (i)) is redesignated as paragraph (6).
            (C) State plan to include election as to which rules to 
        apply in distributing child support arrearages collected on 
        behalf of families formerly receiving assistance.--Section 454 
        (42 U.S.C. 654) is amended--
                (i) by striking ``and'' at the end of paragraph (32);
                (ii) by striking the period at the end of paragraph 
            (33) and inserting ``; and''; and
                (iii) by inserting after paragraph (33) the following:
        ``(34) include an election by the State to apply section 
    457(a)(2)(B) of this Act or former section 457(a)(2)(B) of this Act 
    (as in effect for the State immediately before the date this 
    paragraph first applies to the State) to the distribution of the 
    amounts which are the subject of such sections and, for so long as 
    the State elects to so apply such former section, the amendments 
    made by subsection (b)(1) of section 7301 of the Deficit Reduction 
    Act of 2005 shall not apply with respect to the State, 
    notwithstanding subsection (e) of such section 7301.''.
        (2) Current support amount defined.--Section 457(c) (42 U.S.C. 
    657(c)) is amended by adding at the end the following:
        ``(5) Current support amount.--The term `current support 
    amount' means, with respect to amounts collected as support on 
    behalf of a family, the amount designated as the monthly support 
    obligation of the noncustodial parent in the order requiring the 
    support or calculated by the State based on the order.''.
    (c) State Option To Discontinue Older Support Assignments.--Section 
457(b) (42 U.S.C. 657(b)) is amended to read as follows:
    ``(b) Continuation of Assignments.--
        ``(1) State option to discontinue pre-1997 support 
    assignments.--
            ``(A) In general.--Any rights to support obligations 
        assigned to a State as a condition of receiving assistance from 
        the State under part A and in effect on September 30, 1997 (or 
        such earlier date on or after August 22, 1996, as the State may 
        choose), may remain assigned after such date.
            ``(B) Distribution of amounts after assignment 
        discontinuation.--If a State chooses to discontinue the 
        assignment of a support obligation described in subparagraph 
        (A), the State may treat amounts collected pursuant to the 
        assignment as if the amounts had never been assigned and may 
        distribute the amounts to the family in accordance with 
        subsection (a)(4).
        ``(2) State option to discontinue post-1997 assignments.--
            ``(A) In general.--Any rights to support obligations 
        accruing before the date on which a family first receives 
        assistance under part A that are assigned to a State under that 
        part and in effect before the implementation date of this 
        section may remain assigned after such date.
            ``(B) Distribution of amounts after assignment 
        discontinuation.--If a State chooses to discontinue the 
        assignment of a support obligation described in subparagraph 
        (A), the State may treat amounts collected pursuant to the 
        assignment as if the amounts had never been assigned and may 
        distribute the amounts to the family in accordance with 
        subsection (a)(4).''.
    (d) Conforming Amendments.--Section 6402(c) of the Internal Revenue 
Code of 1986 (relating to offset of past-due support against 
overpayments) is amended--
        (1) in the first sentence, by striking ``the Social Security 
    Act.'' and inserting ``of such Act.''; and
        (2) by striking the third sentence and inserting the following: 
    ``The Secretary shall apply a reduction under this subsection first 
    to an amount certified by the State as past due support under 
    section 464 of the Social Security Act before any other reductions 
    allowed by law.''.
    (e) Effective Date.--
        (1) In general.--Except as otherwise provided in this section, 
    the amendments made by the preceding provisions of this section 
    shall take effect on October 1, 2009, and shall apply to payments 
    under parts A and D of title IV of the Social Security Act for 
    calendar quarters beginning on or after such date, and without 
    regard to whether regulations to implement the amendments (in the 
    case of State programs operated under such part D) are promulgated 
    by such date.
        (2) State option to accelerate effective date.--Notwithstanding 
    paragraph (1), a State may elect to have the amendments made by the 
    preceding provisions of this section apply to the State and to 
    amounts collected by the State (and the payments under parts A and 
    D), on and after such date as the State may select that is not 
    earlier than October 1, 2008, and not later than September 30, 
    2009.
    (f) Use of Tax Refund Intercept Program To Collect Past-Due Child 
Support on Behalf of Children Who Are Not Minors.--
        (1) In general.--Section 464 (42 U.S.C. 664) is amended--
            (A) in subsection (a)(2)(A), by striking ``(as that term is 
        defined for purposes of this paragraph under subsection (c))''; 
        and
            (B) in subsection (c)--
                (i) in paragraph (1)--

                    (I) by striking ``(1) Except as provided in 
                paragraph (2), as used in'' and inserting ``In''; and
                    (II) by inserting ``(whether or not a minor)'' 
                after ``a child'' each place it appears; and

                (ii) by striking paragraphs (2) and (3).
        (2) Effective date.--The amendments made by paragraph (1) shall 
    take effect on October 1, 2007.
    (g) State Option To Use Statewide Automated Data Processing and 
Information Retrieval System for Interstate Cases.--Section 
466(a)(14)(A)(iii) (42 U.S.C. 666(a)(14)(A)(iii)) is amended by 
inserting before the semicolon the following: ``(but the assisting 
State may establish a corresponding case based on such other State's 
request for assistance)''.

SEC. 7302. MANDATORY REVIEW AND ADJUSTMENT OF CHILD SUPPORT ORDERS FOR 
              FAMILIES RECEIVING TANF.

    (a) In General.--Section 466(a)(10)(A)(i) (42 U.S.C. 
666(a)(10)(A)(i)) is amended--
        (1) by striking ``parent, or,'' and inserting ``parent or''; 
    and
        (2) by striking ``upon the request of the State agency under 
    the State plan or of either parent,''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
take effect on October 1, 2007.

SEC. 7303. DECREASE IN AMOUNT OF CHILD SUPPORT ARREARAGE TRIGGERING 
              PASSPORT DENIAL.

    (a) In General.--Section 452(k)(1) (42 U.S.C. 652(k)(1)) is amended 
by striking ``$5,000'' and inserting ``$2,500''.
    (b) Conforming Amendment.--Section 454(31) (42 U.S.C. 654(31)) is 
amended by striking ``$5,000'' and inserting ``$2,500''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on October 1, 2006.

SEC. 7304. MAINTENANCE OF TECHNICAL ASSISTANCE FUNDING.

    Section 452(j) (42 U.S.C. 652(j)) is amended by inserting ``or the 
amount appropriated under this paragraph for fiscal year 2002, 
whichever is greater'' before ``, which shall be available''.

SEC. 7305. MAINTENANCE OF FEDERAL PARENT LOCATOR SERVICE FUNDING.

    Section 453(o) (42 U.S.C. 653(o)) is amended--
        (1) in the first sentence, by inserting ``or the amount 
    appropriated under this paragraph for fiscal year 2002, whichever 
    is greater'' before ``, which shall be available''; and
        (2) in the second sentence, by striking ``for each of fiscal 
    years 1997 through 2001''.

SEC. 7306. INFORMATION COMPARISONS WITH INSURANCE DATA.

    (a) Duties of the Secretary.--Section 452 (42 U.S.C. 652) is 
amended by adding at the end the following:
    ``(l) Comparisons With Insurance Information.--
        ``(1) In general.--The Secretary, through the Federal Parent 
    Locator Service, may--
            ``(A) compare information concerning individuals owing 
        past-due support with information maintained by insurers (or 
        their agents) concerning insurance claims, settlements, awards, 
        and payments; and
            ``(B) furnish information resulting from the data matches 
        to the State agencies responsible for collecting child support 
        from the individuals.
        ``(2) Liability.--An insurer (including any agent of an 
    insurer) shall not be liable under any Federal or State law to any 
    person for any disclosure provided for under this subsection, or 
    for any other action taken in good faith in accordance with this 
    subsection.''.
    (b) State Reimbursement of Federal Costs.--Section 453(k)(3) (42 
U.S.C. 653(k)(3)) is amended by inserting ``or section 452(l)'' after 
``pursuant to this section''.

SEC. 7307. REQUIREMENT THAT STATE CHILD SUPPORT ENFORCEMENT AGENCIES 
              SEEK MEDICAL SUPPORT FOR CHILDREN FROM EITHER PARENT.

    (a) State Agencies Required To Seek Medical Support From Either 
Parent.--
        (1) In general.--Section 466(a)(19)(A) (42 U.S.C. 
    666(a)(19)(A)) is amended by striking ``which include a provision 
    for the health care coverage of the child are enforced'' and 
    inserting ``shall include a provision for medical support for the 
    child to be provided by either or both parents, and shall be 
    enforced''.
        (2) Conforming amendments.--
            (A) Title iv-d.--
                (i) Section 452(f) (42 U.S.C. 652(f)) is amended by 
            striking ``include medical support as part of any child 
            support order and enforce medical support'' and inserting 
            ``enforce medical support included as part of a child 
            support order''.
                (ii) Section 466(a)(19) (42 U.S.C. 666(a)(19)), as 
            amended by paragraph (1) of this subsection, is amended--

                    (I) in subparagraph (A)--

                        (aa) by striking ``section 401(e)(3)(C)'' and 
                    inserting ``section 401(e)''; and
                        (bb) by striking ``section 401(f)(5)(C)'' and 
                    inserting ``section 401(f)'';

                    (II) in subparagraph (B)--

                        (aa) by striking ``noncustodial'' each place it 
                    appears; and
                        (bb) in clause (iii), by striking ``section 
                    466(b)'' and inserting ``subsection (b)''; and

                    (III) in subparagraph (C), by striking 
                ``noncustodial'' each place it appears and inserting 
                ``obligated''.

            (B) State or local governmental group health plans.--
        Section 401(e)(2) of the Child Support Performance and 
        Incentive Act of 1998 (29 U.S.C. 1169 note) is amended, in the 
        matter preceding subparagraph (A), by striking ``who is a 
        noncustodial parent of the child''.
            (C) Church plans.--Section 401(f)(5)(C) of the Child 
        Support Performance and Incentive Act of 1998 (29 U.S.C. 1169 
        note) is amended by striking ``noncustodial'' each place it 
        appears.
    (b) Enforcement of Medical Support Requirements.--Section 452(f) 
(42 U.S.C. 652(f)), as amended by subsection (a)(2)(A)(i), is amended 
by inserting after the first sentence the following: ``A State agency 
administering the program under this part may enforce medical support 
against a custodial parent if health care coverage is available to the 
custodial parent at a reasonable cost, notwithstanding any other 
provision of this part.''.
    (c) Definition of Medical Support.--Section 452(f) (42 U.S.C. 
652(f)), as amended by subsections (a)(2)(A)(i) and (b) of this 
section, is amended by adding at the end the following: ``For purposes 
of this part, the term `medical support' may include health care 
coverage, such as coverage under a health insurance plan (including 
payment of costs of premiums, co-payments, and deductibles) and payment 
for medical expenses incurred on behalf of a child.''.

SEC. 7308. REDUCTION OF FEDERAL MATCHING RATE FOR LABORATORY COSTS 
              INCURRED IN DETERMINING PATERNITY.

    (a) In General.--Section 455(a)(1)(C) (42 U.S.C. 655(a)(1)(C)) is 
amended by striking ``90 percent (rather than the percentage specified 
in subparagraph (A))'' and inserting ``66 percent''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
take effect on October 1, 2006, and shall apply to costs incurred on or 
after that date.

SEC. 7309. ENDING FEDERAL MATCHING OF STATE SPENDING OF FEDERAL 
              INCENTIVE PAYMENTS.

    (a) In General.--Section 455(a)(1) (42 U.S.C. 655(a)(1)) is amended 
by inserting ``from amounts paid to the State under section 458 or'' 
before ``to carry out an agreement''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
take effect on October 1, 2007.

SEC. 7310. MANDATORY FEE FOR SUCCESSFUL CHILD SUPPORT COLLECTION FOR 
              FAMILY THAT HAS NEVER RECEIVED TANF.

    (a) In General.--Section 454(6)(B) (42 U.S.C. 654(6)(B)) is 
amended--
        (1) by inserting ``(i)'' after ``(B)'';
        (2) by redesignating clauses (i) and (ii) as subclauses (I) and 
    (II), respectively;
        (3) by adding ``and'' after the semicolon; and
        (4) by adding after and below the end the following new clause:
            ``(ii) in the case of an individual who has never received 
        assistance under a State program funded under part A and for 
        whom the State has collected at least $500 of support, the 
        State shall impose an annual fee of $25 for each case in which 
        services are furnished, which shall be retained by the State 
        from support collected on behalf of the individual (but not 
        from the first $500 so collected), paid by the individual 
        applying for the services, recovered from the absent parent, or 
        paid by the State out of its own funds (the payment of which 
        from State funds shall not be considered as an administrative 
        cost of the State for the operation of the plan, and the fees 
        shall be considered income to the program);''.
    (b) Conforming Amendments.--Section 457(a)(3) (42 U.S.C. 657(a)(3)) 
is amended to read as follows:
        ``(3) Families that never received assistance.--In the case of 
    any other family, the State shall distribute to the family the 
    portion of the amount so collected that remains after withholding 
    any fee pursuant to section 454(6)(B)(ii).''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on October 1, 2006.

SEC. 7311. EXCEPTION TO GENERAL EFFECTIVE DATE FOR STATE PLANS 
              REQUIRING STATE LAW AMENDMENTS.

    In the case of a State plan under part D of title IV of the Social 
Security Act which the Secretary determines requires State legislation 
in order for the plan to meet the additional requirements imposed by 
the amendments made by this subtitle, the effective date of the 
amendments imposing the additional requirements shall be 3 months after 
the first day of the first calendar quarter beginning after the close 
of the first regular session of the State legislature that begins after 
the date of the enactment of this Act. For purposes of the preceding 
sentence, in the case of a State that has a 2-year legislative session, 
each year of the session shall be considered to be a separate regular 
session of the State legislature.

