[Congressional Record Volume 153, Number 121 (Thursday, July 26, 2007)]
[Senate]
[Pages S10173-S10190]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. BAUCUS:
  S. 1893. An original bill to amend title XXI of the Social Security 
Act to reauthorize the State Children's Health Insurance Program, and 
for other purposes; from the Committee on Finance; placed on the 
calendar.
  Mr. BAUCUS. Mr. President, I ask unanimous consent the following 
material regarding today's introduction of S. 1893, the Children's 
Health Insurance Program Reauthorization Act of 2007, be included in 
the Record, July 26, 2007 letter from the Congressional Budget Office; 
and Technical Summary of the Children's Health Insurance Program 
Reauthorization Act of 2007.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                                    U.S. Congress,


                                  Congressional Budget Office,

                                    Washington, DC, July 26, 2007.
     Hon. Max Baucus,
     Chairman Committee on Finance,
     U.S. Senate, Washington, DC.
       Dear Mr. Chairman: The Congressional Budget Office (CBO) 
     and the Joint Committee on Taxation (JCT) have prepared the 
     attached cost estimate for the Children's Health Insurance 
     Program Reauthorization Act of 2007, based on the legislative 
     language (ERN07632) that was provided by the Committee on 
     Finance on July 26, 2007.
       CBO estimates that enacting this legislation would increase 
     federal direct spending by $35.2 billion over the 2008-2012 
     period and by $71.0 billion over the 2008-2017 period. CBO 
     and JCT estimate that net revenues would increase under the 
     bill by $36.1 billion over the next five years and $72.8 
     billion over the 10-year period. A portion of that increase 
     would be in off-budget revenues: $0.8 billion for the 2008-
     2012 period and $1.1 billion over the 2008-2017 period. On 
     balance, the spending and revenue changes would reduce 
     federal on-budget deficits by $0.1 billion through 2012 and 
     $0.8 billion for the 2008-2017 period. The two attached 
     tables provide estimates of year-by-year changes and a 
     summary of the estimated change in enrollment of children 
     under the State Children's Health Insurance Program (SCHIP) 
     and Medicaid.
       Projected spending would exceed estimated on-budget revenue 
     increases beginning in fiscal year 2015. Pursuant to section 
     203 of S. Con. Res. 21, the Concurrent Resolution on the 
     Budget for Fiscal Year 2008, CBO estimates that the changes 
     in direct spending and revenues would cause an increase in 
     the on-budget deficit greater than $5 billion in at least one 
     of the 10-year periods between 2018 and 2057.
       CBO has reviewed the non-tax provisions of the bill--titles 
     I through VI, excluding section 411, and title VII--for 
     mandates and determined that they contain no 
     intergovernmental mandates as defined in the Unfunded 
     Mandates Reform Act (UMRA). The bill would affect the way 
     states administer SCHIP and Medicaid, but because of the 
     flexibility in those programs, the new requirements would not 
     be intergovernmental mandates as UMRA defines that term. In 
     general, state, local, and tribal governments would benefit 
     from the continuation of existing SCHIP grants, the creation 
     of new grant programs, and broader flexibility and options in 
     some programs.
       According to JCT, the tax provisions of the bill contain no 
     intergovernmental mandates as defined in UMRA. JCT has 
     determined that the tax provisions of the bill contain a 
     private-sector mandate, as defined in UMRA, by increasing the 
     excise tax rate on cigarettes and other tobacco products. The 
     costs of that mandate would be similar to the estimated 
     budget effects of the provision (as shown in the attached 
     table), and thus would significantly exceed the threshold 
     established in UMRA for private-sector mandates in each year 
     (the threshold is $131 million in 2007, and is adjusted 
     annually for inflation).
       If you wish further details on this estimate, we will be 
     pleased to provide them. The CBO staff contacts are Eric 
     Rollins and Jeanne De Sa.
           Sincerely,
                                                  Peter R. Orszag,
                                                         Director.

          CBO'S ESTIMATE OF THE EFFECTS ON DIRECT SPENDING AND REVENUES OF THE CHILDREN'S HEALTH INSURANCE PROGRAM REAUTHORIZATION ACT OF 2007
                       [Based on the legislative language ERN07632, provided by the Senate Committee on Finance on July 26, 2007]
  Figures are outlays, by fiscal year, in billions of dollars. Costs or savings of less than $50 million are shown with an asterisk. Components may not
                                                           sum to totals because of rounding.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                      Section                        2008    2009    2010    2011    2012    2013    2014    2015    2016    2017    2008-12    2008-17
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               CHANGES IN DIRECT SPENDING
 
SCHIP outlays from the funding provided in
 sections 101, 103, 104, and 105 of the bill:
    Benefits and administration costs.............     2.2     3.8     5.5     6.5     7.4    -0.4    -1.8    -1.8    -1.7    -1.6       25.4       18.1
    Incentive payments............................       0     0.4     0.6     0.8     0.9     1.0     1.1     1.2     1.2     1.3        2.7        8.4
                                                   -----------------------------------------------------------------------------------------------------
        Subtotal..................................     2.2     4.1     6.1     7.2     8.4     0.6    -0.7    -0.6    -0.4    -0.3       28.1       26.5
Medicaid outlays due to interactions with the         -0.3     0.3     1.2     1.6     1.8     4.5     6.0     7.1     7.7     8.4        4.7       38.4
 SCHIP outlays shown above........................
Other changes in direct spending that are not
 included with the SCHIP and Medicaid totals
 above:
    104  Additional administrative funding for           *       *       *       *       *       *       *       *       *       *        0.1        0.1
     territories..................................
    105  Funding for improved reporting of               *       *       0       0       0       0       0       0       0       0          *          *
     Medicaid enrollment..........................
    108  Contingency fund.........................       0     0.1     0.1     0.1     0.1     0.2     0.2     0.2     0.2     0.2        0.3        1.1
    201  Grants for outreach and enrollment.......       *       *       *       *     0.1       *       *       *       *       *        0.2        0.4
    203  Express Lane demonstration project.......       *       *       *       *       *       0       0       0       0       0          *          *
    301  Revise requirement to document                  0     0.3     0.3     0.4     0.4     0.4     0.4     0.5     0.5     0.6        1.4        3.7
     citizenship..................................
    501  Development of quality measures for child       *     0.1     0.1     0.1     0.1       *       *       *       *       *        0.3        0.4
     health.......................................
    604  Additional funding for Current Population       *       *       *       *       *       *       *       *       *       *        0.1        0.1
     Survey.......................................
    608  Dental health grants.....................       *     0.1     0.1     0.1       *       0       0       0       0       0        0.2        0.2
    609  Transition grants for payment of FQHC /         *       *       0       0       0       0       0       0       0       0          *          *
     RHC services.................................
                                                   -----------------------------------------------------------------------------------------------------
        Subtotal..................................     0.1     0.5     0.6     0.6     0.6     0.7     0.7     0.7     0.8     0.8        2.4        6.1
            Total changes in direct spending......     2.1     5.0     7.9     9.4    10.8     5.8     6.0     7.2     8.0     8.9       35.2       71.0
 
                                                                   CHANGES IN REVENUES
On-budget revenues:
    701  Increased taxes on tobacco products......     6.2     7.6     7.4     7.3     7.3     7.2     7.1     7.1     7.0     6.9       35.7       71.1
    703  Changed timing of corporate estimated tax       0       0       0       0    -0.9    -0.9       0       0       0       0       -0.9          0
     payments.....................................
    Effect of SCHIP provisions on on-budget              *     0.1     0.1     0.1     0.1     0.1       *       *       *       *        0.5        0.7
     revenues.....................................
                                                   -----------------------------------------------------------------------------------------------------
        Subtotal..................................     6.2     7.7     7.5     7.4     6.5     8.2     7.2     7.1     7.0     7.0       35.3       71.7
Off-budget revenues (due to SCHIP provisions).....     0.1     0.2     0.2     0.2     0.2     0.1       *       *       *     0.1        0.8        1.1
            Total changes in revenues.............     6.3     7.8     7.7     7.6     6.7     8.3     7.2     7.1     7.1     7.0       36.1       72.8
Net budgetary effect of legislation:
    Direct spending and on-budget revenues........    -4.2    -2.7     0.4     2.0     4.3    -2.4    -1.2     0.1     1.0     1.9       -0.1       -0.8
    Direct spending and all revenues..............    -4.3    -2.8     0.2     1.3     4.1    -2.5    -1.2       *     0.9     1.8       -0.9       -1.8
Memorandum:
SCHIP outlays under CBO's baseline................     5.4     5.4     5.5     5.5     5.6     5.5     5.3     5.3     5.2     5.1       27.4       53.8
Additional SCHIP outlays under proposal...........     2.3     4.3     6.2     7.4     8.5     0.7    -0.6    -0.5    -0.3    -0.2       28.6       27.9
Total SCHIP outlays under proposal................     7.7     9.7    11.7    12.9    14.1     6.2     4.7     4.8     4.9     5.0       56.1       81.7
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page S10174]]


                        CBO's ESTIMATE OF CHANGES IN SCHIP AND MEDICAID ENROLLMENT OF CHILDREN UNDER THE CHILDREN'S HEALTH INSURANCE PROGRAM REAUTHORIZATION ACT OF 2007
                                           (Based on the legislative language ERN07632, provided by the Senate Committee on Finance on July 26, 2007)
                                  All figures are average monthly enrollment, in millions of individuals. Components may not sum to totals because of rounding.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              SCHIP a                                         Medicaid b                             SCHIP/Medicaid total
                                                        ----------------------------------------------------------------------------------------------------------------------------------------
                                                          Enrollees    Reduction    Reduction               Enrollees    Reduction    Reduction               Reduction    Reduction
                                                           moved to      in the     in private    Total      moved to      in the     in private    Total       in the     in private    Total
                                                            SCHIP      uninsured     coverage                 SCHIP      uninsured     coverage               uninsured     coverage
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Fiscal Year 2012:
CBO's baseline projections.............................  ...........  ...........  ...........        3.3  ...........  ...........  ...........       25.0  ...........  ...........       28.3
    Effect of providing funding to maintain current              0.6          0.8          0.5        1.9         -0.6         n.a.         n.a.       -0.6          0.8          0.5        1.3
     SCHIP programs....................................
    Effect of additional SCHIP funding and other
     provisions:
        Additional enrollment within existing                   n.a.          0.9          0.6        1.5         n.a.          1.7          0.4        2.2          2.7          1.0        3.7
         eligibility groups c,d........................
        Expansion of SCHIP eligibility to new                   n.a.          0.6          0.6        1.1         n.a.         n.a.         n.a.       n.a.          0.6          0.6        1.1
         populations...................................
                                                        ----------------------------------------------------------------------------------------------------------------------------------------
        Subtotal.......................................         n.a.          1.5          1.2        2.6         n.a.          1.7          0.4        2.2          3.2          1.6        4.8
    Total proposed changes.............................          0.6          2.2          1.7        4.5         -0.6          1.7          0.4        1.5          4.0          2.1        6.1
Estimated enrollment under proposal....................  ...........  ...........  ...........        7.9  ...........  ...........  ...........       26.5  ...........  ...........      34.4
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Notes:
a The figures in this table include the program's adult enrollees, who account for less than 10 percent of total SCHIP enrollment.
b The figures in this table do not include children who receive Medicaid because they are disabled.
c For simplicity of display, the Medicaid figures in this line include the additional children enrolled as a side effect of expansions of SCHIP eligibility.
d The Medicaid figures and SCHIP/Medicaid totals in this line include about 100,000 adults who would gain eligibility under section 301 of the bill.
 
n.a. = not applicable

     Technical Summary of the Children's Health Insurance Program 
                      Reauthorization Act of 2007


Section 1. Short title; Amendments to Social Security Act; References; 
                           Table of Contents

     Current Law
       No provision.
     Explanation of Provision
       This act may be cited as the ``Children's Health Insurance 
     Program (CHIP) Reauthorization Act of 2007.'' Unless 
     otherwise noted, this act amends, or repeals provisions of 
     the Social Security Act. When this act references: ``CHIP'' 
     it is referring to the State Children's Health Insurance 
     Program established under Title XXI; ``MEDICAID'' it is 
     referring to the program for medical assistance established 
     under title XIX; ``Secretary'' it is referring to the 
     Secretary of Health and Human Services.