                       Subtitle D--Child Welfare

SEC. 7401. STRENGTHENING COURTS.

    (a) Court Improvement Grants.--
        (1) In general.--Section 438(a) (42 U.S.C. 629h(a)) is 
    amended--
            (A) by striking ``and'' at the end of paragraph (1);
            (B) by striking the period at the end of paragraph (2) and 
        inserting a semicolon; and
            (C) by adding at the end the following:
        ``(3) to ensure that the safety, permanence, and well-being 
    needs of children are met in a timely and complete manner; and
        ``(4) to provide for the training of judges, attorneys and 
    other legal personnel in child welfare cases.''.
        (2) Applications.--Section 438(b) (42 U.S.C. 629h(b)) is 
    amended to read as follows:
    ``(b) Applications.--
        ``(1) In general.--In order to be eligible to receive a grant 
    under this section, a highest State court shall submit to the 
    Secretary an application at such time, in such form, and including 
    such information and assurances as the Secretary may require, 
    including--
            ``(A) in the case of a grant for the purpose described in 
        subsection (a)(3), a description of how courts and child 
        welfare agencies on the local and State levels will collaborate 
        and jointly plan for the collection and sharing of all relevant 
        data and information to demonstrate how improved case tracking 
        and analysis of child abuse and neglect cases will produce safe 
        and timely permanency decisions;
            ``(B) in the case of a grant for the purpose described in 
        subsection (a)(4), a demonstration that a portion of the grant 
        will be used for cross-training initiatives that are jointly 
        planned and executed with the State agency or any other agency 
        under contract with the State to administer the State program 
        under the State plan under subpart 1, the State plan approved 
        under section 434, or the State plan approved under part E; and
            ``(C) in the case of a grant for any purpose described in 
        subsection (a), a demonstration of meaningful and ongoing 
        collaboration among the courts in the State, the State agency 
        or any other agency under contract with the State who is 
        responsible for administering the State program under part B or 
        E, and, where applicable, Indian tribes.
        ``(2) Separate applications.--A highest State court desiring 
    grants under this section for 2 or more purposes shall submit 
    separate applications for the following grants:
            ``(A) A grant for the purposes described in paragraphs (1) 
        and (2) of subsection (a).
            ``(B) A grant for the purpose described in subsection 
        (a)(3).
            ``(C) A grant for the purpose described in subsection 
        (a)(4).''.
        (3) Allotments.--Section 438(c) (42 U.S.C. 429h(c)) is 
    amended--
            (A) in paragraph (1)--
                (i) by inserting ``of this section for a grant 
            described in subsection (b)(2)(A) of this section'' after 
            ``subsection (b)''; and
                (ii) by striking ``paragraph (2) of this subsection'' 
            and inserting ``subparagraph (B) of this paragraph'';
            (B) in paragraph (2)--
                (i) by striking ``this paragraph'' and inserting ``this 
            subparagraph'';
                (ii) by striking ``paragraph (1) of this subsection'' 
            and inserting ``subparagraph (A) of this paragraph''; and
                (iii) by inserting ``for such a grant'' after 
            ``subsection (b)'';
            (C) by redesignating and indenting paragraphs (1) and (2) 
        as subparagraphs (A) and (B), respectively;
            (D) by inserting before and above such subparagraph (A) the 
        following:
        ``(1) Grants to assess and improve handling of court 
    proceedings relating to foster care and adoption.--''; and
            (E) by adding at the end the following:
        ``(2) Grants for improved data collection and training.--
            ``(A) In general.--Each highest State court which has an 
        application approved under subsection (b) of this section for a 
        grant referred to in subparagraph (B) or (C) of subsection 
        (b)(2) shall be entitled to payment, for each of fiscal years 
        2006 through 2010, from the amount made available under 
        whichever of paragraph (1) or (2) of subsection (e) applies 
        with respect to the grant, of an amount equal to the sum of 
        $85,000 plus the amount described in subparagraph (B) of this 
        paragraph for the fiscal year with respect to the grant.
            ``(B) Formula.--The amount described in this subparagraph 
        for any fiscal year with respect to a grant referred to in 
        subparagraph (B) or (C) of subsection (b)(2) is the amount that 
        bears the same ratio to the amount made available under 
        subsection (e) for such a grant (reduced by the dollar amount 
        specified in subparagraph (A) of this paragraph) as the number 
        of individuals in the State who have not attained 21 years of 
        age bears to the total number of such individuals in all States 
        the highest State courts of which have approved applications 
        under subsection (b) for such a grant.''.
        (4) Funding.--Section 438 (42 U.S.C. 629h) is amended by adding 
    at the end the following:
    ``(e) Funding for Grants for Improved Data Collection and 
Training.--Out of any money in the Treasury of the United States not 
otherwise appropriated, there are appropriated to the Secretary, for 
each of fiscal years 2006 through 2010--
        ``(1) $10,000,000 for grants referred to in subsection 
    (b)(2)(B); and
        ``(2) $10,000,000 for grants referred to in subsection 
    (b)(2)(C).''.
    (b) Requirement To Demonstrate Meaningful Collaboration Between 
Courts and Agencies in Child Welfare Services Programs.--Section 422(b) 
(42 U.S.C. 622(b)) is amended--
        (1) by striking ``and'' at the end of paragraph (13);
        (2) by striking the period at the end of paragraph (14) and 
    inserting ``; and''; and
        (3) by adding at the end the following:
        ``(15) demonstrate substantial, ongoing, and meaningful 
    collaboration with State courts in the development and 
    implementation of the State plan under subpart 1, the State plan 
    approved under subpart 2, and the State plan approved under part E, 
    and in the development and implementation of any program 
    improvement plan required under section 1123A.''.
    (c) Use of Child Welfare Records in State Court Proceedings.--
Section 471 (42 U.S.C. 671) is amended--
        (1) in subsection (a)(8), by inserting ``subject to subsection 
    (c),'' after ``(8)''; and
        (2) by adding at the end the following:
    ``(c) Use of Child Welfare Records in State Court Proceedings.--
Subsection (a)(8) shall not be construed to limit the flexibility of a 
State in determining State policies relating to public access to court 
proceedings to determine child abuse and neglect or other court 
hearings held pursuant to part B or this part, except that such 
policies shall, at a minimum, ensure the safety and well-being of the 
child, parents, and family.''.

SEC. 7402. FUNDING OF SAFE AND STABLE FAMILIES PROGRAMS.

    Section 436(a) (42 U.S.C. 629f(a)) is amended to read as follows:
    ``(a) Authorization.--In addition to any amount otherwise made 
available to carry out this subpart, there are authorized to be 
appropriated to carry out this subpart $345,000,000 for fiscal year 
2006. Notwithstanding the preceding sentence, the total amount 
authorized to be so appropriated for fiscal year 2006 under this 
subsection and under this subsection (as in effect before the date of 
the enactment of the Deficit Reduction Act of 2005) is $345,000,000.''.

SEC. 7403. CLARIFICATION REGARDING FEDERAL MATCHING OF CERTAIN 
              ADMINISTRATIVE COSTS UNDER THE FOSTER CARE MAINTENANCE 
              PAYMENTS PROGRAM.

    (a) Administrative Costs Relating to Unlicensed Care.--Section 472 
(42 U.S.C. 672) is amended by inserting after subsection (h) the 
following:
    ``(i) Administrative Costs Associated With Otherwise Eligible 
Children Not in Licensed Foster Care Settings.--Expenditures by a State 
that would be considered administrative expenditures for purposes of 
section 474(a)(3) if made with respect to a child who was residing in a 
foster family home or child-care institution shall be so considered 
with respect to a child not residing in such a home or institution--
        ``(1) in the case of a child who has been removed in accordance 
    with subsection (a) of this section from the home of a relative 
    specified in section 406(a) (as in effect on July 16, 1996), only 
    for expenditures--
            ``(A) with respect to a period of not more than the lesser 
        of 12 months or the average length of time it takes for the 
        State to license or approve a home as a foster home, in which 
        the child is in the home of a relative and an application is 
        pending for licensing or approval of the home as a foster 
        family home; or
            ``(B) with respect to a period of not more than 1 calendar 
        month when a child moves from a facility not eligible for 
        payments under this part into a foster family home or child 
        care institution licensed or approved by the State; and
        ``(2) in the case of any other child who is potentially 
    eligible for benefits under a State plan approved under this part 
    and at imminent risk of removal from the home, only if--
            ``(A) reasonable efforts are being made in accordance with 
        section 471(a)(15) to prevent the need for, or if necessary to 
        pursue, removal of the child from the home; and
            ``(B) the State agency has made, not less often than every 
        6 months, a determination (or redetermination) as to whether 
        the child remains at imminent risk of removal from the home.''.
    (b) Conforming Amendment.--Section 474(a)(3) (42 U.S.C. 674(a)(3)) 
is amended by inserting ``subject to section 472(i)'' before ``an 
amount equal to''.

SEC. 7404. CLARIFICATION OF ELIGIBILITY FOR FOSTER CARE MAINTENANCE 
              PAYMENTS AND ADOPTION ASSISTANCE.

    (a) Foster Care Maintenance Payments.--Section 472(a) (42 U.S.C. 
672(a)) is amended to read as follows:
    ``(a) In General.--
        ``(1) Eligibility.--Each State with a plan approved under this 
    part shall make foster care maintenance payments on behalf of each 
    child who has been removed from the home of a relative specified in 
    section 406(a) (as in effect on July 16, 1996) into foster care 
    if--
            ``(A) the removal and foster care placement met, and the 
        placement continues to meet, the requirements of paragraph (2); 
        and
            ``(B) the child, while in the home, would have met the AFDC 
        eligibility requirement of paragraph (3).
        ``(2) Removal and foster care placement requirements.--The 
    removal and foster care placement of a child meet the requirements 
    of this paragraph if--
            ``(A) the removal and foster care placement are in 
        accordance with--
                ``(i) a voluntary placement agreement entered into by a 
            parent or legal guardian of the child who is the relative 
            referred to in paragraph (1); or
                ``(ii) a judicial determination to the effect that 
            continuation in the home from which removed would be 
            contrary to the welfare of the child and that reasonable 
            efforts of the type described in section 471(a)(15) for a 
            child have been made;
            ``(B) the child's placement and care are the responsibility 
        of--
                ``(i) the State agency administering the State plan 
            approved under section 471; or
                ``(ii) any other public agency with which the State 
            agency administering or supervising the administration of 
            the State plan has made an agreement which is in effect; 
            and
            ``(C) the child has been placed in a foster family home or 
        child-care institution.
        ``(3) AFDC eligibility requirement.--
            ``(A) In general.--A child in the home referred to in 
        paragraph (1) would have met the AFDC eligibility requirement 
        of this paragraph if the child--
                ``(i) would have received aid under the State plan 
            approved under section 402 (as in effect on July 16, 1996) 
            in the home, in or for the month in which the agreement was 
            entered into or court proceedings leading to the 
            determination referred to in paragraph (2)(A)(ii) of this 
            subsection were initiated; or
                ``(ii)(I) would have received the aid in the home, in 
            or for the month referred to in clause (i), if application 
            had been made therefor; or
                ``(II) had been living in the home within 6 months 
            before the month in which the agreement was entered into or 
            the proceedings were initiated, and would have received the 
            aid in or for such month, if, in such month, the child had 
            been living in the home with the relative referred to in 
            paragraph (1) and application for the aid had been made.
            ``(B) Resources determination.--For purposes of 
        subparagraph (A), in determining whether a child would have 
        received aid under a State plan approved under section 402 (as 
        in effect on July 16, 1996), a child whose resources 
        (determined pursuant to section 402(a)(7)(B), as so in effect) 
        have a combined value of not more than $10,000 shall be 
        considered a child whose resources have a combined value of not 
        more than $1,000 (or such lower amount as the State may 
        determine for purposes of section 402(a)(7)(B)).
        ``(4) Eligibility of certain alien children.--Subject to title 
    IV of the Personal Responsibility and Work Opportunity 
    Reconciliation Act of 1996, if the child is an alien disqualified 
    under section 245A(h) or 210(f) of the Immigration and Nationality 
    Act from receiving aid under the State plan approved under section 
    402 in or for the month in which the agreement described in 
    paragraph (2)(A)(i) was entered into or court proceedings leading 
    to the determination described in paragraph (2)(A)(ii) were 
    initiated, the child shall be considered to satisfy the 
    requirements of paragraph (3), with respect to the month, if the 
    child would have satisfied the requirements but for the 
    disqualification.''.
    (b) Adoption Assistance.--Section 473(a)(2) (42 U.S.C. 673(a)(2)) 
is amended to read as follows:
    ``(2)(A) For purposes of paragraph (1)(B)(ii), a child meets the 
requirements of this paragraph if the child--
        ``(i)(I)(aa) was removed from the home of a relative specified 
    in section 406(a) (as in effect on July 16, 1996) and placed in 
    foster care in accordance with a voluntary placement agreement with 
    respect to which Federal payments are provided under section 474 
    (or section 403, as such section was in effect on July 16, 1996), 
    or in accordance with a judicial determination to the effect that 
    continuation in the home would be contrary to the welfare of the 
    child; and
        ``(bb) met the requirements of section 472(a)(3) with respect 
    to the home referred to in item (aa) of this subclause;
        ``(II) meets all of the requirements of title XVI with respect 
    to eligibility for supplemental security income benefits; or
        ``(III) is a child whose costs in a foster family home or 
    child-care institution are covered by the foster care maintenance 
    payments being made with respect to the minor parent of the child 
    as provided in section 475(4)(B); and
        ``(ii) has been determined by the State, pursuant to subsection 
    (c) of this section, to be a child with special needs.
    ``(B) Section 472(a)(4) shall apply for purposes of subparagraph 
(A) of this paragraph, in any case in which the child is an alien 
described in such section.
    ``(C) A child shall be treated as meeting the requirements of this 
paragraph for the purpose of paragraph (1)(B)(ii) if the child--
        ``(i) meets the requirements of subparagraph (A)(ii);
        ``(ii) was determined eligible for adoption assistance payments 
    under this part with respect to a prior adoption;
        ``(iii) is available for adoption because--
            ``(I) the prior adoption has been dissolved, and the 
        parental rights of the adoptive parents have been terminated; 
        or
            ``(II) the child's adoptive parents have died; and
        ``(iv) fails to meet the requirements of subparagraph (A) but 
    would meet such requirements if--
            ``(I) the child were treated as if the child were in the 
        same financial and other circumstances the child was in the 
        last time the child was determined eligible for adoption 
        assistance payments under this part; and
            ``(II) the prior adoption were treated as never having 
        occurred.''.