                       Title I--Financing of CHIP


                     Section 101. Extension of CHIP

     Current Law
       Title XXI of the Social Security Act specifies the 
     following national appropriation amounts in Sec. 2104(a) from 
     FY 1998 to FY2007 for SCHIP:
       $4,295,000,000 in FY1998;
       $4,275,000,000 in FY 1999;
       $4,275,000,000 in FY2000;
       $4,275,000,000 in FY 2001;
       $3,150,000,000 in FY 2002;
       $3,150,000,000 in FY2003;
       $3,150,000,000 in FY2004;
       $4,050,000,000 in FY2005;
       $4,050,000,000 in FY2006; and
       $5,000,000,000 in FY2007.
       These amounts are alloted to states, including the District 
     of Columbia, except for (1) 0.25% of the total annual amount 
     is alloted to the territories and commonwealths (hereafter 
     referred to simply as ``the territories''), and (2) from 
     FY1998 to FY2002, $60 million was set aside annually for 
     special diabetes grants (Public Health Service Act Sec. 330B 
     and Sec. 330C), which are now funded by direct 
     appropriations. the territories are also alloted the 
     following appropriation amounts in Sec. 2104(c)(4)(B):
       $32,000,000 in FY1999;
       $34,200,000 in FY2000;
       $34,200,000 in FY2001;
       $25,200,000 in FY2002;
       $25,200,000 in FY2003;
       $25,200,000 in FY2004;
       $32,400,000 in FY2005;
       $32,400,000 in FY2006; and
       $40,000,000 in FY2007.
     Explanation of Provision
       The following national appropriation amounts are specified 
     for CHIP in Sec. 2104(a):
       $9,125,000,000 in FY 2008;
       $10,675,000,000 in FY2009;
       $11,850,000,000 in FY 2010;
       $13,750,000,000 in FY 2001; and
       $3,500,000,000 in FY2012.


 Section 102. Allotments for the 50 States and the District of Columbia

     Current Law
       The annual SCHIP appropriation available to states, 
     including the District of Columbia, is the amount of the 
     total appropriation remaining after amounts set aside for the 
     territories and, for FY1998 to FY2002, the special diabetes 
     grants. Each state's share, or percentage, of the available 
     appropriation is determined by a formula using the state's 
     ``number of children,'' as adjusted for geographic variation 
     in health costs and subject to certain floors and a ceiling.
       Beginning with the FY2001 SCHIP allotment, the ``number of 
     children'' is equal to (1) 50 percent of the number of 
     children in the state who are low income (with ``low income'' 
     defined as having family income below 200% of the federal 
     poverty threshold), plus (2) 50 percent of the number of 
     uninsured low-income children in the state. The source of 
     data is the average of the number of such children, as 
     reported and defined in the three most recent Annual Social 
     and Economic (ASEC) Supplements (formerly known as the March 
     supplements) to the Census Bureau's Current Population Survey 
     (CPS) before the beginning of the calendar year in which the 
     applicable fiscal year begins. For example, in determining 
     the FY2007 allotments, the three most recent supplements 
     available before January 1, 2006, were used. Thus, states' 
     FY2007 allotments were based on the ``number of children'' 
     using data that covered calendar years 2002, 2003 and 2004.
       The adjustment for geographic variations in health costs is 
     85% of each state's variation from the national average in 
     its average wages in the health services industry. The source 
     of data is the average wages from mandatory reports filed 
     quarterly by every employer on their unemployment insurance 
     contributions and provided to the Department of Labor's 
     Bureau of Labor Statistics (BLS). A three-year average of 
     these data is also required in the statute.
       Each state's ``number of children,'' as adjusted for 
     geographic variation in health costs, is calculated as a 
     percentage of the national total. This is the state's 
     preliminary proportion of the available SCHIP appropriation, 
     against which the floors and ceiling are compared.
       Since the beginning of SCHIP, no state's share of the 
     available appropriation could result in an allotment of less 
     than $2 million. No state has ever been affected by this 
     floor. Beginning with the FY2000 allotment, two additional 
     floors also applied: (1) no state's share could be less than 
     90% of last year's share, and (2) no state's share could be 
     less than 70% of its FY1999 share. (Each state's FY1999 share 
     was identical to its FY1998 share, per P.L. 105-277.)
       A ceiling has also applied beginning with the FY2000 
     allotment: No state's share can exceed 145% of its FY1999 
     share.
       Once the floors and ceiling are applied to affected states 
     to produce their adjusted proportion, the other states' 
     shares are adjusted proportionally to use exactly 100% of the 
     available appropriation. Each state's adjusted proportion 
     multiplied by the appropriation available to states for a 
     fiscal year results in each state's federal SCHIP allotment 
     for that fiscal year.
     Explanation of Provision
       The annual CHIP funds available to states, including the 
     District of Columbia--that is, the available national 
     allotment--is the amount of the total appropriation remaining 
     after amounts allotted to the territories.
       For FY2008, a state's allotment is calculated as 110% of 
     the greatest of the following four amounts: (1) the state's 
     FY2007 federal CHIP spending multiplied by the annual 
     adjustment; (2) the state's FY2007 federal CHIP allotment 
     multiplied by the annual adjustment; (3) for states that were 
     determined in FY2007 to have exhausted their own federal CHIP 
     allotments (and therefore designated a shortfall state for 
     FY2007), the state's FY2007 projected spending as of November 
     2006 (or as of May 2006, for a state whose May 2006 
     projection was $95 million to $96 million higher than its 
     November 2006 projection) multiplied by the annual 
     adjustment; and (4) the state's FY2008 federal CHIP projected 
     spending as of August 2007 and certified by the state to the 
     Secretary not later than September 30, 2007.
       The annual adjustment for health care cost growth and child 
     population growth is the product of (1) 1 plus the percentage 
     increase (if any) in the projected per capita spending in the 
     National Health Expenditures for the fiscal year over the 
     prior fiscal year, and (2) 1.01 plus the percentage increase 
     in the child population (under age 19) in each state as of 
     July 1 of the fiscal year over the prior fiscal year's, 
     based on the most timely and accurate published estimates 
     from the Census Bureau.
       For FY2009 to FY2012, a state's allotment is calculated as 
     110% of its projected spending for that year, as submitted to 
     CMS no later than August 31 of the preceding fiscal year.

[[Page S10175]]

       For FY2008, if the state allotments as calculated exceed 
     the available national allotment, the allotments are reduced 
     proportionally. For FY2009 to FY2012, if the state allotments 
     as calculated exceed the available national allotment, then 
     the available national allotment is distributed to each state 
     according to its percentage calculated as the sum of the 
     following four factors:
       Each state's projected federal CHIP expenditures for that 
     fiscal year (as certified by the state to the Secretary no 
     later than the August 31 of the preceding fiscal year), 
     calculated as a percentage of the national total, multiplied 
     by 75%;
       Each state's number of low-income children (based on the 
     most timely and accurate published estimates from the Census 
     Bureau), calculated as a percentage of the national total, 
     multiplied by 12\1/2\%;
       Each state's projected federal CHIP expenditures for the 
     preceding fiscal year (as certified by the state to the 
     Secretary in November of the fiscal year), calculated as a 
     percentage of the national total, multiplied by 7\1/2\%; and
       Each state's actual federal CHIP expenditures for the 
     second preceding fiscal year, as determined by the Secretary, 
     calculated as a percentage of the national total, multiplied 
     by 5%.
       If a state's projected CHIP expenditures for FY2009 to 
     FY2012 are at least 10% more than the last year's allotment 
     (excluding any reduction in states' allotments due to 
     insufficient available national allotment) then, unless the 
     state received approval in the prior year of a state plan 
     amendment or waiver to expand CHIP coverage or the state 
     received a payment from the CHIP Contingency Fund, the state 
     must submit to the Secretary by August 31 before the fiscal 
     year information relating to the factors that contributed to 
     the need for the increase in the state's allotment, as well 
     as any other information that the Secretary may require for 
     the state to demonstrate the need for the increase in the 
     state's allotment. The Secretary shall notify the state in 
     writing within 60 days after receipt of the information that 
     (1) the projected expenditures are approved or disapproved 
     (and if disapproved, the reasons for disapproval); or (2) 
     specified additional information is needed. If the Secretary 
     disapproved the projected expenditures or determined 
     additional information is needed, the Secretary shall provide 
     the state with a reasonable opportunity to submit additional 
     information to demonstrate the need for the increase in the 
     State's allotment for the fiscal year. If a determination has 
     not determined by September 30 whether the state has 
     demonstrated the need for the increase in its allotment, the 
     Secretary shall provide the state with a provisional 
     allotment for the fiscal year equal to 110% of last year's 
     allotment (excluding any reduction in states' allotments due 
     to insufficient available national allotment). Once the 
     Secretary makes a determination, the Secretary may adjust the 
     state's allotment (and the allotments of other states) 
     accordingly, but not later than November 30 of the fiscal 
     year.
       For FY2008 allotment factors based on CHIP expenditures, 
     the Secretary of Health and Human Services (HHS) shall use 
     the most recent FY2007 expenditure data available to the 
     Secretary before the start of FY2008. The Secretary may 
     adjust the FY2008 allotments based on the actual expenditure 
     data reported to CMS no later than November 30, 2007; the 
     Secretary may not make adjustments after December 31, 2007.
       For purposes of determining a state's allotment, the 
     state's projected expenditures shall include payments 
     projected using Sec. 2105(g) (discussed in Section 110) and 
     for certain CHIP-enrolled parents and childless adults 
     (discussed in Section 105).


             Section 103. One-Time Appropriation for FY2012

     Current Law
       No provision.
     Explanation of Provision
       In FY 2012, a one-time appropriation of $12,500,000,000 
     shall be made to the Secretary of Health and Human Services 
     to add to the funds already provided under section 2104(a) 
     for that year only. Such funds shall be distributed by the 
     Secretary in a manner consistent with and under the same 
     terms and conditions of section 102 of this Act.


   Section 104. Improving funding for the territories under CHIP and 
                                Medicaid

     Current Law
       The territories were to receive 0.25 percent of the total 
     appropriations provided in Sec. 2104(a). Later legislation 
     added specific appropriations for the territories in FY1999 
     to FY2007:
       $32,000,000 in FY 1999;
       $34,200,000 in FY 2000;
       $34,200,000 in FY 2001;
       $25,200,000 in FY 2002;
       $25,200,000 in FY 2003;
       $25,200,000 in FY 2004;
       $32,400,000 in FY 2005;
       $32,400,000 in FY 2006; and
       $40,000,000 in FY 2007.
       For FY 1999, the $32 million represented approximately 0.75 
     percent of the total appropriations in Sec. 2104(a). For 
     FY2000 to FY2007, the additional appropriation equaled 0.8 
     percent of the total appropriations in Sec. 2104(a). Combined 
     with the 0.25 percent available through the original enacting 
     legislation, the territories were allotted 1.05% of the total 
     appropriations in Sec. 2104(a) from FY2000 to FY2007.
       The amounts set aside for the territories were distributed 
     according to the following percentages provided in statute: 
     Puerto Rico, 91.6 percent; Guam, 3.5 percent; the Virgin 
     Islands, 2.6 percent; American Samoa, 1.2 percent; and the 
     Northern Mariana Islands, 1.1 percent.
       Medicaid (and SCHIP) programs in the territories are 
     subject to spending caps specified in statute. The federal 
     Medicaid matching rate, which determines the share if 
     Medicaid expenditures paid for by the federal government, is 
     statutorily set at 50 percent of the territories. Therefore, 
     the federal government pays 50% of the cost of Medicaid items 
     and services in the territories up to the spending caps. For 
     the 50 states and DC, certain administrative functions have a 
     higher federal match. For example, startup expenses for 
     specified computer systems are matched at 90%, and there is a 
     100% match for the implementation and operation of 
     immigration status verification systems.
     Explanation of Provision
       From the national CHIP appropriation, the allotments to the 
     territories are calculated as follows. For FY2008, each 
     territory's allotment is its highest annual federal CHIP 
     spending between FY1998 and FY2007, plus the annual 
     adjustment for health care cost growth and national child 
     population growth. FY2007 spending will be determined by the 
     Secretary based on the most timely and accurate published 
     estimates of the Census Bureau. For FY2009 through FY2012, 
     each territory's allotment is the prior year's allotment, 
     plus the annual adjustment for health care cost growth and 
     national child population growth.
       For FY2008 and each fiscal year thereafter, federal 
     matching payments for specified data reporting systems (i.e., 
     the design, development, and operations of claims processing 
     systems and citizenship documentation data systems in each of 
     Puerto Rico, the Virgin Islands, Guam, the Northern Mariana 
     Islands, and American Samoa would be subject to the 90% 
     federal match rate for the start-up expenses associated with 
     such systems and the 75% federal match rate for the operation 
     of such systems without regard to the specified spending 
     caps.
       The provision would require the Government Accountability 
     Office (GAO) to submit a report to the appropriate committees 
     of Congress not later than September 30, 2009, with regard to 
     the territories' eligible Medicaid and CHIP populations, 
     their historical and projected spending and the ability of 
     capped funding streams to address such needs, the extent to 
     which the federal poverty level is used for determining 
     Medicaid and CHIP eligibility in the territories, and the 
     extent to which the territories participate in data 
     collection and reporting with regard to Medicaid and CHIP 
     and specifically the extent to which they participate in 
     the Current Population Survey versus the American 
     Community Survey, which are federal surveys that estimate 
     the number of low-income children in the states. The 
     report is also to provide recommendations for improving 
     Medicaid and CHIP funding to the territories.