                Subtitle E--Supplemental Security Income

SEC. 7501. REVIEW OF STATE AGENCY BLINDNESS AND DISABILITY 
              DETERMINATIONS.

     Section 1633 (42 U.S.C. 1383b) is amended by adding at the end the 
following:
    ``(e)(1) The Commissioner of Social Security shall review 
determinations, made by State agencies pursuant to subsection (a) in 
connection with applications for benefits under this title on the basis 
of blindness or disability, that individuals who have attained 18 years 
of age are blind or disabled as of a specified onset date. The 
Commissioner of Social Security shall review such a determination 
before any action is taken to implement the determination.
    ``(2)(A) In carrying out paragraph (1), the Commissioner of Social 
Security shall review--
        ``(i) at least 20 percent of all determinations referred to in 
    paragraph (1) that are made in fiscal year 2006;
        ``(ii) at least 40 percent of all such determinations that are 
    made in fiscal year 2007; and
        ``(iii) at least 50 percent of all such determinations that are 
    made in fiscal year 2008 or thereafter.
    ``(B) In carrying out subparagraph (A), the Commissioner of Social 
Security shall, to the extent feasible, select for review the 
determinations which the Commissioner of Social Security identifies as 
being the most likely to be incorrect.''.

SEC. 7502. PAYMENT OF CERTAIN LUMP SUM BENEFITS IN INSTALLMENTS UNDER 
              THE SUPPLEMENTAL SECURITY INCOME PROGRAM.

    (a) In General.--Section 1631(a)(10)(A)(i) (42 U.S.C. 
1383(a)(10)(A)(i)) is amended by striking ``12'' and inserting ``3''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
take effect 3 months after the date of the enactment of this Act.

       Subtitle F--Repeal of Continued Dumping and Subsidy Offset

SEC. 7601. REPEAL OF CONTINUED DUMPING AND SUBSIDY OFFSET.

    (a) Repeal.--Effective upon the date of enactment of this Act, 
section 754 of the Tariff Act of 1930 (19 U.S.C. 1675c), and the item 
relating to section 754 in the table of contents of title VII of that 
Act, are repealed.
    (b) Distributions on Certain Entries.--All duties on entries of 
goods made and filed before October 1, 2007, that would, but for 
subsection (a) of this section, be distributed under section 754 of the 
Tariff Act of 1930, shall be distributed as if section 754 of the 
Tariff Act of 1930 had not been repealed by subsection (a).

                       Subtitle G--Effective Date

SEC. 7701. EFFECTIVE DATE.

    Except as otherwise provided in this title, this title and the 
amendments made by this title shall take effect as if enacted on 
October 1, 2005.

          TITLE VIII--EDUCATION AND PENSION BENEFIT PROVISIONS
                Subtitle A--Higher Education Provisions

SEC. 8001. SHORT TITLE; REFERENCE; EFFECTIVE DATE.

    (a) Short Title.--This subtitle may be cited as the ``Higher 
Education Reconciliation Act of 2005''.
    (b) References.--Except as otherwise expressly provided, whenever 
in this subtitle an amendment or repeal is expressed in terms of an 
amendment to, or repeal of, a section or other provision, the reference 
shall be considered to be made to a section or other provision of the 
Higher Education Act of 1965 (20 U.S.C. 1001 et seq.).
    (c) Effective Date.--Except as otherwise provided in this subtitle 
or the amendments made by this subtitle, the amendments made by this 
subtitle shall be effective July 1, 2006.

SEC. 8002. MODIFICATION OF 50/50 RULE.

    Section 102(a)(3) (20 U.S.C. 1002(a)(3)) is amended--
        (1) in subparagraph (A), by inserting ``(excluding courses 
    offered by telecommunications as defined in section 484(l)(4))'' 
    after ``courses by correspondence''; and
        (2) in subparagraph (B), by inserting ``(excluding courses 
    offered by telecommunications as defined in section 484(l)(4))'' 
    after ``correspondence courses''.

SEC. 8003. ACADEMIC COMPETITIVENESS GRANTS.

    Subpart 1 of part A of title IV (20 U.S.C. 1070a) is amended by 
adding after section 401 the following new section:

``SEC. 401A. ACADEMIC COMPETITIVENESS GRANTS.

    ``(a) Academic Competitiveness Grant Program.--
        ``(1) Academic competitiveness grants authorized.--The 
    Secretary shall award grants, in the amounts specified in 
    subsection (d)(1), to eligible students to assist the eligible 
    students in paying their college education expenses.
        ``(2) Academic competitiveness council.--
            ``(A) Establishment.--There is established an Academic 
        Competitiveness Council (referred to in this paragraph as the 
        `Council'). From the funds made available under subsection (e) 
        for fiscal year 2006, $50,000 shall be available to the Council 
        to carry out the duties described in subparagraph (B). The 
        Council shall be chaired by the Secretary of Education, and the 
        membership of the Council shall consist of officials from 
        Federal agencies with responsibilities for managing existing 
        Federal programs that promote mathematics and science (or 
        designees of such officials with significant decision-making 
        authority).
            ``(B) Duties.--The Council shall--
                ``(i) identify all Federal programs with a mathematics 
            or science focus;
                ``(ii) identify the target populations being served by 
            such programs;
                ``(iii) determine the effectiveness of such programs;
                ``(iv) identify areas of overlap or duplication in such 
            programs; and
                ``(v) recommend ways to efficiently integrate and 
            coordinate such programs.
            ``(C) Report.--Not later than one year after the date of 
        enactment of the Higher Education Reconciliation Act of 2005, 
        the Council shall transmit a report to each committee of 
        Congress with jurisdiction over a Federal program identified 
        under subparagraph (B)(i), detailing the findings and 
        recommendations under subparagraph (B), including 
        recommendations for legislative or administrative action.
    ``(b) Designation.--A grant under this section--
        ``(1) for the first or second academic year of a program of 
    undergraduate education shall be known as an `Academic 
    Competitiveness Grant'; and
        ``(2) for the third or fourth academic year of a program of 
    undergraduate education shall be known as a `National Science and 
    Mathematics Access to Retain Talent Grant' or a `National SMART 
    Grant'.
    ``(c) Definition of Eligible Student.--In this section the term 
`eligible student' means a full-time student who, for the academic year 
for which the determination of eligibility is made--
        ``(1) is a citizen of the United States;
        ``(2) is eligible for a Federal Pell Grant; and
        ``(3) in the case of a student enrolled or accepted for 
    enrollment in--
            ``(A) the first academic year of a program of undergraduate 
        education at a two- or four-year degree-granting institution of 
        higher education--
                ``(i) has successfully completed, after January 1, 
            2006, a rigorous secondary school program of study 
            established by a State or local educational agency and 
            recognized as such by the Secretary; and
                ``(ii) has not been previously enrolled in a program of 
            undergraduate education;
            ``(B) the second academic year of a program of 
        undergraduate education at a two- or four-year degree-granting 
        institution of higher education--
                ``(i) has successfully completed, after January 1, 
            2005, a rigorous secondary school program of study 
            established by a State or local educational agency and 
            recognized as such by the Secretary; and
                ``(ii) has obtained a cumulative grade point average of 
            at least 3.0 (or the equivalent as determined under 
            regulations prescribed by the Secretary) at the end of the 
            first academic year of such program of undergraduate 
            education; or
            ``(C) the third or fourth academic year of a program of 
        undergraduate education at a four-year degree-granting 
        institution of higher education--
                ``(i) is pursuing a major in--

                    ``(I) the physical, life, or computer sciences, 
                mathematics, technology, or engineering (as determined 
                by the Secretary pursuant to regulations); or
                    ``(II) a foreign language that the Secretary, in 
                consultation with the Director of National 
                Intelligence, determines is critical to the national 
                security of the United States; and

                ``(ii) has obtained a cumulative grade point average of 
            at least 3.0 (or the equivalent as determined under 
            regulations prescribed by the Secretary) in the coursework 
            required for the major described in clause (i).
    ``(d) Grant Award.--
        ``(1) Amounts.--
            ``(A) The Secretary shall award a grant under this section 
        in the amount of--
                ``(i) $750 for an eligible student under subsection 
            (c)(3)(A);
                ``(ii) $1,300 for an eligible student under subsection 
            (c)(3)(B); or
                ``(iii) $4,000 for an eligible student under subsection 
            (c)(3)(C).
            ``(B) Notwithstanding subparagraph (A)--
                ``(i) the amount of such grant, in combination with the 
            Federal Pell Grant assistance and other student financial 
            assistance available to such student, shall not exceed the 
            student's cost of attendance;
                ``(ii) if the amount made available under subsection 
            (e) for any fiscal year is less than the amount required to 
            be provided grants to all eligible students in the amounts 
            determined under subparagraph (A) and clause (i) of this 
            subparagraph, then the amount of the grant to each eligible 
            student shall be ratably reduced; and
                ``(iii) if additional amounts are appropriated for any 
            such fiscal year, such reduced amounts shall be increased 
            on the same basis as they were reduced.
        ``(2) Limitations.--The Secretary shall not award a grant under 
    this section--
            ``(A) to any student for an academic year of a program of 
        undergraduate education described in subparagraph (A), (B), or 
        (C) of subsection (c)(3) for which the student received credit 
        before the date of enactment of the Higher Education 
        Reconciliation Act of 2005; or
            ``(B) to any student for more than--
                ``(i) one academic year under subsection (c)(3)(A);
                ``(ii) one academic year under subsection (c)(3)(B); or
                ``(iii) two academic years under subsection (c)(3)(C).
    ``(e) Funding.--
        ``(1) Authorization and appropriation of funds.--There are 
    authorized to be appropriated, and there are appropriated, out of 
    any money in the Treasury not otherwise appropriated, for the 
    Department of Education to carry out this section--
            ``(A) $790,000,000 for fiscal year 2006;
            ``(B) $850,000,000 for fiscal year 2007;
            ``(C) $920,000,000 for fiscal year 2008;
            ``(D) $960,000,000 for fiscal year 2009; and
            ``(E) $1,010,000,000 for fiscal year 2010.
        ``(2) Use of excess funds.--If, at the end of a fiscal year, 
    the funds available for awarding grants under this section exceed 
    the amount necessary to make such grants in the amounts authorized 
    by subsection (d), then all of the excess funds shall remain 
    available for awarding grants under this section during the 
    subsequent fiscal year.
    ``(f) Recognition of Programs of Study.--The Secretary shall 
recognize at least one rigorous secondary school program of study in 
each State under subsection (c)(3)(A) and (B) for the purpose of 
determining student eligibility under such subsection.
    ``(g) Sunset Provision.--The authority to make grants under this 
section shall expire at the end of academic year 2010-2011.''.

SEC. 8004. REAUTHORIZATION OF FEDERAL FAMILY EDUCATION LOAN PROGRAM.

    (a) Authorization of Appropriations.--Section 421(b)(5) (20 U.S.C. 
1071(b)(5)) is amended by striking ``an administrative cost allowance'' 
and inserting ``a loan processing and issuance fee''.
    (b) Extension of Authority.--
        (1) Federal insurance limitations.--Section 424(a) (20 U.S.C. 
    1074(a)) is amended--
            (A) by striking ``2004'' and inserting ``2012''; and
            (B) by striking ``2008'' and inserting ``2016''.
        (2) Guaranteed loans.--Section 428(a)(5) (20 U.S.C. 1078(a)(5)) 
    is amended--
            (A) by striking ``2004'' and inserting ``2012''; and
            (B) by striking ``2008'' and inserting ``2016''.
        (3) Consolidation loans.--Section 428C(e) (20 U.S.C. 1078-3(e)) 
    is amended by striking ``2004'' and inserting ``2012''.

SEC. 8005. LOAN LIMITS.

    (a) Federal Insurance Limits.--Section 425(a)(1)(A) (20 U.S.C. 
1075(a)(1)(A)) is amended--
        (1) in clause (i)(I), by striking ``$2,625'' and inserting 
    ``$3,500''; and
        (2) in clause (ii)(I), by striking ``$3,500'' and inserting 
    ``$4,500''.
    (b) Guarantee Limits.--Section 428(b)(1)(A) (20 U.S.C. 
1078(b)(1)(A)) is amended--
        (1) in clause (i)(I), by striking ``$2,625'' and inserting 
    ``$3,500''; and
        (2) in clause (ii)(I), by striking ``$3,500'' and inserting 
    ``$4,500''.
    (c) Federal PLUS Loans.--Section 428B (20 U.S.C. 1078-2) is 
amended--
        (1) in subsection (a)(1)--
            (A) in the matter preceding subparagraph (A), by striking 
        ``Parents'' and inserting ``A graduate or professional student 
        or the parents'';
            (B) in subparagraph (A), by striking ``the parents'' and 
        inserting ``the graduate or professional student or the 
        parents''; and
            (C) in subparagraph (B), by striking ``the parents'' and 
        inserting ``the graduate or professional student or the 
        parents'';
        (2) in subsection (b), by striking ``any parent'' and inserting 
    ``any graduate or professional student or any parent'';
        (3) in subsection (c)(2), by striking ``parent'' and inserting 
    ``graduate or professional student or parent''; and
        (4) in subsection (d)(1), by striking ``the parent'' and 
    inserting ``the graduate or professional student or the parent''.
    (d) Unsubsidized Stafford Loans for Graduate or Professional 
Students.--Section 428H(d)(2) (20 U.S.C. 1078-8(d)(2)) is amended--
        (1) in subparagraph (C), by striking ``$10,000'' and inserting 
    ``$12,000''; and
        (2) in subparagraph (D)--
            (A) in clause (i), by striking ``$5,000'' and inserting 
        ``$7,000''; and
            (B) in clause (ii), by striking ``$5,000'' and inserting 
        ``$7,000''.
    (e) Effective Date of Increases.--The amendments made by 
subsections (a), (b), and (d) shall be effective July 1, 2007.

SEC. 8006. PLUS LOAN INTEREST RATES AND ZERO SPECIAL ALLOWANCE PAYMENT.

    (a) PLUS Loans.--Section 427A(l)(2) (20 U.S.C. 1077a(l)(2)) is 
amended by striking ``7.9 percent'' and inserting ``8.5 percent''.
    (b) Conforming Amendments for Special Allowances.--
        (1) Amendments.--Subparagraph (I) of section 438(b)(2) (20 
    U.S.C. 1087-1(b)(2)) is amended--
            (A) in clause (iii), by striking ``, subject to clause (v) 
        of this subparagraph'';
            (B) in clause (iv), by striking ``, subject to clause (vi) 
        of this subparagraph''; and
            (C) by striking clauses (v), (vi), and (vii) and inserting 
        the following:
                ``(v) Recapture of excess interest.--

                    ``(I) Excess credited.--With respect to a loan on 
                which the applicable interest rate is determined under 
                subsection (k) or (l) of section 427A and for which the 
                first disbursement of principal is made on or after 
                April 1, 2006, if the applicable interest rate for any 
                3-month period exceeds the special allowance support 
                level applicable to such loan under this subparagraph 
                for such period, then an adjustment shall be made by 
                calculating the excess interest in the amount computed 
                under subclause (II) of this clause, and by crediting 
                the excess interest to the Government not less often 
                than annually.
                    ``(II) Calculation of excess.--The amount of any 
                adjustment of interest on a loan to be made under this 
                subsection for any quarter shall be equal to--

                        ``(aa) the applicable interest rate minus the 
                    special allowance support level determined under 
                    this subparagraph; multiplied by
                        ``(bb) the average daily principal balance of 
                    the loan (not including unearned interest added to 
                    principal) during such calendar quarter; divided by
                        ``(cc) four.

                    ``(III) Special allowance support level.--For 
                purposes of this clause, the term `special allowance 
                support level' means, for any loan, a number expressed 
                as a percentage equal to the sum of the rates 
                determined under subclauses (I) and (III) of clause 
                (i), and applying any substitution rules applicable to 
                such loan under clauses (ii), (iii), and (iv) in 
                determining such sum.''.

        (2) Effective date.--The amendments made by this subsection 
    shall not apply with respect to any special allowance payment made 
    under section 438 of the Higher Education Act of 1965 (20 U.S.C. 
    1087-1) before April 1, 2006.

SEC. 8007. DEFERMENT OF STUDENT LOANS FOR MILITARY SERVICE.

    (a) Federal Family Education Loans.--Section 428(b)(1)(M) (20 
U.S.C. 1078(b)(1)(M)) is amended--
        (1) by striking ``or'' at the end of clause (ii);
        (2) by redesignating clause (iii) as clause (iv); and
        (3) by inserting after clause (ii) the following new clause:
                ``(iii) not in excess of 3 years during which the 
            borrower--

                    ``(I) is serving on active duty during a war or 
                other military operation or national emergency; or
                    ``(II) is performing qualifying National Guard duty 
                during a war or other military operation or national 
                emergency; or''.

    (b) Direct Loans.--Section 455(f)(2) (20 U.S.C. 1087e(f)(2)) is 
amended--
        (1) by redesignating subparagraph (C) as subparagraph (D); and
        (2) by inserting after subparagraph (B) the following new 
    subparagraph:
            ``(C) not in excess of 3 years during which the borrower--
                ``(i) is serving on active duty during a war or other 
            military operation or national emergency; or
                ``(ii) is performing qualifying National Guard duty 
            during a war or other military operation or national 
            emergency; or''.
    (c) Perkins Loans.--Section 464(c)(2)(A) (20 U.S.C. 
1087dd(c)(2)(A)) is amended--
        (1) by redesignating clauses (iii) and (iv) as clauses (iv) and 
    (v), respectively; and
        (2) by inserting after clause (ii) the following new clause:
                ``(iii) not in excess of 3 years during which the 
            borrower--

                    ``(I) is serving on active duty during a war or 
                other military operation or national emergency; or
                    ``(II) is performing qualifying National Guard duty 
                during a war or other military operation or national 
                emergency;''.

    (d) Definitions.--Section 481 (20 U.S.C. 1088) is amended by adding 
at the end the following new subsection:
    ``(d) Definitions for Military Deferments.--For purposes of parts 
B, D, and E of this title:
        ``(1) Active duty.--The term `active duty' has the meaning 
    given such term in section 101(d)(1) of title 10, United States 
    Code, except that such term does not include active duty for 
    training or attendance at a service school.
        ``(2) Military operation.--The term `military operation' means 
    a contingency operation as such term is defined in section 
    101(a)(13) of title 10, United States Code.
        ``(3) National emergency.--The term `national emergency' means 
    the national emergency by reason of certain terrorist attacks 
    declared by the President on September 14, 2001, or subsequent 
    national emergencies declared by the President by reason of 
    terrorist attacks.
        ``(4) Serving on active duty.--The term `serving on active duty 
    during a war or other military operation or national emergency' 
    means service by an individual who is--
            ``(A) a Reserve of an Armed Force ordered to active duty 
        under section 12301(a), 12301(g), 12302, 12304, or 12306 of 
        title 10, United States Code, or any retired member of an Armed 
        Force ordered to active duty under section 688 of such title, 
        for service in connection with a war or other military 
        operation or national emergency, regardless of the location at 
        which such active duty service is performed; and
            ``(B) any other member of an Armed Force on active duty in 
        connection with such emergency or subsequent actions or 
        conditions who has been assigned to a duty station at a 
        location other than the location at which such member is 
        normally assigned.
        ``(5) Qualifying national guard duty.--The term `qualifying 
    National Guard duty during a war or other military operation or 
    national emergency' means service as a member of the National Guard 
    on full-time National Guard duty (as defined in section 101(d)(5) 
    of title 10, United States Code) under a call to active service 
    authorized by the President or the Secretary of Defense for a 
    period of more than 30 consecutive days under section 502(f) of 
    title 32, United States Code, in connection with a war, other 
    military operation, or a national emergency declared by the 
    President and supported by Federal funds.''.
    (e) Rule of Construction.--Nothing in the amendments made by this 
section shall be construed to authorize any refunding of any repayment 
of a loan.
    (f) Effective Date.--The amendments made by this section shall 
apply with respect to loans for which the first disbursement is made on 
or after July 1, 2001.

SEC. 8008. ADDITIONAL LOAN TERMS AND CONDITIONS.

    (a) Disbursement.--Section 428(b)(1)(N) (20 U.S.C. 1078(b)(1)(N)) 
is amended--
        (1) by striking ``or'' at the end of clause (i); and
        (2) by striking clause (ii) and inserting the following:
                ``(ii) in the case of a student who is studying outside 
            the United States in a program of study abroad that is 
            approved for credit by the home institution at which such 
            student is enrolled, and only after verification of the 
            student's enrollment by the lender or guaranty agency, are, 
            at the request of the student, disbursed directly to the 
            student by the means described in clause (i), unless such 
            student requests that the check be endorsed, or the funds 
            transfer be authorized, pursuant to an authorized power-of-
            attorney; or
                ``(iii) in the case of a student who is studying 
            outside the United States in a program of study at an 
            eligible foreign institution, are, at the request of the 
            foreign institution, disbursed directly to the student, 
            only after verification of the student's enrollment by the 
            lender or guaranty agency by the means described in clause 
            (i).''.
    (b) Repayment Plans: Direct Loans.--Section 455(d)(1) (20 U.S.C. 
1087e(d)(1)) is amended by striking subparagraphs (A), (B), and (C) and 
inserting the following:
            ``(A) a standard repayment plan, consistent with subsection 
        (a)(1) of this section and with section 428(b)(9)(A)(i);
            ``(B) a graduated repayment plan, consistent with section 
        428(b)(9)(A)(ii);
            ``(C) an extended repayment plan, consistent with section 
        428(b)(9)(A)(v), except that the borrower shall annually repay 
        a minimum amount determined by the Secretary in accordance with 
        section 428(b)(1)(L); and''.
    (c) Origination Fees.--
        (1) FFEL program.--Paragraph (2) of section 438(c) (20 U.S.C. 
    1087-1(c)) is amended--
            (A) by striking the designation and heading of such 
        paragraph and inserting the following:
        ``(2) Amount of origination fees.--
            ``(A) In general.--''; and
            (B) by adding at the end the following new subparagraph:
            ``(B) Subsequent reductions.--Subparagraph (A) shall be 
        applied to loans made under this part (other than loans made 
        under sections 428C and 439(o))--
                ``(i) by substituting `2.0 percent' for `3.0 percent' 
            with respect to loans for which the first disbursement of 
            principal is made on or after July 1, 2006, and before July 
            1, 2007;
                ``(ii) by substituting `1.5 percent' for `3.0 percent' 
            with respect to loans for which the first disbursement of 
            principal is made on or after July 1, 2007, and before July 
            1, 2008;
                ``(iii) by substituting `1.0 percent' for `3.0 percent' 
            with respect to loans for which the first disbursement of 
            principal is made on or after July 1, 2008, and before July 
            1, 2009;
                ``(iv) by substituting `0.5 percent' for `3.0 percent' 
            with respect to loans for which the first disbursement of 
            principal is made on or after July 1, 2009, and before July 
            1, 2010; and
                ``(v) by substituting `0.0 percent' for `3.0 percent' 
            with respect to loans for which the first disbursement of 
            principal is made on or after July 1, 2010.''.
        (2) Direct loan program.--Subsection (c) of section 455 (20 
    U.S.C. 1087e(c)) is amended--
            (A) by striking ``(c) Loan Fee.--'' and inserting the 
        following:
    ``(c) Loan Fee.--
        ``(1) In general.--''; and
            (B) by adding at the end the following:
        ``(2) Subsequent reduction.--Paragraph (1) shall be applied to 
    loans made under this part, other than Federal Direct Consolidation 
    loans and Federal Direct PLUS loans--
            ``(A) by substituting `3.0 percent' for `4.0 percent' with 
        respect to loans for which the first disbursement of principal 
        is made on or after the date of enactment of the Higher 
        Education Reconciliation Act of 2005, and before July 1, 2007;
            ``(B) by substituting `2.5 percent' for `4.0 percent' with 
        respect to loans for which the first disbursement of principal 
        is made on or after July 1, 2007, and before July 1, 2008;
            ``(C) by substituting `2.0 percent' for `4.0 percent' with 
        respect to loans for which the first disbursement of principal 
        is made on or after July 1, 2008, and before July 1, 2009;
            ``(D) by substituting `1.5 percent' for `4.0 percent' with 
        respect to loans for which the first disbursement of principal 
        is made on or after July 1, 2009, and before July 1, 2010; and
            ``(E) by substituting `1.0 percent' for `4.0 percent' with 
        respect to loans for which the first disbursement of principal 
        is made on or after July 1, 2010.''.
        (3) Conforming amendment.--Section 455(b)(8)(A) (20 U.S.C. 
    1087e(b)(8)(A)) is amended by inserting ``or origination fee'' 
    after ``reductions in the interest rate''.

SEC. 8009. CONSOLIDATION LOAN CHANGES.

    (a) Consolidation Between Programs.--Section 428C (20 U.S.C. 1078-
3) is amended--
        (1) in subsection (a)(3)(B)(i)--
            (A) by inserting ``or under section 455(g)'' after ``under 
        this section'' both places it appears;
            (B) by inserting ``under both sections'' after 
        ``terminates'';
            (C) by striking ``and'' at the end of subclause (III);
            (D) by striking the period at the end of subclause (IV) and 
        inserting ``; and''; and
            (E) by adding at the end the following new subclause:
            ``(V) an individual may obtain a subsequent consolidation 
        loan under section 455(g) only for the purposes of obtaining an 
        income contingent repayment plan, and only if the loan has been 
        submitted to the guaranty agency for default aversion.''; and
        (2) in subsection (b)(5), by striking the first sentence and 
    inserting the following: ``In the event that a lender with an 
    agreement under subsection (a)(1) of this section denies a 
    consolidation loan application submitted to the lender by an 
    eligible borrower under this section, or denies an application 
    submitted to the lender by such a borrower for a consolidation loan 
    with income-sensitive repayment terms, the Secretary shall offer 
    any such borrower who applies for it, a Federal Direct 
    Consolidation loan. The Secretary shall offer such a loan to a 
    borrower who has defaulted, for the purpose of resolving the 
    default.''.
    (b) Repeal of In-School Consolidation.--
        (1) Definition of repayment period.--Section 428(b)(7)(A) (20 
    U.S.C. 1078(b)(7)(A)) is amended by striking ``shall begin--'' and 
    all that follows through ``earlier date.'' and inserting the 
    following: ``shall begin the day after 6 months after the date the 
    student ceases to carry at least one-half the normal full-time 
    academic workload (as determined by the institution).''.
        (2) Conforming change to eligible borrower definition.--Section 
    428C(a)(3)(A)(ii)(I) (20 U.S.C. 1078-3(a)(3)(A)(ii)(I)) is amended 
    by inserting ``as determined under section 428(b)(7)(A)'' after 
    ``repayment status''.
    (c) Additional Amendments.--Section 428C (20 U.S.C. 1078-3) is 
amended in subsection (a)(3), by striking subparagraph (C).
    (d) Conforming Amendments to Direct Loan Program.--Section 455 (20 
U.S.C. 1087e) is amended--
        (1) in subsection (a)(1) by inserting ``428C,'' after 
    ``428B,'';
        (2) in subsection (a)(2)--
            (A) by striking ``and'' at the end of subparagraph (B);
            (B) by redesignating subparagraph (C) as subparagraph (D); 
        and
            (C) by inserting after subparagraph (B) the following:
            ``(C) section 428C shall be known as `Federal Direct 
        Consolidation Loans'; and ''; and
        (3) in subsection (g)--
            (A) by striking the second sentence; and
            (B) by adding at the end the following new sentences: ``To 
        be eligible for a consolidation loan under this part, a 
        borrower shall meet the eligibility criteria set forth in 
        section 428C(a)(3). The Secretary, upon application for such a 
        loan, shall comply with the requirements applicable to a lender 
        under section 428C(b)(1)(F).''.