               Section 105. Incentive bonuses for states

     Current Law
       No provision.
     Explanation of Provision
       Incentive Pool
       A CHIP Incentive Bonuses Pool is established in the U.S. 
     Treasury. The Incentive Pool receives deposits from an 
     initial appropriation in FY2008 of $3 billion, along with 
     transfers from six different potential sources, with the 
     currently available but not immediately required funds 
     invested in interest-bearing U.S. securities that provide 
     additional income into the Incentive Pool. The six sources 
     for deposits are as follows:
       On December 1, 2007, the amount by which states' FY2006 and 
     FY2007 allotments not expended by September 30, 2007, exceed 
     50% of the federal share of the FY2008 allotment, as 
     determined by the Secretary by not later than October 1, 
     2007;
       On each December 1 from 2008 to 2012, any of the annual 
     CHIP appropriation not used by the states;
       On October 1 of fiscal years 2009 to 2012, the amount by 
     which the unspent funds from the prior year's allotment 
     exceeds the applicable percentage of that allotment. The 
     applicable percentage is 20% for FY2009, and 10% for FY2010, 
     FY2011, and FY2012;
       Any original allotment amounts not expended by the end of 
     their second year of availability;
       On October 1, 2009, any amounts set aside for transition 
     off of CHIP coverage for childless adults that are not 
     expended by September 30, 2009; and
       On October 1 of FY2009 through FY2012, any amounts in the 
     CHIP Contingency Fund in excess of the fund's aggregate cap, 
     as well as any Contingency Fund payments provided to a state 
     that are unspent at the end of the fiscal year following the 
     one in which the funds were provided.
       Funds from the Incentive Pool are payable in FY2008 to 
     FY2012 to states that have increased their Medicaid and CHIP 
     enrollment among low-income children above a defined 
     baseline, with associated payments as follows (reduced 
     proportionally if necessary). (For purposes of Incentive Pool 
     policies, a ``child'' enrolled in Medicaid means an 
     individual under age 19--or age 20 or 21, if a state has so 
     elected under its Medicaid plan; and ``low-income children'' 
     means children in

[[Page S10176]]

     families with incomes at 200% of federal poverty or below.) 
     Beginning in FY2009, a state may receive a payment from the 
     Incentive Pool if its average monthly enrollment of low-
     income children in CHIP and Medicaid for the coverage period 
     (which is defined as the last two quarters of the preceding 
     fiscal year and the first two quarters of the fiscal year, 
     except that for FY2009 it is based only on the first two 
     quarters of FY2009) exceeds the baseline monthly average.
       For FY2009, the baseline monthly average is each state's 
     average monthly enrollment in the first two quarters of 
     FY2007 enrollment (as determined over a 6-month period on the 
     basis of the most recent information reported through the 
     Medicaid Statistical Information System (MSIS) multiplied by 
     the sum of 1.02 and the percentage increase in the population 
     of low-income children in the state from FY2007 to FY2009, as 
     determined by the Secretary based on the most recent 
     published estimates from the Census Bureau before the 
     beginning of FY2009. For FY2010 onward, the baseline monthly 
     average is the prior year's baseline monthly average 
     multiplied by the sum of 1.01 and the percentage increase in 
     the population of low-income children in the state over the 
     preceding fiscal year, as determined by the Secretary based 
     on the most recent published estimates from the Census Bureau 
     before the beginning of the fiscal year.
       A state eligible for a bonus shall receive in the last 
     quarter of the fiscal year the following amount, depending on 
     the ``excess'' of the state's enrollment above the baseline 
     monthly average: (i) If such excess with respect to the 
     number of individuals who are enrolled in the State plan 
     under title XIX does not exceed 2 percent, the product of $75 
     and the number of such individuals included in such excess; 
     (ii) if such excess with respect to the number of individuals 
     who are enrolled in the State plan under title XIX exceeds 2 
     percent, but does not exceed 5 percent, the product of $300 
     and the number of such individuals included in such excess; 
     and (iii) if such excess with respect to the number of 
     individuals who are enrolled in the State plan under title 
     XIX exceeds 5 percent, the product of $625 and the number of 
     such individuals included in such excess. For FY2010 onward, 
     these dollar amounts are to be increased by the percentage 
     increase (if any) in the projected per capita spending in the 
     National Health Expenditures for the calendar year beginning 
     on January 1 of the coverage period over that of the 
     preceding coverage period.
  Payments from the Incentive Pool shall be used for any purpose that 
the State determines is likely to reduce the percentage of low-income 
children in the State without health insurance.
       Redistribution of FY2005 Allotments
       An appropriation of $5,000,000 is provided to the Secretary 
     for FY2008 for improving the timeliness of MSIS and to 
     provide guidance to states with respect to any new reporting 
     requirements related to such improvements. Amounts 
     appropriated are available until expended. The resulting 
     improvements are to be designed and implemented so that 
     beginning no later than October 1, 2008, Medicaid and CHIP 
     enrollment data are collected and analyzed by the Secretary 
     within six months of submission.
       FY2005 original CHIP allotments unspent at the end of 
     FY2007 are to be redistributed on a proportional basis to 
     states that were projected at any point in FY2007 to exhaust 
     their federal CHIP allotments.


  Section 106. Phase-out of coverage for nonpregnant childless adults 
             under CHIP, conditions for coverage of parents

     Current Law
       Section 1115 of the Social Security Act gives the Secretary 
     of HHS broad authority to modify virtually all aspects of the 
     Medicaid and SCHIP programs. Under Section 1115, the 
     Secretary may waive requirements in Section 1902 (usually, 
     freedom of choice of provider, comparability, and 
     statewideness). For SCHIP, no specific sections or 
     requirements are cited as ``waive-able.'' SCHIP statute 
     simply states that Section 1115, pertaining to research and 
     demonstration projects, applies to SCHIP. States may obtain 
     waivers that allow them to provide services to individuals 
     not traditionally eligible for SCHIP, or limit benefit 
     packages for certain groups as long as the Secretary 
     determines that these programs further the goals of SCHIP.
       Approved SCHIP Section 1115 waivers are deemed to be part 
     of a state's SCHIP state plan for purposes of federal 
     reimbursement. Costs associated with waiver programs are 
     subject to each state's enhanced-FMAP. Under SCHIP Section 
     1115 waivers, states must meet an ``allotment neutrality 
     test'' where combined federal expenditures for the state's 
     regular SCHIP program and for the state's SCHIP demonstration 
     program are capped at the state's individual SCHIP allotment. 
     This policy limits federal spending to the capped allotment 
     levels.
       Under current law, including 1115 waiver authority, states 
     cover pregnant women, parents of Medicaid and SCHIP eligible 
     children and childless adults in their SCHIP programs.
       The Deficit Reduction Act of 2005 prohibited the approval 
     of new demonstration programs that allow federal SCHIP funds 
     to be used to provide coverage to nonpregnant childless 
     adults, but allowed for the continuation and renewal of such 
     existing Medicaid or SCHIP waiver projects affecting federal 
     SCHIP funds that were approved under the Section 1115 waiver 
     authority before February 8, 2006.
     Explanation of Provision
       Childless Adults
       The provision would prohibit the approval or renewal of 
     Section 1115 demonstration waivers that allow federal CHIP 
     funds to be used to provide coverage to nonpregnant childless 
     adults (hereafter referred to as applicable existing waivers) 
     on or after the date of enactment of this Act. Beginning on 
     or after October 1, 2008, rules regarding the period to which 
     an applicable existing waiver would apply, individuals 
     eligible for coverage under such waivers, and the amount of 
     federal payment available for such coverage would be subject 
     to the following requirements: (1) no federal CHIP funds 
     would be available for coverage of nonpregnant childless 
     adults under an applicable existing waiver after September 
     30, 2008, (2) State-requested extensions of applicable 
     existing waivers that would otherwise expire before October 
     1, 2008, would be granted by the Secretary but only through 
     September 30, 2008, and (3) coverage to a nonpregnant 
     childless adult under applicable existing waivers provided 
     during FY2008 will be reimbursed at the CHIP enhanced FMAP 
     rate.
       States with applicable existing waivers (that are otherwise 
     terminated under this provision) would be permitted to extend 
     coverage, through FY2009, to individual nonpregnant childless 
     adults who received coverage under the applicable existing 
     waiver at any time during FY2008 (regardless of whether the 
     individual lost coverage at any time during FY2008 and was 
     later provided benefit coverage under the waiver in that 
     fiscal year) subject to the following restrictions: (1) for 
     each such State, the Secretary would be required to set aside 
     an amount as part of a separate allotment equal to the 
     federal share of the State's projected FY2008 expenditures 
     (as certified by the state and submitted to the Secretary by 
     August 31, 2008) for providing coverage under the waiver to 
     such individuals in FY2008 increased by the annual adjustment 
     for per capita health care growth (described in Section 102 
     of this bill), (2) the Secretary may adjust the set aside 
     amount based on State-reported FY2008 expenditure data 
     (reported on CMS Form 64 or CMS Form 21 not later than 
     November 30, 2008), but in no case shall the Secretary adjust 
     such amount after December 31, 2008, and (3) the Secretary 
     would pay an amount equal to the federal Medicaid matching 
     rate for expenditures related to such coverage (provided 
     during FY2009) up to the set-aside spending cap.
       States with existing CHIP waivers to extend coverage to 
     nonpregnant childless adults (that are otherwise terminated 
     under this provision) would be permitted to submit a request 
     to CMS (not later than June 30, 2009) for a Medicaid 
     nonpregnant childless adult waiver. For such states, the 
     Secretary would be required to make a decision to deny or 
     approve such application within 90 days of the date of 
     submission. For such states, if no CMS decision to approve or 
     deny such request has been made as of September 30, 2009, the 
     provision would allow such application to be deemed approved.
       States with applicable existing waivers that request a 
     Medicaid nonpregnant childless adult waiver under this 
     provision would be required to meet the following ``budget 
     neutrality'' requirements. For fiscal year 2010, allowable 
     waiver expenditures for such populations would not be 
     permitted to exceed the total amount payments made to the 
     State (as specified above) for FY2009, increased by the 
     percentage increase (if any) in the projected per capita 
     spending in the National Health Expenditures for fiscal year 
     2010 over fiscal year 2009). In the case of any succeeding 
     fiscal year, allowable waiver expenditures for such 
     populations would not be permitted to exceed each such 
     State's set aside amount (described above) for the preceding 
     fiscal year, increased by the percentage increase (if any) in 
     the projected per capita spending in the National Health 
     Expenditures for such fiscal year over the prior fiscal year.
       Parents
       The provision would also prohibit the approval of 
     additional Section 1115 demonstration waivers that allow 
     federal CHIP funds to be used to provide coverage to 
     parent(s) of a targeted low-income child(ren) (hereafter 
     referred to as applicable existing CHIP parent coverage 
     waiver) on or after the date of enactment of this Act. 
     Beginning on or after October 1, 2009, rules regarding the 
     period to which an applicable existing CHIP parent coverage 
     waiver extends coverage to eligible populations, and the 
     amount of federal payment available for coverage to such 
     populations under the waiver would be subject to the 
     following requirements: (1) State-requested extensions of 
     applicable existing CHIP-financed Section 1115 parent 
     coverage waivers that would otherwise expire before October 
     1, 2009, would be granted by the Secretary but only through 
     September 30, 2009, and (2) the CHIP enhanced FMAP rate would 
     apply for such coverage to such eligible populations during 
     FY2008 and FY2009.
       States with existing CHIP waivers to extend coverage to 
     parent(s) of targeted low-income child(ren) would be 
     permitted to continue such assistance during each of fiscal