SEC. 8010. REQUIREMENTS FOR DISBURSEMENTS OF STUDENT LOANS.

    Section 428G (20 U.S.C. 1078-7) is amended--
        (1) in subsection (a)(3), by adding at the end the following: 
    ``Notwithstanding section 422(d) of the Higher Education Amendments 
    of 1998, this paragraph shall be effective beginning on the date of 
    enactment of the Higher Education Reconciliation Act of 2005.'';
        (2) in subsection (b)(1), by adding at the end the following: 
    ``Notwithstanding section 422(d) of the Higher Education Amendments 
    of 1998, the second sentence of this paragraph shall be effective 
    beginning on the date of enactment of the Higher Education 
    Reconciliation Act of 2005.''; and
        (3) in subsection (e), by striking ``, made to a student to 
    cover the cost of attendance at an eligible institution outside the 
    United States''.

SEC. 8011. SCHOOL AS LENDER.

    Paragraph (2) of section 435(d) (20 U.S.C. 1085(d)(2)) is amended 
to read as follows:
        ``(2) Requirements for eligible institutions.--
            ``(A) In general.--To be an eligible lender under this 
        part, an eligible institution--
                ``(i) shall employ at least one person whose full-time 
            responsibilities are limited to the administration of 
            programs of financial aid for students attending such 
            institution;
                ``(ii) shall not be a home study school;
                ``(iii) shall not--

                    ``(I) make a loan to any undergraduate student;
                    ``(II) make a loan other than a loan under section 
                428 or 428H to a graduate or professional student; or
                    ``(III) make a loan to a borrower who is not 
                enrolled at that institution;

                ``(iv) shall award any contract for financing, 
            servicing, or administration of loans under this title on a 
            competitive basis;
                ``(v) shall offer loans that carry an origination fee 
            or an interest rate, or both, that are less than such fee 
            or rate authorized under the provisions of this title;
                ``(vi) shall not have a cohort default rate (as defined 
            in section 435(m)) greater than 10 percent;
                ``(vii) shall, for any year for which the institution 
            engages in activities as an eligible lender, provide for a 
            compliance audit conducted in accordance with section 
            428(b)(1)(U)(iii)(I), and the regulations thereunder, and 
            submit the results of such audit to the Secretary;
                ``(viii) shall use any proceeds from special allowance 
            payments and interest payments from borrowers, interest 
            subsidies received from the Department of Education, and 
            any proceeds from the sale or other disposition of loans, 
            for need-based grant programs; and
                ``(ix) shall have met the requirements of subparagraphs 
            (A) through (F) of this paragraph as in effect on the day 
            before the date of enactment of the Higher Education 
            Reconciliation Act of 2005, and made loans under this part, 
            on or before April 1, 2006.
            ``(B) Administrative expenses.--An eligible lender under 
        subparagraph (A) shall be permitted to use a portion of the 
        proceeds described in subparagraph (A)(viii) for reasonable and 
        direct administrative expenses.
            ``(C) Supplement, not supplant.--An eligible lender under 
        subparagraph (A) shall ensure that the proceeds described in 
        subparagraph (A)(viii) are used to supplement, and not to 
        supplant, non-Federal funds that would otherwise be used for 
        need-based grant programs.''.

SEC. 8012. REPAYMENT BY THE SECRETARY OF LOANS OF BANKRUPT, DECEASED, 
              OR DISABLED BORROWERS; TREATMENT OF BORROWERS ATTENDING 
              SCHOOLS THAT FAIL TO PROVIDE A REFUND, ATTENDING CLOSED 
              SCHOOLS, OR FALSELY CERTIFIED AS ELIGIBLE TO BORROW.

    Section 437 (20 U.S.C. 1087) is amended--
        (1) in the section heading, by striking ``CLOSED SCHOOLS OR 
    FALSELY CERTIFIED AS ELIGIBLE TO BORROW'' and inserting ``SCHOOLS 
    THAT FAIL TO PROVIDE A REFUND, ATTENDING CLOSED SCHOOLS, OR FALSELY 
    CERTIFIED AS ELIGIBLE TO BORROW''; and
        (2) in the first sentence of subsection (c)(1), by inserting 
    ``or was falsely certified as a result of a crime of identity 
    theft'' after ``falsely certified by the eligible institution''.

SEC. 8013. ELIMINATION OF TERMINATION DATES FROM TAXPAYER-TEACHER 
              PROTECTION ACT OF 2004.

    (a) Extension of Limitations on Special Allowance for Loans From 
the Proceeds of Tax Exempt Issues.--Section 438(b)(2)(B) (20 U.S.C. 
1087-1(b)(2)(B)) is amended--
        (1) in clause (iv), by striking ``and before January 1, 
    2006,''; and
        (2) in clause (v)(II)--
            (A) by striking ``and before January 1, 2006,'' each place 
        it appears in divisions (aa) and (bb); and
            (B) by striking ``, and before January 1, 2006'' in 
        division (cc).
    (b) Additional Limitation on Special Allowance for Loans From the 
Proceeds of Tax Exempt Issues.--Section 438(b)(2)(B) (20 U.S.C 1087-
1(b)(2)(B)) is further amended by adding at the end thereof the 
following new clauses:
        ``(vi) Notwithstanding clauses (i), (ii), and (v), but subject 
    to clause (vii), the quarterly rate of the special allowance shall 
    be the rate determined under subparagraph (A), (E), (F), (G), (H), 
    or (I) of this paragraph, as the case may be, for a holder of 
    loans--
            ``(I) that were made or purchased on or after the date of 
        enactment of the Higher Education Reconciliation Act of 2005; 
        or
            ``(II) that were not earning a quarterly rate of special 
        allowance determined under clauses (i) or (ii) of subparagraph 
        (B) of this paragraph (20 U.S.C. 1087-1(b)(2)(b)) as of the 
        date of enactment of the Higher Education Reconciliation Act of 
        2005.
        ``(vii) Clause (vi) shall be applied by substituting `December 
    31, 2010' for `the date of enactment of the Higher Education 
    Reconciliation Act of 2005' in the case of a holder of loans that--
            ``(I) was, as of the date of enactment of the Higher 
        Education Reconciliation Act of 2005, and during the quarter 
        for which the special allowance is paid, a unit of State or 
        local government or a nonprofit private entity;
            ``(II) was, as of such date of enactment, and during such 
        quarter, not owned or controlled by, or under common ownership 
        or control with, a for-profit entity; and
            ``(III) held, directly or through any subsidiary, 
        affiliate, or trustee, a total unpaid balance of principal 
        equal to or less than $100,000,000 on loans for which special 
        allowances were paid under this subparagraph in the most recent 
        quarterly payment prior to September 30, 2005.''.
    (c) Elimination of Effective Date Limitation on Higher Teacher Loan 
Forgiveness Benefits.--
        (1) Technical clarification.--The matter preceding paragraph 
    (1) of section 2 of the Taxpayer-Teacher Protection Act of 2004 
    (Public Law 108-409; 118 Stat. 2299) is amended by inserting ``of 
    the Higher Education Act of 1965'' after ``Section 438(b)(2)(B)''.
        (2) Amendment.--Paragraph (3) of section 3(b) of the Taxpayer-
    Teacher Protection Act of 2004 (20 U.S.C. 1078-10 note) is amended 
    by striking ``, and before October 1, 2005''.
        (3) Effective dates.--The amendment made by paragraph (1) shall 
    be effective as if enacted on October 30, 2004, and the amendment 
    made by paragraph (2) shall be effective as if enacted on October 
    1, 2005.
    (d) Coordination With Second Higher Education Extension Act of 
2005.--
        (1) Repeal.--Section 2 of the Second Higher Education Extension 
    Act of 2005 is amended by striking subsections (b) and (c).
        (2) Effect on amendments.--The amendments made by subsections 
    (a) and (c) of this section shall be effective as if the amendments 
    made in subsections (b) and (c) of section 2 of the Second Higher 
    Education Extension Act of 2005 had not been enacted.
    (e) Additional Changes to Teacher Loan Forgiveness Provisions.--
        (1) FFEL provisions.--Section 428J (20 U.S.C. 1078-10) is 
    amended--
            (A) in subsection (b)(1)(B), by inserting after ``1965'' 
        the following: ``, or meets the requirements of subsection 
        (g)(3)''; and
            (B) in subsection (g), by adding at the end the following 
        new paragraph:
        ``(3) Private school teachers.--An individual who is employed 
    as a teacher in a private school and is exempt from State 
    certification requirements (unless otherwise applicable under State 
    law), may, in lieu of the requirement of subsection (b)(1)(B), have 
    such employment treated as qualifying employment under this section 
    if such individual is permitted to and does satisfy rigorous 
    subject knowledge and skills tests by taking competency tests in 
    the applicable grade levels and subject areas. For such purposes, 
    the competency tests taken by such a private school teacher shall 
    be recognized by 5 or more States for the purpose of fulfilling the 
    highly qualified teacher requirements under section 9101 of the 
    Elementary and Secondary Education Act of 1965, and the score 
    achieved by such teacher on each test shall equal or exceed the 
    average passing score of those 5 States.''.
        (2) Direct loan provisions.--Section 460 (20 U.S.C. 1087j) is 
    amended--
            (A) in subsection (b)(1)(A)(ii), by inserting after 
        ``1965'' the following: ``, or meets the requirements of 
        subsection (g)(3)''; and
            (B) in subsection (g), by adding at the end the following 
        new paragraph:
        ``(3) Private school teachers.--An individual who is employed 
    as a teacher in a private school and is exempt from State 
    certification requirements (unless otherwise applicable under State 
    law), may, in lieu of the requirement of subsection (b)(1)(A)(ii), 
    have such employment treated as qualifying employment under this 
    section if such individual is permitted to and does satisfy 
    rigorous subject knowledge and skills tests by taking competency 
    tests in the applicable grade levels and subject areas. For such 
    purposes, the competency tests taken by such a private school 
    teacher shall be recognized by 5 or more States for the purpose of 
    fulfilling the highly qualified teacher requirements under section 
    9101 of the Elementary and Secondary Education Act of 1965, and the 
    score achieved by such teacher on each test shall equal or exceed 
    the average passing score of those 5 States.''.

SEC. 8014. ADDITIONAL ADMINISTRATIVE PROVISIONS.