[[Page S10177]]

     years 2010, 2011, and 2012 subject to the following 
     requirements: (1) for each such State and for each such 
     fiscal year, the Secretary would be required to set aside an 
     amount as part of a separate allotment equal to the federal 
     share of 110% of the State's projected expenditures (as 
     certified by the state and submitted to the Secretary by 
     August 31 of the preceding fiscal year) for providing waiver 
     coverage to such individuals enrolled in the waiver in the 
     applicable fiscal year, and (2) the Secretary would pay the 
     State from the set aside amount (specified above) for each 
     such fiscal year an amount equal to the applicable percentage 
     for expenditures in the quarter to provide coverage as 
     specified under the waiver to parent(s) of targeted low-
     income child(ren).
       In fiscal year 2010 only, costs associated with such parent 
     coverage would be subject to each such state's CHIP enhanced 
     FMAP for States that meet one of the outreach or coverage 
     benchmarks (listed below) in FY2009, or each such state's 
     Medicaid FMAP rate for all other states. The provision would 
     prohibit federal matching payments for the payment of 
     services beyond the set-aside spending cap.
       For fiscal year 2011 or 2012, costs associated with such 
     parent coverage would be subject to: (1) each such state's 
     Reduced Enhanced Matching Assistance Percentage (REMAP) 
     (i.e., a percentage which would be equal to the sum of (a) 
     each such state's FMAP percentage and (b) the number of 
     percentage points equal to one-half of the difference between 
     each such state's FMAP rate and each such state's enhanced 
     FMAP rate) if the state meets one of the coverage benchmarks 
     (listed below) for FY2010 or FY2011 (as applicable), or (2) 
     each such state's FMAP rate if the state failed to meet any 
     of the coverage benchmarks (listed below) for the applicable 
     fiscal year. The provision would prohibit federal matching 
     payments for the payment of services beyond the setaside 
     spending cap.
       FY2010 outreach and coverage benchmarks include: (1) the 
     state implemented a significant child outreach campaign 
     including (a) the state was awarded an outreach and 
     enrollment grant (under Section 201 of this bill) for fiscal 
     year 2009, (b) the state implemented 1 or more process 
     measures for that fiscal year, or (c) the state has submitted 
     a specific plan for outreach for such fiscal year, (2) the 
     state ranks in the lowest 1/3 of the States in terms of the 
     State's percentage of low-income children without health 
     insurance based on timely and accurate published estimates of 
     the Bureau of the Census, or (3) the State qualified for a 
     payment from the Incentive Fund for the most recent coverage 
     period.
       FY2011 and 2012 coverage benchmarks include: (1) the state 
     ranks in the lowest \1/3\ of the States in terms of the 
     State's percentage of low-income children without health 
     insurance based on timely and accurate published estimates of 
     the Bureau of the Census, and (2) the State qualified for a 
     payment from the Incentive Fund for the most recent coverage 
     period.
       A rule of construction clarifies that states are not 
     prohibited from submitting applications for 1115 waivers to 
     provide medical assistance to a parent of a targeted low-
     income child.
       The General Accountability Office would be required to 
     conduct a study to determine if the coverage of a parent, 
     caretaker relative, or legal guardian of a targeted low-
     income child increases the enrollment of or quality of care 
     for children, and if such parents, relatives, and legal 
     guardians are more likely to enroll their children in CHIP or 
     Medicaid. Results of the study (and report recommended 
     changes) would be reported to appropriate committees of 
     Congress 2 years after the date of enactment.


Section 107. State option to cover low-income pregnant women under CHIP 
                     through a State plan amendment

     Current Law
       Under SCHIP, states can cover pregnant women ages 19 and 
     older in one of two ways: (1) via a special waiver of program 
     rules (through Section 1115 authority), or (2) by providing 
     coverage as permitted through regulation. In the latter case, 
     coverage includes prenatal and delivery services only.
       In general, SCHIP allows states to cover targeted low-
     income children with family income that is above applicable 
     Medicaid eligibility levels in a given state. States can set 
     the upper income level up to 200% FPL, or if the applicable 
     Medicaid income level was at or above 200% FPL before SCHIP, 
     the upper income limit may be raised an additional 50 
     percentage points above that level. Other SCHIP eligibility 
     restrictions include (1) the child must be uninsured, (2) the 
     child must be otherwise ineligible for regular Medicaid, and 
     (3) the child cannot be an inmate of a public institution 
     or a patient in an institution for mental disease, or 
     eligible for coverage under a state employee health plan. 
     States may provide SCHIP coverage to children who are 
     covered under a health insurance program that has been in 
     operation since before July 1, 1997 and that is offered by 
     a state that receives no federal funds for this program. 
     States may use enrollment restrictions such as capping 
     total program enrollment, creating waiting lists, and 
     instituting a minimum period of no insurance (e.g., 6 
     months) before being eligible.
       Under regular Medicaid, states must provide coverage for 
     pregnant women with income up to 133% FPL, and at state 
     option, may extend such coverage to pregnant women with 
     income up to 185% FPL. States must also provide coverage to 
     first-time pregnant women with income that meets former cash 
     assistance program rules (which were generally well below 
     100% FPL). The period of coverage for these mandatory and 
     optional pregnant women is during pregnancy through the end 
     of the month in which the 60 days postpartum period ends. In 
     addition, waiver authority may be used to cover pregnant 
     women at even higher income levels and for extended periods 
     of time (e.g., 18 or 24 months postpartum).
       Under regular Medicaid, states may temporarily enroll 
     pregnant women whose family income appears to be below 
     Medicaid income standards for up to 2 months until a final 
     formal determination of eligibility is made. Entities that 
     may qualify to make such presumptive eligibility 
     determinations for pregnant women include Medicaid providers 
     that are outpatient hospital departments, rural health 
     clinics and certain other clinics, and other entities 
     including certain primary care health centers and rural 
     health care programs funded under Sections 330 and 330A of 
     the Public Health Service Act, grantees under the Maternal 
     and Child Health Block Grant Program, entities receiving 
     funds under the Health Services for Urban Indians program, 
     and entities that participate in WIC, the Commodity 
     Supplemental Food Program, a state perinatal program (as 
     designated by the state), or in the Indian Health Service or 
     a health program or facility operated by tribes or tribal 
     organizations under the Indian Self Determination Act.
       Mandatory Medicaid eligibility applies to children under 
     age 6 in families with income at or below 133% FPL. In 
     addition, states may cover newborns under age 1 up to 185% 
     FPL under Medicaid. Children born to Medicaid-eligible 
     pregnant women must be deemed to be eligible for Medicaid 
     from the date of birth up to age 1 so long as the child is a 
     member of the mother's household, and the mother remains 
     eligible for Medicaid (or would remain eligible if pregnant). 
     During this period of deemed eligibility for the newborn, for 
     claiming and payment purposes, the Medicaid identification 
     (ID) number of the mother must also be used for the newborn, 
     unless the state issues a separate ID number for the child 
     during this period. In general, newborns may also be enrolled 
     in SCHIP if they meet the applicable financial standards in a 
     given state, which build on top of Medicaid's rules.
       For families with income below 150% FPL, premiums cannot 
     exceed nominal amounts specified in Medicaid regulations, and 
     service-related cost-sharing is limited to nominal Medicaid 
     amounts for the subgroup under 100% FPL and slightly higher 
     amounts in SCHIP regulations for the subgroup with income 
     between 100-150% FPL.
       For families with income above 150% FPL, premiums and cost-
     sharing may be imposed in any amount as long as such costs 
     for higher-income children are not less than the costs for 
     lower-income children. Total premiums and cost-sharing 
     incurred by all SCHIP children cannot exceed 5% of annual 
     family income.
       Other cost-sharing protections also apply. Applicable 
     premium and cost-sharing amounts cannot favor children from 
     families with higher income over children in families with 
     lower income. No cost-sharing may be applied to preventive 
     services.
     Explanation of Provision
       The provision would allow states to provide optional 
     coverage under CHIP to pregnant women, through a state plan 
     amendment, if certain conditions are met, including (1) the 
     state has established an income eligibility level of at least 
     185% FPL for mandatory, welfare-related qualified pregnant 
     women and optional poverty-related pregnant women under 
     Medicaid, (2) the state does not apply an effective income 
     level under the state plan amendment for pregnant women that 
     is lower than the effective income level (expressed as a 
     percent of poverty and accounting for applicable income 
     disregards) for mandatory, welfare-related qualified pregnant 
     women and optional poverty-related pregnant women under 
     Medicaid on the date of enactment of this provision to be 
     eligible for Medicaid as pregnant women, (3) the state does 
     not provide coverage for pregnant women with higher family 
     income without covering such pregnant women with a lower 
     family income, (4) the state provides pregnancy-related 
     assistance (defined below) for targeted low-income pregnant 
     women in the same manner, and subject to the same 
     requirements, as the state provides child health assistance 
     for targeted low-income children under the state CHIP plan, 
     and in addition to providing child health assistance for such 
     women, (5) the state does not apply any exclusion of benefits 
     for pregnancy-related assistance based on any pre-existing 
     condition or any waiting period (including waiting periods to 
     ensure that CHIP does not substitute for private insurance 
     coverage), and (6) the state must provide the same cost-
     sharing protections to pregnant women as applied to CHIP 
     children, and all cost-sharing incurred by targeted low-
     income pregnant women under CHIP would be capped at 5% of 
     annual family income.
       States that elect this new optional coverage for pregnant 
     women under CHIP and that meet all the above conditions 
     associated with this option, may also elect to provide 
     presumptive eligibility for pregnant women, as defined in the 
     Medicaid statute, to targeted low-income pregnant women under 
     CHIP.

[[Page S10178]]

       Pregnancy-related assistance would include all the services 
     covered as child health assistance under the state's CHIP 
     program, and includes medical assistance that would be 
     provided to a pregnant woman under Medicaid, during pregnancy 
     through the end of the month in which the 60 day postpartum 
     period ends. The upper income limit for coverage of targeted 
     low-income pregnant women under CHIP could be up to the level 
     for coverage of targeted low-income children in the state. As 
     with targeted low-income children under CHIP, the new group 
     of targeted low-income pregnant women must be determined 
     eligible, be uninsured, and must not be an inmate of a public 
     institution or a patient in an institution for mental disease 
     or eligible for coverage under a state employee health 
     benefit plan. Also as with targeted low-income children, 
     pregnant women may include those covered under a health 
     insurance program that has been in operation since before 
     July 1, 1997 and that is offered by a state that receives no 
     federal funds for this program.
       The provision would also deem children born to the new 
     group of targeted low-income pregnant women under CHIP to be 
     eligible for Medicaid or CHIP, as applicable.
       Such newborns would be covered from birth to age 1. During 
     this period of eligibility, the mother's identification 
     number must also be used for filing claims for the newborn, 
     unless the state issues a separate identification number for 
     that newborn.
       The provision would also address States that provide 
     assistance through other options. The option to provide 
     assistance in accordance with the preceding subsections of 
     this section shall not limit any other option for a State to 
     provide (A) child health assistance through the application 
     of sections 457.10, 457.350(b)(2), 457.622(c)(5), and 
     457.626(a)(3) of title 42, Code of Federal Regulations, or 
     (B) pregnancy-related services through the application of any 
     other waiver authority (as in effect on June 1, 2007).
       Any State that provides child health assistance under any 
     authority described in paragraph (1) may continue to provide 
     such assistance, as well as postpartum services, through the 
     end of the month in which the 60-day period (beginning on the 
     last day of the pregnancy) ends, in the same manner as 
     assistance and postpartum services would be provided if 
     provided under the State plan under title XIX, but only if 
     the mother would otherwise satisfy the eligibility 
     requirements that apply under the State child health plan 
     (other than with respect to age) during such period.
       A rule of construction clarifies that nothing in this 
     subsection shall be construed to (A) infer the congressional 
     intent regarding the legality or illegality of the content of 
     sections of title 42, Code of Federal Regulations, specified 
     in paragraph (l)(A), or (B) modify the authority to provide 
     pregnancy-related services under a waiver specified in 
     paragraph (l)(B).
       For the new group of targeted low-income pregnant women, 
     additional conforming amendments would prohibit cost-sharing 
     for pregnancy-related services and waiting periods prior to 
     enrollment or for the purpose of preventing crowd-out of 
     private health insurance.