    (a) Insurance Percentage.--
        (1) Amendment.--Subparagraph (G) of section 428(b)(1) (20 
    U.S.C. 1078(b)(1)(G)) is amended to read as follows:
            ``(G) insures 98 percent of the unpaid principal of loans 
        insured under the program, except that--
                ``(i) such program shall insure 100 percent of the 
            unpaid principal of loans made with funds advanced pursuant 
            to section 428(j) or 439(q);
                ``(ii) for any loan for which the first disbursement of 
            principal is made on or after July 1, 2006, the preceding 
            provisions of this subparagraph shall be applied by 
            substituting `97 percent' for `98 percent'; and
                ``(iii) notwithstanding the preceding provisions of 
            this subparagraph, such program shall insure 100 percent of 
            the unpaid principal amount of exempt claims as defined in 
            subsection (c)(1)(G);''.
        (2) Effective date of amendment.--The amendment made by this 
    subsection shall apply with respect to loans for which the first 
    disbursement of principal is made on or after July 1, 2006.
    (b) Federal Default Fees.--
        (1) In general.--Subparagraph (H) of section 428(b)(1) (20 
    U.S.C. 1078(b)(1)(H)) is amended to read as follows:
            ``(H) provides--
                ``(i) for loans for which the date of guarantee of 
            principal is before July 1, 2006, for the collection of a 
            single insurance premium equal to not more than 1.0 percent 
            of the principal amount of the loan, by deduction 
            proportionately from each installment payment of the 
            proceeds of the loan to the borrower, and ensures that the 
            proceeds of the premium will not be used for incentive 
            payments to lenders; or
                ``(ii) for loans for which the date of guarantee of 
            principal is on or after July 1, 2006, for the collection, 
            and the deposit into the Federal Student Loan Reserve Fund 
            under section 422A of a Federal default fee of an amount 
            equal to 1.0 percent of the principal amount of the loan, 
            which fee shall be collected either by deduction from the 
            proceeds of the loan or by payment from other non-Federal 
            sources, and ensures that the proceeds of the Federal 
            default fee will not be used for incentive payments to 
            lenders;''.
        (2) Unsubsidized loans.--Section 428H(h) (20 U.S.C. 1078-8(h)) 
    is amended by adding at the end the following new sentences: 
    ``Effective for loans for which the date of guarantee of principal 
    is on or after July 1, 2006, in lieu of the insurance premium 
    authorized under the preceding sentence, each State or nonprofit 
    private institution or organization having an agreement with the 
    Secretary under section 428(b)(1) shall collect and deposit into 
    the Federal Student Loan Reserve Fund under section 422A, a Federal 
    default fee of an amount equal to 1.0 percent of the principal 
    amount of the loan, which fee shall be collected either by 
    deduction from the proceeds of the loan or by payment from other 
    non-Federal sources. The Federal default fee shall not be used for 
    incentive payments to lenders.''.
        (3) Voluntary flexible agreements.--Section 428A(a)(1) (20 
    U.S.C. 1078-1(a)(1)) is amended--
            (A) by striking ``or'' at the end of subparagraph (A);
            (B) by striking the period at the end of subparagraph (B) 
        and inserting ``; or''; and
            (C) by adding at the end the following new subparagraph:
            ``(C) the Federal default fee required by section 
        428(b)(1)(H) and the second sentence of section 428H(h).''.
    (c) Treatment of Exempt Claims.--
        (1) Amendment.--Section 428(c)(1) (20 U.S.C. 1078(c)(1)) is 
    amended--
            (A) by redesignating subparagraph (G) as subparagraph (H), 
        and moving such subparagraph 2 em spaces to the left; and
            (B) by inserting after subparagraph (F) the following new 
        subparagraph:
        ``(G)(i) Notwithstanding any other provisions of this section, 
    in the case of exempt claims, the Secretary shall apply the 
    provisions of--
            ``(I) the fourth sentence of subparagraph (A) by 
        substituting `100 percent' for `95 percent';
            ``(II) subparagraph (B)(i) by substituting `100 percent' 
        for `85 percent'; and
            ``(III) subparagraph (B)(ii) by substituting `100 percent' 
        for `75 percent'.
        ``(ii) For purposes of clause (i) of this subparagraph, the 
    term `exempt claims' means claims with respect to loans for which 
    it is determined that the borrower (or the student on whose behalf 
    a parent has borrowed), without the lender's or the institution's 
    knowledge at the time the loan was made, provided false or 
    erroneous information or took actions that caused the borrower or 
    the student to be ineligible for all or a portion of the loan or 
    for interest benefits thereon.''.
        (2) Effective date of amendments.--The amendments made by this 
    subsection shall apply with respect to loans for which the first 
    disbursement of principal is made on or after July 1, 2006.
    (d) Consolidation of Defaulted Loans.--Section 428(c) (20 U.S.C. 
1078(c)) is further amended--
        (1) in paragraph (2)(A)--
            (A) by inserting ``(i)'' after ``including''; and
            (B) by inserting before the semicolon at the end the 
        following: ``and (ii) requirements establishing procedures to 
        preclude consolidation lending from being an excessive 
        proportion of guaranty agency recoveries on defaulted loans 
        under this part'';
        (2) in paragraph (2)(D), by striking ``paragraph (6)'' and 
    inserting ``paragraph (6)(A)''; and
        (3) in paragraph (6)--
            (A) by redesignating subparagraphs (A) and (B) as clauses 
        (i) and (ii), respectively;
            (B) by inserting ``(A)'' before ``For the purpose of 
        paragraph (2)(D),''; and
            (C) by adding at the end the following new subparagraphs:
        ``(B) A guaranty agency shall--
            ``(i) on or after October 1, 2006--
                ``(I) not charge the borrower collection costs in an 
            amount in excess of 18.5 percent of the outstanding 
            principal and interest of a defaulted loan that is paid off 
            through consolidation by the borrower under this title; and
                ``(II) remit to the Secretary a portion of the 
            collection charge under subclause (I) equal to 8.5 percent 
            of the outstanding principal and interest of such defaulted 
            loan; and
            ``(ii) on and after October 1, 2009, remit to the Secretary 
        the entire amount charged under clause (i)(I) with respect to 
        each defaulted loan that is paid off with excess consolidation 
        proceeds.
        ``(C) For purposes of subparagraph (B), the term `excess 
    consolidation proceeds' means, with respect to any guaranty agency 
    for any Federal fiscal year beginning on or after October 1, 2009, 
    the proceeds of consolidation of defaulted loans under this title 
    that exceed 45 percent of the agency's total collections on 
    defaulted loans in such Federal fiscal year.''.
    (e) Documentation of Forbearance Agreements.--Section 428(c) (20 
U.S.C. 1078(c)) is further amended--
        (1) in paragraph (3)(A)(i)--
            (A) by striking ``in writing''; and
            (B) by inserting ``and documented in accordance with 
        paragraph (10)'' after ``approval of the insurer''; and
        (2) by adding at the end the following new paragraph:
        ``(10) Documentation of forbearance agreements.--For the 
    purposes of paragraph (3), the terms of forbearance agreed to by 
    the parties shall be documented by confirming the agreement of the 
    borrower by notice to the borrower from the lender, and by 
    recording the terms in the borrower's file.''.
    (f) Voluntary Flexible Agreements.--Section 428A(a) (20 U.S.C. 
1078-1(a)) is further amended--
        (1) in paragraph (1)(B), by striking ``unless the Secretary'' 
    and all that follows through ``designated guarantor'';
        (2) by striking paragraph (2);
        (3) by redesignating paragraph (3) as paragraph (2); and
        (4) by striking paragraph (4).
    (g) Fraud; Repayment Required.--Section 428B(a)(1) (20 U.S.C. 1078-
2(a)(1)) is further amended--
        (1) by striking ``and'' at the end of subparagraph (A);
        (2) by redesignating subparagraph (B) as subparagraph (C); and
        (3) by inserting after subparagraph (A) the following new 
    subparagraph:
            ``(B) in the case of a graduate or professional student or 
        parent who has been convicted of, or has pled nolo contendere 
        or guilty to, a crime involving fraud in obtaining funds under 
        this title, such graduate or professional student or parent has 
        completed the repayment of such funds to the Secretary, or to 
        the holder in the case of a loan under this title obtained by 
        fraud; and''.
    (h) Default Reduction Program.--Section 428F(a)(1) (20 U.S.C. 1078-
6(a)(1)) is amended--
        (1) in subparagraph (A), by striking ``consecutive payments for 
    12 months'' and inserting ``9 payments made within 20 days of the 
    due date during 10 consecutive months'';
        (2) by redesignating subparagraph (C) as subparagraph (D); and
        (3) by inserting after subparagraph (B) the following new 
    subparagraph:
            ``(C) A guaranty agency may charge the borrower and retain 
        collection costs in an amount not to exceed 18.5 percent of the 
        outstanding principal and interest at the time of sale of a 
        loan rehabilitated under subparagraph (A).''.
    (i) Exceptional Performance Insurance Rate.--Section 428I(b)(1) (20 
U.S.C. 1078-9(b)(1)) is amended--
        (1) in the heading, by striking ``100 percent'' and inserting 
    ``99 percent''; and
        (2) by striking ``100 percent of the unpaid'' and inserting 
    ``99 percent of the unpaid''.
    (j) Uniform Administrative and Claims Procedure.--Section 
432(l)(1)(H) (20 U.S.C. 1082(l)(1)(H)) is amended by inserting ``and 
anticipated graduation date'' after ``status change''.
        (1) Section 428(a)(3)(A)(v) (20 U.S.C. 1078(a)(3)(A)(v)) is 
    amended--
            (A) by striking ``or'' at the end of subclause (I);
            (B) by striking the period at the end of subclause (II) and 
        inserting ``; or''; and
            (C) by adding after subclause (II) the following new 
        subclause:
            ``(III) in the case of a loan disbursed through an escrow 
        agent, 3 days before the first disbursement of the loan.''.
        (2) Section 428(c)(1)(A) (20 U.S.C. 1078(c)(1)(A)) is amended 
    by striking ``45 days'' in the last sentence and inserting ``30 
    days''.
        (3) Section 428(i)(1) (20 U.S.C. 1078(i)(1)) is amended by 
    striking ``21 days'' in the third sentence and inserting ``10 
    days''.

SEC. 8015. FUNDS FOR ADMINISTRATIVE EXPENSES.

    Section 458 is amended to read as follows:

``SEC. 458. FUNDS FOR ADMINISTRATIVE EXPENSES.

    ``(a) Administrative Expenses.--
        ``(1) Mandatory funds for fiscal year 2006.--For fiscal year 
    2006, there shall be available to the Secretary, from funds not 
    otherwise appropriated, funds to be obligated for--
            ``(A) administrative costs under this part and part B, 
        including the costs of the direct student loan programs under 
        this part; and
            ``(B) account maintenance fees payable to guaranty agencies 
        under part B and calculated in accordance with subsections (b) 
        and (c),
    not to exceed (from such funds not otherwise appropriated) 
    $820,000,000 in fiscal year 2006.
        ``(2) Authorization for administrative costs beginning in 
    fiscal years 2007 through 2011.--For each of the fiscal years 2007 
    through 2011, there are authorized to be appropriated such sums as 
    may be necessary for administrative costs under this part and part 
    B, including the costs of the direct student loan programs under 
    this part.
        ``(3) Continuing mandatory funds for account maintenance 
    fees.--For each of the fiscal years 2007 through 2011, there shall 
    be available to the Secretary, from funds not otherwise 
    appropriated, funds to be obligated for account maintenance fees 
    payable to guaranty agencies under part B and calculated in 
    accordance with subsection (b).
        ``(4) Account maintenance fees.--Account maintenance fees under 
    paragraph (3) shall be paid quarterly and deposited in the Agency 
    Operating Fund established under section 422B.
        ``(5) Carryover.--The Secretary may carry over funds made 
    available under this section to a subsequent fiscal year.
    ``(b) Calculation Basis.--Account maintenance fees payable to 
guaranty agencies under subsection (a)(3) shall not exceed the basis of 
0.10 percent of the original principal amount of outstanding loans on 
which insurance was issued under part B.
    ``(c) Budget Justification.--No funds may be expended under this 
section unless the Secretary includes in the Department of Education's 
annual budget justification to Congress a detailed description of the 
specific activities for which the funds made available by this section 
have been used in the prior and current years (if applicable), the 
activities and costs planned for the budget year, and the projection of 
activities and costs for each remaining year for which administrative 
expenses under this section are made available.''.

SEC. 8016. COST OF ATTENDANCE.

    Section 472 (20 U.S.C. 1087ll) is amended--
        (1) by striking paragraph (4) and inserting the following:
        ``(4) for less than half-time students (as determined by the 
    institution), tuition and fees and an allowance for only--
            ``(A) books, supplies, and transportation (as determined by 
        the institution);
            ``(B) dependent care expenses (determined in accordance 
        with paragraph (8)); and
            ``(C) room and board costs (determined in accordance with 
        paragraph (3)), except that a student may receive an allowance 
        for such costs under this subparagraph for not more than 3 
        semesters or the equivalent, of which not more than 2 semesters 
        or the equivalent may be consecutive;'';
        (2) in paragraph (11), by striking ``and'' after the semicolon;
        (3) in paragraph (12), by striking the period and inserting ``; 
    and''; and
        (4) by adding at the end the following:
        ``(13) at the option of the institution, for a student in a 
    program requiring professional licensure or certification, the one-
    time cost of obtaining the first professional credentials (as 
    determined by the institution).''.

SEC. 8017. FAMILY CONTRIBUTION.

    (a) Family Contribution for Dependent Students.--
        (1) Amendments.--Section 475 (20 U.S.C. 1087oo) is amended--
            (A) in subsection (g)(2)(D), by striking ``$2,200'' and 
        inserting ``$3,000''; and
            (B) in subsection (h), by striking ``35'' and inserting 
        ``20''.
        (2) Effective date.--The amendments made by paragraph (1) shall 
    apply with respect to determinations of need for periods of 
    enrollment beginning on or after July 1, 2007.
    (b) Family Contribution for Independent Students Without Dependents 
Other Than a Spouse.--
        (1) Amendments.--Section 476 (20 U.S.C. 1087pp) is amended--
            (A) in subsection (b)(1)(A)(iv)--
                (i) in subclause (I), by striking ``$5,000'' and 
            inserting ``$6,050'';
                (ii) in subclause (II), by striking ``$5,000'' and 
            inserting ``$6,050''; and
                (iii) in subclause (III), by striking ``$8,000'' and 
            inserting ``$9,700''; and
            (B) in subsection (c)(4), by striking ``35'' and inserting 
        ``20''.
        (2) Effective date.--The amendments made by paragraph (1) shall 
    apply with respect to determinations of need for periods of 
    enrollment beginning on or after July 1, 2007.
    (c) Family Contribution for Independent Students With Dependents 
Other Than a Spouse.--
        (1) Amendment.--Section 477(c)(4) (20 U.S.C. 1087qq(c)(4)) is 
    amended by striking ``12'' and inserting ``7''.
        (2) Effective date.--The amendment made by paragraph (1) shall 
    apply with respect to determinations of need for periods of 
    enrollment beginning on or after July 1, 2007.
    (d) Regulations; Updated Tables.--Section 478(b) (20 U.S.C. 
1087rr(b)) is amended--
        (1) in paragraph (1), by adding at the end the following: ``For 
    the 2007-2008 academic year, the Secretary shall revise the tables 
    in accordance with this paragraph, except that the Secretary shall 
    increase the amounts contained in the table in section 477(b)(4) by 
    a percentage equal to the greater of the estimated percentage 
    increase in the Consumer Price Index (as determined under the 
    preceding sentence) or 5 percent.''; and
        (2) in paragraph (2)--
            (A) by striking ``2000-2001'' and inserting ``2007-2008''; 
        and
            (B) by striking ``1999'' and inserting ``2006''.
    (e) Employment Expense Allowance.--Section 478(h) (20 U.S.C. 
1087rr(h)) is amended--
        (1) by striking ``476(b)(4)(B),''; and
        (2) by striking ``meals away from home, apparel and upkeep, 
    transportation, and housekeeping services'' and inserting ``food 
    away from home, apparel, transportation, and household furnishings 
    and operations''.