                   Section 108. CHIP contingency fund

     Current Law
       No provision.
     Explanation of Provision
       A CHIP Contingency Fund is established in the U.S. 
     Treasury. The Contingency Fund receives deposits through a 
     separate appropriation. For FY2009, the appropriation to the 
     Fund is equal to 12.5% of the available national allotment 
     for CHIP. For FY2010 through FY2012, the appropriation is 
     such sums as are necessary for making payments to eligible 
     states for the fiscal year, as long as the annual payments do 
     not exceed 12.5% of that fiscal year's available national 
     allotment for CHIP. Balances that are not immediately 
     required for payments from the Fund are to be invested in 
     U.S. securities that provide addition income to the Fund, as 
     long as the annual payments do not cause the Fund to exceed 
     12.5% of the available national allotment for CHIP. Amounts 
     in excess of the 12.5% limit shall be deposited into the 
     Incentive Pool. For purposes of the CHIP Contingency Fund, 
     amounts set aside for block grant payments for transitional 
     coverage of childless adults shall not count as part of the 
     available national allotment.
       Payments from the Fund are to be used only to eliminate any 
     eligible state's shortfall (that is, the amount by which a 
     state's available federal CHIP allotments are not adequate to 
     cover the state's federal CHIP expenditures, on the basis of 
     the most recent data available to the Secretary or requested 
     from the state by the Secretary).
       The Secretary shall separately compute the shortfalls 
     attributable to children and pregnant women, to childless 
     adults, and to parents of low-income children. No payment 
     from the Contingency Fund shall be made for nonpregnant 
     childless adults. Any payments for shortfalls attributable to 
     parents shall be made from the Fund at the relevant matching 
     rate. Contingency funds are not transferable among 
     allotments.
       Eligible states, which cannot be a territory, for a month 
     in FY2009 to FY2012 are those that meet any of the following 
     criteria:
       The state's available federal CHIP allotments are at least 
     95% but less than 100% of its projected federal CHIP 
     expenditures for the fiscal year (i.e., less than 5% 
     shortfall in federal funds), without regard to any payments 
     provided from the Incentive Fund; or
       The state's available federal CHIP allotments are less than 
     95% of its projected federal CHIP expenditures for the fiscal 
     year (i.e., more than 5% shortfall in federal funds) and that 
     such shortfall is attributable to one or more of the 
     following: (1) One or more parishes or counties has been 
     declared a major disaster and the President has determined 
     individual and public assistance has been warranted from the 
     federal government pursuant to the Stafford Act, or a public 
     health emergency was declared by the Secretary pursuant to 
     the Public Health Service Act; (2) the state unemployment 
     rate is at least 5.5% during any 13 consecutive week period 
     during the fiscal year and such rate is at least 120% of the 
     state unemployment rate for the same period as averaged over 
     the last three fiscal years; (3) the state experienced a 
     recent event that resulted in an increase in the percentage 
     of low-income children in the state without health insurance 
     (as determined on the basis of the most timely and accurate 
     published estimates from the Census Bureau) that was outside 
     the control of the state and warrants granting the state 
     access to the Fund, as determined by the Secretary.
       The Secretary shall make monthly payments from the Fund to 
     all states determined eligible for a month. If the sum of the 
     payments from the Fund exceeds the amount available, the 
     Secretary shall reduce each payment proportionally.
       If a state was determined to be eligible in a given fiscal 
     year, that does not make the state eligible in the following 
     fiscal year. In the case of an event that occurred after July 
     1 of the fiscal year that resulted in the declaration of a 
     Stafford Act or public health emergency that increased the 
     number of uninsured low-income children as described above, 
     any related Contingency Fund payment shall remain available 
     until the end of the following fiscal year.
       The Secretary shall provide annual reports to Congress on 
     the Contingency Fund, the payments from it, and the events 
     that caused states to apply for payment.


 Section 109. 2-year availability of allotments; expenditures counted 
                       against oldest allotments

     Current Law
       SCHIP allotments (currently through FY2007) are available 
     for three years. Allotments unspent after three years are 
     available for reallocation. For example, the FY2004 allotment 
     was available through the end of FY2006; any remaining 
     balances at the end of FY2006 were redistributed to other 
     states.
     Explanation of Provision
       CHIP allotments through FY2006 are available for three 
     years. CHIP allotments made for FY2007 through FY2012 are 
     available for two years.
       Payments to states from the Incentive Pool are available 
     until expended by the state. Payments for a month from the 
     Contingency Fund are available through the end of the fiscal 
     year, except in the case of an event that occurred after July 
     1 of the fiscal year that resulted in the declaration of a 
     Stafford Act or public health emergency that increased the 
     number of uninsured low-income children.
       States' federal CHIP expenditures on or after October 1, 
     2007, shall be counted first against the Contingency Funds 
     from the earliest available month in the earliest fiscal 
     year, then against the earliest available allotments.
       A State may elect, but is not required, to count CHIP 
     expenditures against any incentive bonuses paid to the State.
       Expenditures for coverage of nonpregnant childless adults 
     in FY2009 and of parents of targeted low-income children in 
     FY2010 through FY2012 shall be counted only against the 
     amount set aside for such coverage


  Section 110. Limitation on matching rate for States that propose to 
cover children with effective family income that exceeds 300 percent of 
                            the poverty line

     Current Law
       The federal medical assistance percentage (FMAP) is the 
     rate at which states are reimbursed for most Medicaid service 
     expenditures. It is based on a formula that provides higher 
     reimbursement to states with lower per capita incomes 
     relative to the national average (and vice versa); it has a 
     statutory minimum of 50% and maximum of 83%. There are 
     statutory exceptions to the FMAP formula for the District of 
     Columbia (since FY1998) and Alaska (for FY1998-FY2007). In 
     addition, the territories have FMAPs set at 50% and are 
     subject to federal spending caps.
       The enhanced FMAP (E-FMAP) for SCHIP equals a state's 
     Medicaid FMAP increased by the number of percentage points 
     that is equal to 30% multiplied by the number of percentage 
     points by which the FMAP is less than 100%. For example, in 
     states with an FMAP of 60%, the E-FMAP equals the FMAP 
     increased by 12 percentage points (60% + [30% multiplied by 
     40 percentage points] = 72%). The E-FMAP has a statutory 
     minimum of 65% and maximum of 85%.
     Explanation of Provision
       For child health assistance or health benefits coverage 
     furnished in any fiscal year inning with FY2008 to a targeted 
     low-income child whose effective family income would exceed 
     300% of the federal poverty line but for the application of a 
     general exclusion of

[[Page S10179]]

     a block of income that is not determined by type of expense 
     or type of income, states would be reimbursed using the FMAP 
     instead of the E-FMAP for services provided to that child. An 
     exception would be provided for states that, on the date of 
     enactment of the Children's Health Insurance Program (CHIP) 
     Reauthorization Act of 2007 has an approved State plan 
     amendment or waiver or has enacted a State law to submit a 
     State plan amendment to provide child health assistance or 
     health benefits under their state child health plan or its 
     waiver of such plan to children above 300% of the poverty 
     line.


   Section 111. Option for qualifying States to receive the enhanced 
  portion of the CHIP matching rate for Medicaid coverage of certain 
                          children current Law

     Current Law
       Section 2105(g) of the Social Security Act permits 
     qualifying states to apply federal SCHIP funds toward the 
     coverage of certain children already enrolled in regular 
     Medicaid (that is, not SCHIP-funded expansions of Medicaid). 
     Specifically, these federal SCHIP funds are used to pay the 
     difference between SCHIP's enhanced Federal Medical 
     Assistance Percentage (FMAP) and the Medicaid FMAP that the 
     state is already receiving for these children. Funds under 
     this provision may only be claimed for expenditures occurring 
     after August 15, 2003.
       Qualifying states are limited in the amount they can claim 
     for this purpose to the lesser of the following two amounts: 
     (1) 20% of the state's original SCHIP allotment amounts (if 
     available) from FY1998, FY1999, FY2000, FY2001, FY2004, 
     FY2005, FY2006, and FY2007 (hence the ``terms ``20% 
     allowance'' and ``20% spending''); and (2) the state's 
     available balances of those allotments. If there is no 
     balance, states may not claim Section 2105(g) spending.
       The statutory definitions for qualifying states capture 
     most of those that had expanded their upper-income 
     eligibility levels for children in their Medicaid programs to 
     185% of the federal poverty level or higher prior to the 
     enactment of SCHIP. Based on statutory definitions, 11 states 
     were determined to be qualifying states: Connecticut, Hawaii, 
     Maryland, Minnesota, New Hampshire, New Mexico, Rhode Island, 
     Tennessee, Vermont, Washington and Wisconsin.
       SCHIP spending under Sec. 2105(g) can be used by qualifying 
     states only for Medicaid enrollees (excluding those covered 
     by an SCHIP-funded expansion of Medicaid) who are under age 
     19 and whose family income exceeds 150% of poverty, to pay 
     the difference between the SCHIP enhanced FMAP and the 
     regular Medicaid FMAP.
     Explanation of Provision
       Qualifying states under Sec. 2105(g) may also use available 
     balances from their CHIP allotments from FY2008 to FY2012 to 
     pay the difference between the regular Medicaid FMAP and the 
     CHIP enhanced FMAP for Medicaid enrollees under age 19 (or 
     age 20 or 21, if the state has so elected in its Medicaid 
     plan) whose family income exceeds 133% of poverty.