SEC. 8018. SIMPLIFIED NEED TEST AND AUTOMATIC ZERO IMPROVEMENTS.

    (a) Amendments.--Section 479 (20 U.S.C. 1087ss) is amended--
        (1) in subsection (b)--
            (A) in paragraph (1)--
                (i) in subparagraph (A), by striking clause (i) and 
            inserting the following:
                ``(i) the student's parents--

                    ``(I) file, or are eligible to file, a form 
                described in paragraph (3);
                    ``(II) certify that the parents are not required to 
                file a Federal income tax return; or
                    ``(III) received, or the student received, benefits 
                at some time during the previous 12-month period under 
                a means-tested Federal benefit program as defined under 
                subsection (d); and''; and

                (ii) in subparagraph (B), by striking clause (i) and 
            inserting the following:
                ``(i) the student (and the student's spouse, if any)--

                    ``(I) files, or is eligible to file, a form 
                described in paragraph (3);
                    ``(II) certifies that the student (and the 
                student's spouse, if any) is not required to file a 
                Federal income tax return; or
                    ``(III) received benefits at some time during the 
                previous 12-month period under a means-tested Federal 
                benefit program as defined under subsection (d); and''; 
                and

            (B) in the matter preceding subparagraph (A) of paragraph 
        (3), by striking ``A student or family files a form described 
        in this subsection, or subsection (c), as the case maybe, if 
        the student or family, respectively, files'' and inserting ``In 
        the case of an independent student, the student, or in the case 
        of a dependent student, the family, files a form described in 
        this subsection, or subsection (c), as the case may be, if the 
        student or family, as appropriate, files'';
        (2) in subsection (c)--
            (A) in paragraph (1)--
                (i) by striking subparagraph (A) and inserting the 
            following:
            ``(A) the student's parents--
                ``(i) file, or are eligible to file, a form described 
            in subsection (b)(3);
                ``(ii) certify that the parents are not required to 
            file a Federal income tax return; or
                ``(iii) received, or the student received, benefits at 
            some time during the previous 12-month period under a 
            means-tested Federal benefit program as defined under 
            subsection (d); and''; and
                (ii) by striking subparagraph (B) and inserting the 
            following:
            ``(B) the sum of the adjusted gross income of the parents 
        is less than or equal to $20,000; or''; and
            (B) in paragraph (2)--
                (i) by striking subparagraph (A) and inserting the 
            following:
            ``(A) the student (and the student's spouse, if any)--
                ``(i) files, or is eligible to file, a form described 
            in subsection (b)(3);
                ``(ii) certifies that the student (and the student's 
            spouse, if any) is not required to file a Federal income 
            tax return; or
                ``(iii) received benefits at some time during the 
            previous 12-month period under a means-tested Federal 
            benefit program as defined under subsection (d); and''; and
                (ii) by striking subparagraph (B) and inserting the 
            following:
            ``(B) the sum of the adjusted gross income of the student 
        and spouse (if appropriate) is less than or equal to 
        $20,000.''; and
        (3) by adding at the end the following:
    ``(d) Definition of Means-Tested Federal Benefit Program.--In this 
section, the term `means-tested Federal benefit program' means a 
mandatory spending program of the Federal Government, other than a 
program under this title, in which eligibility for the program's 
benefits, or the amount of such benefits, are determined on the basis 
of income or resources of the individual or family seeking the benefit, 
and may include such programs as--
        ``(1) the supplemental security income program under title XVI 
    of the Social Security Act (42 U.S.C. 1381 et seq.);
        ``(2) the food stamp program under the Food Stamp Act of 1977 
    (7 U.S.C. 2011 et seq.);
        ``(3) the free and reduced price school lunch program 
    established under the Richard B. Russell National School Lunch Act 
    (42 U.S.C. 1751 et seq.);
        ``(4) the program of block grants for States for temporary 
    assistance for needy families established under part A of title IV 
    of the Social Security Act (42 U.S.C. 601 et seq.);
        ``(5) the special supplemental nutrition program for women, 
    infants, and children established by section 17 of the Child 
    Nutrition Act of 1966 (42 U.S.C. 1786); and
        ``(6) other programs identified by the Secretary.''.
    (b) Evaluation of Simplified Needs Test.--
        (1) Eligibility guidelines.--The Secretary of Education shall 
    regularly evaluate the impact of the eligibility guidelines in 
    subsections (b)(1)(A)(i), (b)(1)(B)(i), (c)(1)(A), and (c)(2)(A) of 
    section 479 of the Higher Education Act of 1965 (20 U.S.C. 
    1087ss(b)(1)(A)(i), (b)(1)(B)(i), (c)(1)(A), and (c)(2)(A)).
        (2) Means-tested federal benefit program.--For each 3-year 
    period, the Secretary of Education shall evaluate the impact of 
    including the receipt of benefits by a student or parent under a 
    means-tested Federal benefit program (as defined in section 479(d) 
    of the Higher Education Act of 1965 (20 U.S.C. 1087ss(d)) as a 
    factor in determining eligibility under subsections (b) and (c) of 
    section 479 of the Higher Education Act of 1965 (20 U.S.C. 
    1087ss(b) and (c)).

SEC. 8019. ADDITIONAL NEED ANALYSIS AMENDMENTS.

    (a) Treating Active Duty Members of the Armed Forces as Independent 
Students.--Section 480(d)(3) (20 U.S.C. 1087vv(d)(3)) is amended by 
inserting before the semicolon at the end the following: ``or is 
currently serving on active duty in the Armed Forces for other than 
training purposes''.
    (b) Definition of Assets.--Section 480(f)(1) (20 U.S.C. 
1087vv(f)(1)) is amended by inserting ``qualified education benefits 
(except as provided in paragraph (3)),'' after ``tax shelters,''.
    (c) Treatment of Family Ownership of Small Businesses.--Section 
480(f)(2) (20 U.S.C. 1087vv(f)(2)) is amended--
        (1) in subparagraph (A), by striking ``or'';
        (2) in subparagraph (B), by striking the period at the end and 
    inserting ``; or''; and
        (3) by adding at the end the following new subparagraph:
        ``(C) a small business with not more than 100 full-time or 
    full-time equivalent employees (or any part of such a small 
    business) that is owned and controlled by the family.''.
    (d) Additional Definitions.--Section 480(f) is further amended by 
adding at the end the following new paragraphs:
    ``(3) A qualified education benefit shall not be considered an 
asset of a student for purposes of section 475.
    ``(4) In determining the value of assets in a determination of need 
under this title (other than for subpart 4 of part A), the value of a 
qualified education benefit shall be--
        ``(A) the refund value of any tuition credits or certificates 
    purchased under a qualified education benefit; and
        ``(B) in the case of a program in which contributions are made 
    to an account that is established for the purpose of meeting the 
    qualified higher education expenses of the designated beneficiary 
    of the account, the current balance of such account.
    ``(5) In this subsection:
        ``(A) The term `qualified education benefit' means--
            ``(i) a qualified tuition program (as defined in section 
        529(b)(1)(A) of the Internal Revenue Code of 1986) or other 
        prepaid tuition plan offered by a State; and
            ``(ii) a Coverdell education savings account (as defined in 
        section 530(b)(1) of the Internal Revenue Code of 1986).
        ``(B) The term `qualified higher education expenses' has the 
    meaning given the term in section 529(e) of the Internal Revenue 
    Code of 1986.''.
    (e) Designated Assistance.--Section 480(j) (20 U.S.C. 1087vv(j)) is 
amended--
        (1) in the subsection heading, by striking ``; Tuition 
    Prepayment Plans'';
        (2) by striking paragraph (2);
        (3) by redesignating paragraph (3) as paragraph (2); and
        (4) by adding at the end the following new paragraph:
    ``(3) Notwithstanding paragraph (1) and section 472, assistance not 
received under this title may be excluded from both estimated financial 
assistance and cost of attendance, if that assistance is provided by a 
State and is designated by such State to offset a specific component of 
the cost of attendance. If that assistance is excluded from either 
estimated financial assistance or cost of attendance, it shall be 
excluded from both.''.

SEC. 8020. GENERAL PROVISIONS.

    (a) Academic Year.--Paragraph (2) of section 481(a) (20 U.S.C. 
1088(a)) is amended to read as follows:
    ``(2)(A) For the purpose of any program under this title, the term 
`academic year' shall--
        ``(i) require a minimum of 30 weeks of instructional time for a 
    course of study that measures its program length in credit hours; 
    or
        ``(ii) require a minimum of 26 weeks of instructional time for 
    a course of study that measures its program length in clock hours; 
    and
        ``(iii) require an undergraduate course of study to contain an 
    amount of instructional time whereby a full-time student is 
    expected to complete at least--
            ``(I) 24 semester or trimester hours or 36 quarter credit 
        hours in a course of study that measures its program length in 
        credit hours; or
            ``(II) 900 clock hours in a course of study that measures 
        its program length in clock hours.
    ``(B) The Secretary may reduce such minimum of 30 weeks to not less 
than 26 weeks for good cause, as determined by the Secretary on a case-
by-case basis, in the case of an institution of higher education that 
provides a 2-year or 4-year program of instruction for which the 
institution awards an associate or baccalaureate degree.''.
    (b) Distance Education: Eligible Program.--Section 481(b) (20 
U.S.C. 1088(b)) is amended by adding at the end the following new 
paragraphs:
    ``(3) An otherwise eligible program that is offered in whole or in 
part through telecommunications is eligible for the purposes of this 
title if the program is offered by an institution, other than a foreign 
institution, that has been evaluated and determined (before or after 
the date of enactment of the Higher Education Reconciliation Act of 
2005) to have the capability to effectively deliver distance education 
programs by an accrediting agency or association that--
        ``(A) is recognized by the Secretary under subpart 2 of part H; 
    and
        ``(B) has evaluation of distance education programs within the 
    scope of its recognition, as described in section 496(n)(3).
    ``(4) For purposes of this title, the term `eligible program' 
includes an instructional program that, in lieu of credit hours or 
clock hours as the measure of student learning, utilizes direct 
assessment of student learning, or recognizes the direct assessment of 
student learning by others, if such assessment is consistent with the 
accreditation of the institution or program utilizing the results of 
the assessment. In the case of a program being determined eligible for 
the first time under this paragraph, such determination shall be made 
by the Secretary before such program is considered to be an eligible 
program.''.
    (c) Correspondence Courses.--Section 484(l)(1) (20 U.S.C. 
1091(l)(1)) is amended--
        (1) in subparagraph (A)--
            (A) by striking ``for a program of study of 1 year or 
        longer''; and
            (B) by striking ``unless the total'' and all that follows 
        through ``courses at the institution''; and
        (2) by amending subparagraph (B) to read as follows:
            ``(B) Exception.--Subparagraph (A) shall not apply to an 
        institution or school described in section 3(3)(C) of the Carl 
        D. Perkins Vocational and Technical Education Act of 1998.''.

SEC. 8021. STUDENT ELIGIBILITY.

    (a) Fraud: Repayment Required.--Section 484(a) (20 U.S.C. 1091(a)) 
is amended--
        (1) by striking the period at the end of paragraph (5) and 
    inserting ``; and''; and
        (2) by adding at the end the following new paragraph:
        ``(6) if the student has been convicted of, or has pled nolo 
    contendere or guilty to, a crime involving fraud in obtaining funds 
    under this title, have completed the repayment of such funds to the 
    Secretary, or to the holder in the case of a loan under this title 
    obtained by fraud.''.
    (b) Verification of Income Date.--Paragraph (1) of section 484(q) 
(20 U.S.C. 1091(q)) is amended to read as follows:
        ``(1) Confirmation with irs.--The Secretary of Education, in 
    cooperation with the Secretary of the Treasury, is authorized to 
    confirm with the Internal Revenue Service the information specified 
    in section 6103(l)(13) of the Internal Revenue Code of 1986 
    reported by applicants (including parents) under this title on 
    their Federal income tax returns for the purpose of verifying the 
    information reported by applicants on student financial aid 
    applications.''.
    (c) Suspension of Eligibility for Drug Offenses.--Section 484(r)(1) 
(20 U.S.C. 1091(r)(1)) is amended by striking everything preceding the 
table and inserting the following:
        ``(1) In general.--A student who is convicted of any offense 
    under any Federal or State law involving the possession or sale of 
    a controlled substance for conduct that occurred during a period of 
    enrollment for which the student was receiving any grant, loan, or 
    work assistance under this title shall not be eligible to receive 
    any grant, loan, or work assistance under this title from the date 
    of that conviction for the period of time specified in the 
    following table:''.

SEC. 8022. INSTITUTIONAL REFUNDS.

    Section 484B (20 U.S.C. 1091b) is amended--
        (1) in the matter preceding clause (i) of subsection (a)(2)(A), 
    by striking ``a leave of'' and inserting ``1 or more leaves of'';
        (2) in subsection (a)(3)(B)(ii), by inserting ``(as determined 
    in accordance with subsection (d))'' after ``student has 
    completed'';
        (3) in subsection (a)(3)(C)(i), by striking ``grant or loan 
    assistance under this title'' and inserting ``grant assistance 
    under subparts 1 and 3 of part A, or loan assistance under parts B, 
    D, and E,'';
        (4) in subsection (a)(4), by amending subparagraph (A) to read 
    as follows:
            ``(A) In general.--After determining the eligibility of the 
        student for a late disbursement or post-withdrawal disbursement 
        (as required in regulations prescribed by the Secretary), the 
        institution of higher education shall contact the borrower and 
        obtain confirmation that the loan funds are still required by 
        the borrower. In making such contact, the institution shall 
        explain to the borrower the borrower's obligation to repay the 
        funds following any such disbursement. The institution shall 
        document in the borrower's file the result of such contact and 
        the final determination made concerning such disbursement.'';
        (5) in subsection (b)(1), by inserting ``not later than 45 days 
    from the determination of withdrawal'' after ``return'';
        (6) in subsection (b)(2), by amending subparagraph (C) to read 
    as follows:
            ``(C) Grant overpayment requirements.--
                ``(i) In general.--Notwithstanding subparagraphs (A) 
            and (B), a student shall only be required to return grant 
            assistance in the amount (if any) by which--

                    ``(I) the amount to be returned by the student (as 
                determined under subparagraphs (A) and (B)), exceeds
                    ``(II) 50 percent of the total grant assistance 
                received by the student under this title for the 
                payment period or period of enrollment.