                  Title II--A Outreach and Enrollment


            Section 201. Grants for outreach and enrollment

     Current Law
       The federal and state governments share in the costs of 
     both Medicaid and SCHIP, based on formulas defining the 
     federal contribution in federal law. States are responsible 
     for the non-federal share, using state tax revenues, for 
     example, but can also use local government funds to comprise 
     a portion of the non-federal share. Generally, the non-
     federal share of costs under Medicaid and SCHIP cannot be 
     comprised of other federal funds.
       Under Medicaid, there are no caps on administrative 
     expenses that may be claimed for federal matching dollars. 
     Title XXI specifies that federal SCHIP funds can be used for 
     SCHIP health insurance coverage, called child health 
     assistance, which meets certain requirements. Apart from 
     these benefit payments; SCHIP payments for four other 
     specific health care activities can be made, including: (1) 
     other child health assistance for targeted low-income 
     children; (2) health services initiatives to improve the 
     health of SCHIP children and other low-income children; (3) 
     outreach activities; and (4) other reasonable administrative 
     costs. For a given fiscal year, payments for other specific 
     health care activities cannot exceed 10% of the total amount 
     of expenditures for SCHIP benefits and other specific health 
     care activities combined.
     Explanation of Provision
       The provision would establish a new grant program under 
     CHIP to finance outreach and enrollment efforts that increase 
     participation of eligible children in both Medicaid and CHIP. 
     For the purpose of awarding grants, the provision would 
     appropriate $100 million for fiscal years 2008 through 2012. 
     These amounts would be in addition to amounts appropriated 
     for CHIP allotments to states (as per Section 2104 of the 
     CHIP statute) and would not be subject to restrictions on 
     expenditures for outreach activities under current law.
       For each fiscal year, the provision would require that ten 
     percent of the funds appropriated for this new grant would be 
     set aside to finance a national enrollment campaign 
     (described below), and an additional 10 percent would be set-
     side to be used by the Secretary to award grants to Indian 
     Health Service providers and Urban Indian Organizations that 
     receive funds under title V of the Indian Health Care 
     Improvement Act for outreach to, and enrollment of, children 
     who are Indians.
       The provision would require the Secretary to develop and 
     implement a national enrollment campaign to improve the 
     enrollment of under-served child populations in Medicaid and 
     CHIP. Such a campaign may include: (1) the establishment of 
     partnerships with the Secretary of Education and the 
     Secretary of Agriculture to develop national campaigns to 
     link the eligibility and enrollment systems for the programs 
     each Secretary administers that often serve the same 
     children, (2) the integration of information about Medicaid 
     and CHIP in public health awareness campaigns administered by 
     the Secretary, (3) increased financial and technical support 
     for enrollment hotlines maintained by the Secretary to ensure 
     that all states participate in such hotlines, (4) the 
     establishment of joint public awareness outreach initiatives 
     with the Secretary of Education and the Secretary of Labor 
     regarding the importance of health insurance to building 
     strong communities and the economy, (5) the development of 
     special outreach materials for Native Americans or for 
     individuals with limited English proficiency, and (6) such 
     other outreach initiatives as the Secretary determines would 
     increase public awareness of Medicaid and CHIP.
       In awarding grants, the Secretary would be required to give 
     priority to entities that propose to target geographic areas 
     with high rates of eligible but not enrolled children who 
     reside in rural areas, or racial and ethnic minorities and 
     health disparity populations, including proposals that 
     address cultural and linguistic barriers to enrollment, and 
     which submit the most demonstrable evidence that (1) the 
     entity includes members with access to, and credibility with, 
     ethnic or low-income populations in the targeted communities, 
     and (2) the entity has the ability to address barriers to 
     enrollment (e.g., lack of awareness of eligibility, stigma 
     concerns, punitive fears associated with receipt of benefits) 
     as well as other cultural barriers to applying for and 
     receiving coverage under CHIP or Medicaid.
       To receive grant funds, eligible entities would be required 
     to submit an application to the Secretary in such form and 
     manner, and containing such information as the Secretary 
     chooses. As noted above, such applications must include 
     evidence that the entity (a) includes members with access to, 
     and credibility with, ethnic or low-income populations in the 
     targeted communities, and (b) has the ability to address 
     barriers to enrollment (e.g., lack of awareness of 
     eligibility, stigma concerns, punitive fears associated with 
     receipt of benefits) as well as other cultural barriers to 
     applying for and receiving CHIP or Medicaid benefits. The 
     applicable must also include specific quality or outcome 
     performance measures to evaluate the effectiveness of 
     activities funded by the grant. In addition, the applicable 
     must contain an assurance that the entity will (1) conduct an 
     assessment of the effectiveness of such activities against 
     the performance measures, (2) cooperate with the collection 
     and reporting of enrollment data and other information in 
     order for the Secretary to conduct such assessment, and (3) 
     in the case of an entity that is not a state, provide the 
     state with enrollment data and other information necessary 
     for the state to make projections of eligible children and 
     pregnant women. The Secretary would be required to make 
     publicly available the enrollment data and information 
     collected and reported by grantees, and would also be 
     required to submit an annual report to Congress on the funded 
     outreach and enrollment activities conducted under the new 
     grant.
       Seven types of entities would be eligible to receive 
     grants, including (1) a state with an approved CHIP plan, (2) 
     a local government, (3) an Indian tribe or tribal consortium, 
     a tribal organization, an urban Indian organization receiving 
     funds under title V of the Indian Health Care Improvement 
     Act, or an Indian Health Service provider, (4) a federal 
     health safety net organization, (5) a national, local, or 
     community-based public or nonprofit organization, including 
     organizations that use community health workers or community-
     based doula programs, (6) a faith-based organization or 
     consortia, to the extent that a grant awarded to such an 
     entity is consistent with requirements of section 1955 of the 
     Public Health Service Act relating to a grant award to non-
     governmental entities, or (7) an elementary or secondary 
     school.
       Federal health safety net organizations include a number of 
     different types of entities, including for example: (1) 
     federally qualified health centers, (2) hospitals that 
     receive disproportionate share hospital (DSH) payments, (3) 
     entities described in Section 340B(a)(4) of the Public Health 
     Service Act (e.g., certain family planning projects, certain 
     grantees providing early intervention services for HIV 
     disease, certain comprehensive hemophilia diagnostic 
     treatment centers, and certain Native Hawaiian health 
     centers), and (4) any other entity or consortium that 
     serves children under a federally-funded program, 
     including the Special Supplemental Nutrition Program for 
     Women, Infants and Children (WIC), Head Start programs, 
     school lunch programs, and elementary or secondary 
     schools.
       The provision defines ``community health worker'' as an 
     individual who promotes health or nutrition within the 
     community in which the individual resides by (1) serving as a 
     liaison between communities and health

[[Page S10180]]

     care agencies, (2) providing guidance and social assistance 
     to residents, (3) enhancing residents' ability to effectively 
     communicate with health care providers, (4) providing 
     culturally and linguistically appropriate health or nutrition 
     education, (5) advocating for individual and community health 
     or nutrition needs, and (6) providing referral and follow-up 
     services.
       In the case of a State that is awarded an Outreach and 
     Enrollment grant, the State would be required to meet a 
     maintenance of effort requirement with regard to the state 
     share of funds spent on outreach and enrollment activities 
     under the CHIP state plan. For such states, the funds spent 
     on outreach and enrollment under the state plan for a fiscal 
     year would not permitted to be less than the State share of 
     funds spent in the fiscal year preceding the first fiscal 
     year for which the grant is awarded.
       The provision would add translation and interpretation 
     services to the specific health care activities that can be 
     reimbursed under CHIP. Translation or interpretation services 
     in connection with the enrollment and use of services under 
     CHIP by individuals for whom English is not their primary 
     language (as found by the Secretary for the proper and 
     efficient administration of the state plan) would be matched 
     at either 75% or the sum of the enhanced FMAP for the state 
     plus five percentage points, whichever is higher.
       In addition, the 10% limit on payments for other specific 
     health care activities in current CHIP statute would not 
     apply to expenditures for outreach and enrollment activities 
     funded under this section.


       Section 202. Increased outreach and enrollment of Indians

       (a) Agreements with States for Medicaid and CHIP Outreach 
     on or Near Reservations to Increase the Enrollment of Indians 
     in Those Programs
     Current Law
       No provision in the Social Security Act.
       Section 404(a) of the IHCIA requires the Secretary to make 
     grants or enter into contracts with Tribal Organizations for 
     establishing and administering programs on or near federal 
     Indian reservations and trust areas and in or near Alaska 
     Native villages. The purpose of the programs is to assist 
     individual Indians to enroll in Medicare, apply for Medicaid 
     and pay monthly premiums for coverage due to financial need 
     of such individuals. Section 404(b) of the IHCIA directs the 
     Secretary, through the IHS, to set conditions for any grant 
     or contract. The conditions include, but are not limited to: 
     (1) determining the Indian population that is, or could be, 
     served by Medicare and Medicaid; (2) assisting individual 
     Indians to become familiar with and use benefits; (3) 
     providing transportation to Indians to the appropriate 
     offices to enroll or apply for medical assistance; and (4) 
     developing and implementing both an income schedule to 
     determine premium payment levels for coverage of needy 
     individuals and methods to improve Indian participation in 
     Medicare and Medicaid. Section 404( c) of the IHCIA 
     authorizes the Secretary, acting through the IHS, to enter 
     into agreements with tribes, Tribal Organizations, and Urban 
     Indian Organizations to receive and process applications for 
     medical assistance under Medicaid and benefits under Medicare 
     at facilities administered by the IHS, or by a tribe, Tribal 
     Organization or Urban Indian Organization under the Indian 
     Self-Determination Act.
     Explanation of Provision
       The provision would amend Section 1139 of the Social 
     Security Act (replacing the current Section 1139 provision 
     dealing with an expired National Commission on Children).
       The provision would encourage states to take steps to 
     provide for enrollment of Indians residing on or near a 
     reservation in Medicaid and CHIP. The steps could include 
     outreach efforts such as: outstationing of eligibility 
     workers; entering into agreements with the IHS, Indian Tribes 
     (ITs), Tribal Organizations (TOs), and Urban Indian 
     Organizations (UIOs) to provide outreach; education regarding 
     eligibility, benefits, and enrollment; and translation 
     services. The provision would not affect the arrangements 
     between states and Indian Tribes, Tribal Organizations, and 
     Urban Indian Organizations to conduct administrative 
     activities under Medicaid and CHIP.
       The provision would require the Secretary, acting through 
     CMS, to take such steps as necessary to facilitate 
     cooperation with and agreements between states, and the IHS, 
     ITs, TOs, or UIOs relating to the provision of benefits to 
     Indians under Medicaid and CHIP.
       The provision would specify that the following terms have 
     the meanings given to these terms in Section 4 of the Indian 
     Health Care Improvement Act: Indian, Indian Tribe, Indian 
     Health Program, Tribal Organization, and Urban Indian 
     Organization.
       (b) Nonapplication of 10 Percent Limit On Outreach and 
     Certain Other Expenditures
     Current Law
       Title XXI of the Social Security Act provides states with 
     annual federal SCHIP allotments based on a formula set in 
     law. State SCHIP payments are matched by the federal 
     government at an enhanced rate that builds on the base rate 
     applicable to Medicaid. The SCHIP statute also specifies that 
     federal SCHIP funds can be used for SCHIP health insurance 
     coverage, called child health assistance that meets certain 
     requirements. States may also provide benefits to SCHIP 
     children, called targeted low-income children, through 
     enrollment in Medicaid. Apart from these benefit payments, 
     SCHIP payments for four other specific health care activities 
     can be made, including: (1) other child health assistance for 
     targeted low-income children; (2) health services initiatives 
     to improve the health of targeted low-income children and 
     other low-income children; (3) outreach activities; and (4) 
     other reasonable administrative costs. For a given fiscal 
     year, SCHIP statute specifies that payments for these four 
     other specific health care activities cannot exceed 10% of 
     the total amount of expenditures for benefits (excluding 
     payments for services rendered during periods of presumptive 
     eligibility under Medicaid) and other specific health care 
     activities combined.
     Explanation of Provision
       The provision would exclude from the 10% cap on CHIP 
     payments for the four other specific health care activities 
     described above: (1) expenditures for outreach activities to 
     families of Indian children likely to be eligible for CHIP or 
     Medicaid, or under related waivers, and (2) related informing 
     and enrollment assistance activities for Indian children 
     under such programs, expansions, or waivers, including such 
     activities conducted under grants, contracts, or agreements 
     entered into under Section 1139 of this Act.


 Section 203. Option for states to rely on findings by an Express Lane 
agency to determine components of a child's eligibility for Medicaid or 
                                  CHIP

     Current Law
       Medicaid law and regulations contain requirements regarding 
     determinations of eligibility and applications for 
     assistance. Generally, the Medicaid agency must determine the 
     eligibility of each applicant no more than 90 days from the 
     date of application for disability-based applications and 45 
     days for all other applications. The agency must assure that 
     eligibility for care and services under the plan is 
     determined in a manner consistent with the best interests of 
     the recipients.
       In limited circumstances outside agencies are permitted to 
     determine eligibility for Medicaid. For example, when a joint 
     TANF-Medicaid application is used the state TANF agency may 
     make the Medicaid eligibility determination, or the Secretary 
     may enter into an agreement with a given state to allow the 
     Social Security Administration (SSA) to determine Medicaid 
     eligibility of aged, blind, or disabled individuals in that 
     state.
       Applicants must attest to the accuracy of the information 
     submitted on their Medicaid applications, and sign 
     application forms under penalty of perjury. Each state must 
     have an income and eligibility verification system under 
     which (1) applicants for Medicaid and several other 
     specified government programs must furnish their Social 
     Security numbers to the state as a condition for 
     eligibility, and (2) wage information from various 
     specified government agencies is used to verify 
     eligibility and to determine the amount of available 
     benefits. Subsequent to initial application, states must 
     request information from other federal and state agencies, 
     to verify applicants' income, resources, citizenship 
     status, and validity of Social Security number (e.g., 
     income from the Social Security Administration (SSA), 
     unearned income from the Internal Revenue Service (IRS), 
     unemployment information from the appropriate state 
     agency, qualified aliens must present documentation of 
     their immigration status, which states must then verify 
     with the Immigration and Naturalization Service, and the 
     state must verify the SSN with the Social Security 
     Administration). States must also establish a Medicaid 
     eligibility quality control (MEQC) program designed to 
     reduce erroneous expenditures by monitoring eligibility 
     determinations. State Medicaid overpayments made on behalf 
     of individuals due to an error in determining eligibility 
     may not exceed 3% of the State's total Medicaid 
     expenditures in a given fiscal year. Erroneous excess 
     payments that exceed the 3% error rate will not be matched 
     with Federal Medicaid funds.
       With regard to criteria for State Personnel Administration 
     and Offices, current law requires each state plan to 
     establish and maintain methods of personnel administration in 
     accordance with the Administration of the Standards for a 
     Merit System of Personnel Administration, 5 CFR Part 900, 
     Subpart F. States must assure compliance with the standards 
     by local jurisdictions; assure that the U.S. Civil Service 
     Commission has reviewed and determined the adequacy of state 
     laws, regulations, and policies; obtain statements of 
     acceptance of the standards by local agencies; submit 
     materials to show compliance with these standards when 
     requested by HHS; and have in effect an affirmative action 
     plan, which includes specific action steps and timetables, to 
     assure equal employment opportunity.
       SCHIP defines a targeted low-income child as one who is 
     under the age of 19 years with no health insurance, and who 
     would not have been eligible for Medicaid under the rules in 
     effect in the state on March 31, 1997. Federal law requires 
     that eligibility for Medicaid and SCHIP be coordinated when 
     states implement separate SCHIP programs. In these 
     circumstances, applications for SCHIP coverage must first be 
     screened for Medicaid eligibility.
       Under Medicaid presumptive eligibility rules, states are 
     allowed to temporarily enroll children whose family income 
     appears to be below Medicaid income standards for up