                ``(ii) Minimum.--A student shall not be required to 
            return amounts of $50 or less.'';
        (7) in subsection (d), by striking ``(a)(3)(B)(i)'' and 
    inserting ``(a)(3)(B)''; and
        (8) in subsection (d)(2), by striking ``clock hours--'' and all 
    that follows through the period and inserting ``clock hours 
    scheduled to be completed by the student in that period as of the 
    day the student withdrew.''.

SEC. 8023. COLLEGE ACCESS INITIATIVE.

    Part G is further amended by inserting after section 485C (20 
U.S.C. 1092c) the following new section:

``SEC. 485D. COLLEGE ACCESS INITIATIVE.

    ``(a) State-by-State Information.--The Secretary shall direct each 
guaranty agency with which the Secretary has an agreement under section 
428(c) to provide to the Secretary the information necessary for the 
development of Internet web links and access for students and families 
to a comprehensive listing of the postsecondary education 
opportunities, programs, publications, Internet web sites, and other 
services available in the States for which such agency serves as the 
designated guarantor.
    ``(b) Guaranty Agency Activities.--
        ``(1) Plan and activity required.--Each guaranty agency with 
    which the Secretary has an agreement under section 428(c) shall 
    develop a plan, and undertake the activity necessary, to gather the 
    information required under subsection (a) and to make such 
    information available to the public and to the Secretary in a form 
    and manner as prescribed by the Secretary.
        ``(2) Activities.--Each guaranty agency shall undertake such 
    activities as are necessary to promote access to postsecondary 
    education for students through providing information on college 
    planning, career preparation, and paying for college. The guaranty 
    agency shall publicize such information and coordinate such 
    activities with other entities that either provide or distribute 
    such information in the States for which such guaranty agency 
    serves as the designated guarantor.
        ``(3) Funding.--The activities required by this section may be 
    funded from the guaranty agency's Operating Fund established 
    pursuant to section 422B and, to the extent funds remain, from 
    earnings on the restricted account established pursuant to section 
    422(h)(4).
        ``(4) Rule of construction.--Nothing in this subsection shall 
    be construed to require a guaranty agency to duplicate any efforts 
    under way on the date of enactment of the Higher Education 
    Reconciliation Act of 2005 that meet the requirements of this 
    section.
    ``(c) Access to Information.--
        ``(1) Secretary's responsibility.--The Secretary shall ensure 
    the availability of the information provided, by the guaranty 
    agencies in accordance with this section, to students, parents, and 
    other interested individuals, through Internet web links or other 
    methods prescribed by the Secretary.
        ``(2) Guaranty agency responsibility.--The guaranty agencies 
    shall ensure that the information required by this section is 
    available without charge in printed format for students and parents 
    requesting such information.
        ``(3) Publicity.--Not later than 270 days after the date of 
    enactment of the Higher Education Reconciliation Act of 2005, the 
    Secretary and guaranty agencies shall publicize the availability of 
    the information required by this section, with special emphasis on 
    ensuring that populations that are traditionally underrepresented 
    in postsecondary education are made aware of the availability of 
    such information.''.

SEC. 8024. WAGE GARNISHMENT REQUIREMENT.

    Section 488A(a)(1) (20 U.S.C. 1095a(a)(1)) is amended by striking 
``10 percent'' and inserting ``15 percent''.

                          Subtitle B--Pensions

SEC. 8101. INCREASES IN PBGC PREMIUMS.

    (a) Flat-Rate Premiums.--
        (1) Single-employer plans.--
            (A) In general.--Clause (i) of section 4006(a)(3)(A) of the 
        Employee Retirement Income Security Act of 1974 (29 U.S.C. 
        1306(a)(3)(A)) is amended by striking ``$19'' and inserting 
        ``$30''.
            (B) Adjustment for inflation.--Section 4006(a)(3) of such 
        Act (29 U.S.C. 1306(a)(3)) is amended by adding at the end the 
        following new subparagraph:
    ``(F) For each plan year beginning in a calendar year after 2006, 
there shall be substituted for the premium rate specified in clause (i) 
of subparagraph (A) an amount equal to the greater of--
        ``(i) the product derived by multiplying the premium rate 
    specified in clause (i) of subparagraph (A) by the ratio of--
            ``(I) the national average wage index (as defined in 
        section 209(k)(1) of the Social Security Act) for the first of 
        the 2 calendar years preceding the calendar year in which such 
        plan year begins, to
            ``(II) the national average wage index (as so defined) for 
        2004; and
        ``(ii) the premium rate in effect under clause (i) of 
    subparagraph (A) for plan years beginning in the preceding calendar 
    year.
If the amount determined under this subparagraph is not a multiple of 
$1, such product shall be rounded to the nearest multiple of $1.''.
        (2) Multiemployer plans.--
            (A) In general.--Section 4006(a)(3)(A) of such Act (29 
        U.S.C. 1306(a)(3)(A)) is amended--
                (i) in clause (iii)--

                    (I) by inserting ``and before January 1, 2006,'' 
                after ``Act of 1980,''; and
                    (II) by striking the period at the end and 
                inserting ``, or''; and

                (ii) by adding at the end the following:
        ``(iv) in the case of a multiemployer plan, for plan years 
    beginning after December 31, 2005, $8.00 for each individual who is 
    a participant in such plan during the applicable plan year.''.
            (B) Adjustment for inflation.--Section 4006(a)(3) of such 
        Act (29 U.S.C. 1306(a)(3)), as amended by this subsection, is 
        amended by adding at the end the following new subparagraph:
    ``(G) For each plan year beginning in a calendar year after 2006, 
there shall be substituted for the premium rate specified in clause 
(iv) of subparagraph (A) an amount equal to the greater of--
        ``(i) the product derived by multiplying the premium rate 
    specified in clause (iv) of subparagraph (A) by the ratio of--
            ``(I) the national average wage index (as defined in 
        section 209(k)(1) of the Social Security Act) for the first of 
        the 2 calendar years preceding the calendar year in which such 
        plan year begins, to
            ``(II) the national average wage index (as so defined) for 
        2004; and
        ``(ii) the premium rate in effect under clause (iv) of 
    subparagraph (A) for plan years beginning in the preceding calendar 
    year.
If the amount determined under this subparagraph is not a multiple of 
$1, such product shall be rounded to the nearest multiple of $1.''.
    (b) Premium Rate for Certain Terminated Single-Employer Plans.--
Subsection (a) of section 4006 of such Act (29 U.S.C. 1306) is amended 
by adding at the end the following:
    ``(7) Premium Rate for Certain Terminated Single-Employer Plans.--
        ``(A) In general.--If there is a termination of a single-
    employer plan under clause (ii) or (iii) of section 4041(c)(2)(B) 
    or section 4042, there shall be payable to the corporation, with 
    respect to each applicable 12-month period, a premium at a rate 
    equal to $1,250 multiplied by the number of individuals who were 
    participants in the plan immediately before the termination date. 
    Such premium shall be in addition to any other premium under this 
    section.
        ``(B) Special rule for plans terminated in bankruptcy 
    reorganization.--In the case of a single-employer plan terminated 
    under section 4041(c)(2)(B)(ii) or under section 4042 during 
    pendency of any bankruptcy reorganization proceeding under chapter 
    11 of title 11, United States Code, or under any similar law of a 
    State or a political subdivision of a State (or a case described in 
    section 4041(c)(2)(B)(i) filed by or against such person has been 
    converted, as of such date, to such a case in which reorganization 
    is sought), subparagraph (A) shall not apply to such plan until the 
    date of the discharge or dismissal of such person in such case.
        ``(C) Applicable 12-month period.--For purposes of subparagraph 
    (A)--
            ``(i) In general.--The term `applicable 12-month period' 
        means--
                ``(I) the 12-month period beginning with the first 
            month following the month in which the termination date 
            occurs, and
                ``(II) each of the first two 12-month periods 
            immediately following the period described in subclause 
            (I).
            ``(ii) Plans terminated in bankruptcy reorganization.--In 
        any case in which the requirements of subparagraph (B)(i)(I) 
        are met in connection with the termination of the plan with 
        respect to 1 or more persons described in such subparagraph, 
        the 12-month period described in clause (i)(I) shall be the 12-
        month period beginning with the first month following the month 
        which includes the earliest date as of which each such person 
        is discharged or dismissed in the case described in such clause 
        in connection with such person.
        ``(D) Coordination with section 4007.--
            ``(i) Notwithstanding section 4007--
                ``(I) premiums under this paragraph shall be due within 
            30 days after the beginning of any applicable 12-month 
            period, and
                ``(II) the designated payor shall be the person who is 
            the contributing sponsor as of immediately before the 
            termination date.
            ``(ii) The fifth sentence of section 4007(a) shall not 
        apply in connection with premiums determined under this 
        paragraph.
        ``(E) Termination.--Subparagraph (A) shall not apply with 
    respect to any plan terminated after December 31, 2010.''.
    (c) Conforming Amendment.--Section 4006(a)(3)(B) of such Act (29 
U.S.C. 1306(a)(3)(B)) is amended by striking ``subparagraph (A)(iii)'' 
and inserting ``clause (iii) or (iv) of subparagraph (A)''.
    (d) Effective Dates.--
        (1) In general.--Except as otherwise provided in this 
    subsection, the amendments made by this section shall apply to plan 
    years beginning after December 31, 2005.
        (2) Premium rate for certain terminated single-employer 
    plans.--
            (A) In general.--Except as provided in subparagraph (B), 
        the amendment made by subsection (b) shall apply to plans 
        terminated after December 31, 2005.
            (B) Special rule for plans terminated in bankruptcy.--The 
        amendment made by subsection (b) shall not apply to a 
        termination of a single-employer plan that is terminated during 
        the pendency of any bankruptcy reorganization proceeding under 
        chapter 11 of title 11, United States Code (or under any 
        similar law of a State or political subdivision of a State), if 
        the proceeding is pursuant to a bankruptcy filing occurring 
        before October 18, 2005.

                      TITLE IX--LIHEAP PROVISIONS

SEC. 9001. FUNDING AVAILABILITY.

    (a) In General.--In addition to amounts otherwise made available, 
there are appropriated, out of any money in the Treasury not otherwise 
appropriated, to the Secretary of Health and Human Services for a 1-
time only obligation and expenditure--
        (1) $250,000,000 for fiscal year 2007 for allocation under 
    section 2604(a) through (d) of the Low-Income Home Energy 
    Assistance Act of 1981 (42 U.S.C. 8623(a) through (d)); and
        (2) $750,000,000 for fiscal year 2007 for allocation under 
    section 2604(e) of the Low-Income Home Energy Assistance Act of 
    1981 (42 U.S.C. 8623(e)).
    (b) Sunset.--The provisions of this section shall terminate, be 
null and void, and have no force and effect whatsoever after September 
30, 2007. No monies provided for under this section shall be available 
after such date.

                 TITLE X--JUDICIARY RELATED PROVISIONS
                  Subtitle A--Civil Filing Adjustments

SEC. 10001. CIVIL CASE FILING FEE INCREASES.

    (a) Civil Actions Filed in District Courts.--Section 1914(a) of 
title 28, United States Code, is amended by striking ``$250'' and 
inserting ``$350''.
    (b) Appeals Filed in Courts of Appeals.--The $250 fee for docketing 
a case on appeal or review, or docketing any other proceeding, in a 
court of appeals, as prescribed by the Judicial Conference, effective 
as of January 1, 2005, under section 1913 of title 28, United States 
Code, shall be increased to $450.
    (c) Expenditure Limitation.--Incremental amounts collected by 
reason of the enactment of this section shall be deposited in a special 
fund in the Treasury to be established after the enactment of this Act. 
Such amounts shall be available for the purposes specified in section 
1931(a) of title 28, United States Code, but only to the extent 
specifically appropriated by an Act of Congress enacted after the 
enactment of this Act.
    (d) Effective Date.--This section and the amendment made by this 
section shall take effect 60 days after the date of the enactment of 
this Act.

                      Subtitle B--Bankruptcy Fees

SEC. 10101. BANKRUPTCY FEES.

    (a) Bankruptcy Filing Fees.--Section 1930(a) of title 28, United 
States Code, is amended--
        (1) in paragraph (1)--
            (A) in subparagraph (A) by striking ``$220'' and inserting 
        ``$245''; and
            (B) in subparagraph (B) by striking ``$150'' and inserting 
        ``$235''; and
        (2) in paragraph (2) by striking ``$1,000'' and inserting 
    ``$2,750''.
    (b) Expenditure Limitation.--Incremental amounts collected by 
reason of the amendments made by subsection (a) shall be deposited in a 
special fund in the Treasury to be established after the enactment of 
this Act. Such amounts shall be available for the purposes specified in 
section 1931(a) of title 28, United States Code, but only to the extent 
specifically appropriated by an Act of Congress enacted after the 
enactment of this Act.
    (c) Effective Date.--This section and the amendments made by this 
section shall take effect 60 days after the date of the enactment of 
this Act.

                               Speaker of the House of Representatives.

                            Vice President of the United States and    
                                               President of the Senate.