[[Page S10181]]

     to 2 months until a final formal determination of eligibility 
     is made. Entities qualified to make presumptive eligibility 
     determinations for children include Medicaid providers, 
     agencies that determine eligibility for Head Start, 
     subsidized child care, or the Special Supplemental Food 
     Program for Women, Infants and Children (WIC). BIPA 2000 
     added several entities to the list of those qualified to make 
     Medicaid presumptive eligibility determinations. These 
     include agencies that determine eligibility for Medicaid or 
     the State Children's Health Insurance Program (SCHIP); 
     certain elementary and secondary schools; state or tribal 
     child support enforcement agencies; certain organizations 
     providing food and shelter to the homeless; entities involved 
     in enrollment under Medicaid, TANF, SCHIP, or that determine 
     eligibility for federally funded housing assistance; or any 
     other entity deemed by a state, as approved by the Secretary 
     of HHS. These Medicaid presumptive eligibility rules for 
     children also apply to SCHIP.
     Explanation of Provision
       The provision would create a three year demonstration 
     program that would allow up to 10 states to use Express Lane 
     at Medicaid and SCHIP enrollment and renewal. The 
     demonstration would provide $44 million for systems upgrades 
     and implementation (not coverage costs) and $5 million for an 
     independent evaluation of the demonstration at the end of 
     three years and a report on the demonstration's effectiveness 
     to Congress. The report would be due one year after 
     completion of the demonstration.
       The Demonstration would allow states the option to rely on 
     a finding made by an Express Lane Agency within the preceding 
     12 months to determine whether a child under age 19 (or at 
     state option age 20, or 21) has met one or more of the 
     eligibility requirements (e.g., income, assets or resources, 
     citizenship, or other criteria) necessary to determine an 
     individual's initial eligibility, eligibility 
     redetermination, or renewal of eligibility for medical 
     assistance under Medicaid (including the waiver of 
     requirements of this title).
       If a finding from an Express Lane agency results in a child 
     not being found eligible for Medicaid or CHIP, the State 
     would be required to determine Medicaid or CHIP eligibility 
     using its regular procedures. The provision does not relieve 
     states of their obligation to determine eligibility for 
     medical assistance under Medicaid, or prohibit state options 
     intended to increase enrollment of eligible children under 
     Medicaid or CHIP. In addition, the provision requires states 
     to inform the families (especially those whose children are 
     enrolled in CHIP) that they may qualify for lower premium 
     payments or more comprehensive health coverage under Medicaid 
     if the family's income were directly evaluated for an 
     eligibility determination by the State Medicaid agency, and 
     at the family's option they can seek a regular Medicaid 
     eligibility determination.
       The provision would allow States to rely on an Express Lane 
     Agency finding that a child is a qualified alien as long as 
     the Agency complies with guidance and regulatory procedures 
     issued by the Secretary of Homeland Security for eligibility 
     determinations of qualified aliens, and verifications of 
     immigration status (that meet the requirements of Section 301 
     of this bill).
       States that opt to use an Express Lane Agency to determine 
     eligibility for Medicaid or CHIP may meet the CHIP screen and 
     enroll requirements by using any of the following 
     requirements: (1) establishing a threshold percentage of the 
     Federal poverty level that is 30 percentage points (or such 
     other higher number of percentage points) as the state 
     determines reflects the income methodologies of the program 
     administered by the Express Lane Agency and the Medicaid 
     State plan, (2) providing that the child satisfies all income 
     requirements for Medicaid eligibility, or (3) providing that 
     such child has a family income that exceeds the Medicaid 
     income eligibility threshold that serves as the lower income 
     eligibility threshold for CHIP.
       The provision would allow states to provide for presumptive 
     eligibility under CHIP for a child who, based on an 
     eligibility determination of an income finding from an 
     Express Lane agency, would qualify for child health 
     assistance under CHIP. During the period of presumptive 
     eligibility, the State may determine the child's eligibility 
     for CHIP based on telephone contact with family members, 
     access to data available in electronic or paper format, or 
     other means that minimize to the maximum extent feasible the 
     burden on the family.
       A State may initiate a Medicaid eligibility determination 
     (and determine program eligibility) without a program 
     application based on data obtained from sources other than 
     the child (or the child's family), but such child can only be 
     automatically enrolled in Medicaid (or CHIP) if the family 
     affirmatively consented to being enrolled through affirmation 
     and signature on an Express Lane agency application. The 
     provision requires the State to have procedures in place to 
     inform the individual of the services that will be covered, 
     appropriate methods for using such services, premium or other 
     cost sharing charges (if any) that apply, medical support 
     obligations created by the enrollment (if applicable), and 
     the actions the individual must take to maintain enrollment 
     and renew coverage. For children who consent to enrollment in 
     the State plan, the provision would allow the State to waive 
     signature requirements on behalf of such child.
       States that participate in the Express Lane Eligibility 
     Demonstration would not be required to direct a child (or a 
     child's family) to submit information or documentation 
     previously submitted by the child or family to an Express 
     Lane agency that the State relies on for its Medicaid 
     eligibility determination. A participating state may rely on 
     information from an Express Lane agency when evaluating a 
     child's eligibility for Medicaid or SCHIP without a separate, 
     independent confirmation of the information at the time of 
     enrollment.
       An Express Lane agency must be a public agency determined 
     by the State agency to be capable of making the 
     determinations described in the provisions of this section 
     and is identified in the state plan under this title or Title 
     XXI. Express Lane Agencies would include: (1) a public agency 
     that determines eligibility for assistance under a State 
     program funded under part A of title IV, a program funded 
     under Part D of title IV, a State child health plan under 
     title XXI, the Food Stamp Act of 1977, the Head Start Act, 
     the Richard B. Russell National School Lunch Act, the Child 
     Nutrition Act of 1966, or the Child Care and Development 
     Block Grant, the Steward B. McKinney Homeless Assistance Act, 
     the United States Housing Act of 1937, the Native American 
     Housing Assistance and Self-Determination Act of 1996, (2) a 
     state specified governmental agency that has fiscal liability 
     or legal responsibility for the accuracy of the eligibility 
     determination findings, and (3) a public agency that is 
     subject to an interagency agreement limiting the disclosure 
     and use of such information for eligibility determination 
     purposes.
       Programs run through Title XX (SSBG) are not eligible 
     Express Lane agencies. Private for-profit organizations are 
     not eligible Express Lane agencies. Current law applies 
     regarding the ability of Medicaid to contract with non-profit 
     and for-profit agencies to administer the Medicaid 
     application process with clarifying language that nothing in 
     this demonstration exempts states from the merit-based system 
     for Medicaid employees. A rule of construction would also 
     clarify that states may not use the Express Lane option as a 
     means of avoiding current merit-based employment requirements 
     for Medicaid determinations.
       In addition, the provision would require such agencies to 
     notify the child's family (1) of the information that will be 
     disclosed under this provision, (2) that the information will 
     be used solely for the purposes of determining eligibility 
     under Medicaid and CHIP, (3) that the family may elect not to 
     have the information disclosed for such purposes. The Express 
     Lane agency must also enter into or be subject to an 
     interagency agreement to limit the disclosure and use of such 
     information.
       As part of the demonstration, signatures under penalty of 
     perjury would not be required on a Medicaid application form 
     attesting to any element of the application for which 
     eligibility is based on information received from a source 
     other than an applicant. The provision would provide that any 
     signature requirement for a Medicaid application may be 
     satisfied through an electronic signature.
       States participating in the Demonstration will have to code 
     which children are enrolled in Medicaid or CHIP by way of 
     Express Lane for the duration of the demonstration. States 
     must take a statistically valid sample, approved by CMS, of 
     the children enrolled via Express Lane annually for full 
     Medicaid eligibility review to determine eligibility error 
     rate. States submit the error rate to CMS and if the error 
     rate exceeds 3% either of the first two years, the state must 
     show CMS what corrective actions are in place to improve upon 
     their error rate and will be required to reimburse erroneous 
     excess payments that exceed the allowable error rate of 3%. 
     However, CMS does not have the authority to apply the error 
     rate derived from the Express Lane sample to the entire 
     Express Lane or Medicaid child population, or to take other 
     punitive action against a state based on the error rate. 
     States that participate in the Express Lane demonstration 
     will continue to be subject to existing requirements under 
     Medicaid requiring states to reimburse erroneous excess 
     payments that exceed the allowable error rate of 3% 
     consistent with 1903(u).


    Section 204. Authorization of certain information disclosure to 
                simplify health coverage determinations

     Current Law
       Each state must have an income and eligibility verification 
     system under which (1) applicants for Medicaid and several 
     other specified government programs must furnish their Social 
     Security numbers to the state as a condition for eligibility, 
     and (2) wage information from various specified government 
     agencies is used to verify eligibility and to determine the 
     amount of available benefits. Subsequent to initial 
     application, states must request information from other 
     federal and state agencies, to verify applicants' income, 
     resources, citizenship status, and validity of Social 
     Security number (e.g., income from the Social Security 
     Administration (SSA), unearned income from the Internal 
     Revenue Service (IRS), unemployment information from the 
     appropriate state agency, qualified aliens must present 
     documentation of their immigration status, which states must 
     then verify with the Immigration and Naturalization Service, 
     and the state must verify the SSN with the Social

[[Page S10182]]

     Security Administration). States must also establish a 
     Medicaid eligibility quality control (MEQC) program designed 
     to reduce erroneous expenditures by monitoring eligibility 
     determinations.
     Explanation of Provision
       The provision would authorize federal or State agencies or 
     private entities with potential data sources relevant for the 
     determination of eligibility under Medicaid (e.g., 
     eligibility files, vital records about births, etc.) to share 
     such information with the Medicaid agency if: (1) the child 
     (or such child's parent, guardian, or caretaker relative) has 
     provided advanced consent to disclosure, and has not objected 
     to disclosure, (2) such data are used solely for the purpose 
     of identifying, enrolling, and verifying potential 
     eligibility for Medicaid medical assistance, and (3) an 
     interagency agreement prevents the unauthorized use, 
     disclosure, or modification of such data, and otherwise meets 
     federal standards for safeguarding privacy and data security, 
     and requires the State agency to use such data for the 
     purposes of child enrollment in Medicaid. The provision would 
     impose criminal penalties for persons who engage in 
     unauthorized activities with such data.
       For purposes of the Express Lane Demonstration only, the 
     provision would also authorize the Medicaid and CHIP programs 
     to receive data directly relevant to eligibility 
     determinations and determining the correct amount of benefits 
     under such program from (1) the National New Hires Database, 
     (2) the National Income Data collected by the Commissioner of 
     Social Security, or (3) data about enrollment in insurance 
     that may help to facilitate outreach and enrollment under 
     Medicaid, CHIP and certain other programs.

              Title III--Removal of Barriers to Enrollment


Section 301. Verification of declaration of citizenship or nationality 
           for purposes of eligibility for Medicaid and CHIP

     Current Law
       To be eligible for the full range of benefits offered under 
     Medicaid, an individual must be a citizen or national of the 
     United States or a qualified alien. Nonqualified aliens can 
     only receive limited emergency Medicaid benefits. Noncitizens 
     who apply for full Medicaid benefits have been required since 
     1986 to present documentation that indicates a ``satisfactory 
     immigration status.''
       Due to recent changes in federal law, citizens and 
     nationals also must present documentation that proves 
     citizenship and documents personal identity in order for 
     states to receive federal Medicaid reimbursement for services 
     provided to them. This citizenship documentation requirement 
     was included in the Deficit Reduction Act of 2005 (DRA, P.L. 
     109-171) and modified by the Tax Relief and Health Care Act 
     of 2006 (P.L. 109-432). Before the DRA, states could accept 
     self-declaration of citizenship for Medicaid, although some 
     chose to require additional supporting evidence.
       The citizenship documentation requirement is outlined under 
     Section 1903(x) of the Social Security Act and applies to 
     Medicaid eligibility determinations and redeterminations made 
     on or after July 1, 2006. The law specifies documents that 
     are acceptable for this purpose and exempts certain groups 
     from the requirement, including people who receive Medicare 
     benefits, Social Security benefits on the basis of a 
     disability, Supplemental Security Income benefits, child 
     welfare assistance under Title IV-B of the Social Security 
     Act, or adoption or foster care assistance under Title IV-E 
     of the Social Security Act. An interim final rule on the 
     requirement was issued in July 2006, and a final rule was 
     issued in July 2007.
       The citizenship documentation requirement does not apply to 
     SCHIP. However, some states use the same enrollment 
     procedures for all Medicaid and SCHIP applicants. As a 
     result, it is possible that some SCHIP enrollees would be 
     asked to present evidence of citizenship.
     Explanation of Provision
       As part of its Medicaid state plan and with respect to 
     individuals declaring to be U.S. citizens or nationals for 
     purposes of establishing Medicaid eligibility, a state would 
     be required to provide that it satisfies existing Medicaid 
     citizenship documentation rules under Section 1903(x) or new 
     rules under Section 1902(dd). The Secretary would not be 
     allowed to waive this requirement.
       Under a new Section 1902(dd), a state could meet its 
     Medicaid state plan requirement for citizenship documentation 
     by: (1) submitting the name and Social Security number (SSN) 
     of an individual to the Commissioner of Social Security as 
     part of a plan established under specified rules and (2) in 
     the case of an individual whose name or SSN is invalid, 
     providing the individual with an opportunity to cure the 
     invalid determination with the Social Security 
     Administration, followed by 90 days to present evidence of 
     citizenship as defined in Section 1903(x) and disenrolling 
     the individual within 30 days after the end of the 90-day 
     period if evidence is not provided.
       A state opting for name and SSN validation would be 
     required to establish a program under which it submits each 
     month to the Commissioner of Social Security for verification 
     of the name and SSN of each individual enrolled in Medicaid 
     that month who has attained the age of 1 before the date of 
     the enrollment. In establishing its program, a state could 
     enter into an agreement with the Commissioner to provide for 
     the electronic submission and verification of name and SSN 
     before an individual is enrolled in Medicaid.
       At such times and in such form as the Secretary may 
     specify, states would be required to provide information on 
     the percentage of invalid names and SSNs submitted each 
     month. If the average monthly percentage for any fiscal year 
     is greater than 7%, the state shall develop and adopt a 
     corrective plan and pay the Secretary an amount equal to 
     total Medicaid payments for the fiscal year for individuals 
     who provided invalid information multiplied by the ratio of 
     the number of individuals with invalid information in excess 
     of the 7% limited divided by the total number of individuals 
     with invalid information. The Secretary could waive, in 
     certain limited cases, all or part of such payment if a state 
     is unable to reach the allowable error rate despite a good 
     faith effort by the state. This provision shall not apply to 
     a State for a fiscal year, if there is an agreement with the 
     Commissioner to provide for the electronic submission and 
     verification of name and SSN before an individual is enrolled 
     in Medicaid, as of the close of the fiscal year.
       States would receive 90% reimbursement for costs 
     attributable to the design, development, or installation of 
     such mechanized verification and information retrieval 
     systems as the Secretary determines are necessary to 
     implement name and SSN validation, and 75% for the operation 
     of such systems.
       The provision would also clarify requirements under the 
     existing Section 1903(x). It would add ``a document issued by 
     a federally-recognized Indian tribe evidencing membership or 
     enrollment in, or affiliation with, such tribe'' to the list 
     of documents that provide satisfactory documentary evidence 
     of citizenship or nationality, except for tribes located 
     within states having an international border whose membership 
     includes noncitizens, who would only be allowed to use such 
     documents until the Secretary of HHS issues regulations 
     authorizing the presentation of other evidence. It would 
     require states to provide citizens with the same reasonable 
     opportunity to present evidence that is provided under 
     Section 1137(d)(4)(A) to noncitizens who must present 
     evidence of satisfactory immigration status. Groups that are 
     exempt from the Section 1903(x) citizenship documentation 
     requirement would remain the same as under current law, 
     except for the inclusion of a permanent exemption for 
     children who are deemed eligible for Medicaid coverage by 
     virtue of being born to a mother on Medicaid. The provision 
     would clarify that deemed eligibility applies to children 
     born to noncitizen women on emergency Medicaid, and would 
     require separate identification numbers for children born to 
     these women.
       In order to receive reimbursement for an individual who 
     has, or is, declared to be a U.S. citizen or national for 
     purposes of establishing CHIP eligibility, a state would be 
     required to meet the Medicaid state plan requirement for 
     citizenship documentation described above. The 90% and 75% 
     reimbursement for name and SSN validation would be available 
     under SCHIP, and would not count towards a state's CHIP 
     administrative expenditures cap.
       Except for technical amendments made by the provision and 
     the application of citizenship documentation to CHIP, which 
     would be effective upon enactment, the provision would be 
     effective as if included in the Deficit Reduction Act of 
     2005. States would be allowed to provide retroactive 
     eligibility for certain individuals who had been determined 
     ineligible under previous citizenship documentation rules.


      Section 302. Reducing administrative barriers to enrollment

     Current Law
       During the implementation of SCHIP states instituted a 
     variety of enrollment facilitation and outreach strategies to 
     bring eligible children into Medicaid and SCHIP. As a result, 
     substantial progress was made at the state level to simplify 
     the application and enrollment processes to find, enroll, and 
     maintain eligibility among those eligible for the program.
     Explanation of Provision
       The provision would require the State plan to describe the 
     procedures used to reduce the administrative barriers to the 
     enrollment of children and pregnant women in Medicaid and 
     CHIP, and to ensure that such procedures are revised as often 
     as the State determines is appropriate to reduce newly 
     identified barriers to enrollment. States would be deemed to 
     comply with the above-listed requirement if (1) the State's 
     application and renewal forms, and information verification 
     processes are the same under Medicaid and CHIP for 
     establishing and renewing eligibility for children and 
     pregnant women, and (2) the state does not require a face-to-
     face interview during the application process.

    Title IV--Elmination of Barriers to Providing Premium Assistance

  Subtitle A--Additional State Option for Providing Premium Assistance


 Section 401. Additional State option for providing premium assistance

     Current Law
       Under Medicaid, a provision in the Omnibus Budget 
     Reconciliation Act (OBRA) of 1990 created the health 
     insurance premium payment (HIPP) program. The original HIPP 
     provision required state Medicaid programs to pay a Medicaid 
     beneficiary's share of costs

[[Page S10183]]

     for group (employer-based) health coverage for any Medicaid 
     enrollee for whom employer-based coverage is available when 
     that coverage is both comprehensive and cost effective for 
     the state. An individual's enrollment in an employer plan is 
     considered cost effective if paying the premiums, 
     deductibles, coinsurance and other cost-sharing obligations 
     of the employer plan is less expensive than the state's 
     expected cost of directly providing Medicaid-covered 
     services. Under the original provision, states were also 
     required to purchase employer-based health insurance for non-
     Medicaid eligible family members if such family coverage was 
     necessary for Medicaid-eligible individual to receive 
     coverage, and as long as it was still cost-effective. States 
     were also to provide coverage for those Medicaid covered 
     services that are not included in the private plans. In 
     August 1997, as part of the Balanced Budget Act, Congress 
     amended the mandatory nature of the HIPP provision. Today, 
     states can opt to use Medicaid funds to pay for premiums and 
     other cost-sharing for Medicaid beneficiaries when coverage 
     is available, comprehensive, and cost-effective.
       Under SCHIP, the Secretary has the authority to approve 
     funding for the purchase of ``family coverage'' if it is cost 
     effective relative to the amount paid to cover only the 
     targeted low-income children and does not substitute for 
     coverage under group health plans that would otherwise be 
     provided to the children. While the term ``family coverage'' 
     is not specifically defined in the statute, it has been 
     interpreted to refer to either coverage for the entire family 
     under an SCHIP program or under an employer-sponsored health 
     insurance plan. In addition, states using SCHIP funds for 
     employer-based plan premiums must ensure that SCHIP minimum 
     benefits are provided and SCHIP cost-sharing ceilings are 
     met.
       Because of these requirements, implementation of premium 
     assistance programs under Medicaid and SCHIP are not 
     widespread. States cited difficulty in identifying potential 
     enrollees, determining whether the subsidy would be cost-
     effective, and obtaining necessary information (e.g., 
     information about the availability of employer-sponsored 
     plans, covered benefits, available contributions, and the 
     remaining costs) as some of the barriers to the 
     implementation of such programs.
       In August 2001, the Bush Administration introduced the 
     Health Insurance Flexibility and Accountability (HIFA) 
     Initiative under the Section 1115 waiver authority. Under 
     HIFA, states were to direct unspent SCHIP funds to extend 
     coverage to uninsured populations with annual income less 
     than 200% FPL and to use Medicaid and SCHIP funds to pay 
     premium costs for waiver enrollees who have access to 
     Employer Sponsored Insurance (ESI). This resulted in an 
     increased emphasis on states' use of the Section 1115 waiver 
     authority to offer premium assistance for employer-based 
     health coverage in lieu of full Medicaid and/or SCHIP 
     coverage. ESI programs approved under the Section 1115 waiver 
     authority are not subject to the same current law constraints 
     required under Medicaid's HIPP program or SCHIP's family 
     coverage variance option (i.e., the comprehensiveness and 
     cost-effectiveness tests).
     Explanation of Provision
       The provision would allow states to offer a premium 
     assistance subsidy for qualified employer sponsored coverage 
     to all targeted low-income children who are eligible for 
     child health assistance and have access to such coverage. 
     Qualified employer sponsored coverage would be defined as a 
     group health plan or health insurance coverage offered 
     through an employer that (1) qualifies as credible health 
     coverage as a group health plan under the Public Health 
     Service Act, (2) for which the employer contributes at least 
     40 percent toward the cost of the premium, and (3) is non-
     discriminatory in a manner similar to section 105(h) of the 
     Internal Revenue Code but would not allow employers to 
     exclude workers who had less than 3 years of service. 
     Qualified employer-sponsored insurance would not include (1) 
     benefits provided under a health flexible spending 
     arrangement, (2) a high deductible health plan purchased in 
     conjunction with a health savings account as defined in the 
     Internal Revenue Code of 1986.
       The provision would establish a new cost effectiveness test 
     for ESI programs. A group health plan or health insurance 
     coverage offered through an employer would be considered 
     qualified employer sponsored coverage if the state 
     establishes that (1) the cost of such coverage is less than 
     the expenditures that the State would have made to enroll the 
     child or the family (as applicable) in CHIP, or (2) the State 
     establishes that the aggregate amount of State expenditures 
     for the purchase of all such coverage for targeted low-income 
     children under CHIP (including administrative expenses) does 
     not exceed the aggregate amount of expenditures that the 
     State would have made for providing coverage under the CHIP 
     state plan for all such children.
       Premium assistance subsidies would be considered child 
     health assistance for the purpose of making federal matching 
     payments under the CHIP program, and the state would be 
     considered a secondary payor for any items or services 
     provided under ESI coverage. The provision defines premium 
     assistance subsidies as an amount equal to the difference 
     between the employee contribution for the employee only, and 
     the employee contribution for the employee and CHIP-eligible 
     child, less applicable premium cost sharing imposed under 
     title XXI (including the employee contribution toward the 5 
     percent total annual aggregate cost-sharing limit under 
     CHIP). States would be permitted to provide a premium 
     assistance subsidy as reimbursement for out-of-pocket 
     expenses directly to an employee, or directly to the 
     employer. At the employer's option, the provision permits the 
     employer to notify the State that it elects to opt out of 
     being directly paid a premium assistance subsidy on behalf of 
     an employee. In the event of such notification, the employer 
     would be required to withhold the total amount of the 
     employee contribution required for enrollment of the employee 
     (and the child) in the ESI coverage and then the State would 
     then pay the premium subsidy directly to the employee.
       States would be required to provide supplemental coverage 
     for each targeted low income child enrolled in the ESI plan 
     consisting of items or services that are not covered, or are 
     only partially covered, and cost-sharing protections 
     consistent with the requirements of CHIP. States would be 
     permitted to directly pay out-of-pocket expenditures for 
     cost-sharing imposed under the qualified ESI coverage and 
     collect all (or any) portion for cost-sharing imposed on the 
     family.
       Waiting periods (to prevent crowd-out of private coverage 
     with public coverage) imposed under the CHIP state plan would 
     also apply to premium assistance coverage. Parents would be 
     permitted to disenroll their child(ren) from ESI coverage 
     and enroll them in CHIP coverage effective on the first 
     day of any month for which the child is eligible for such 
     coverage.
       States that provide ESI coverage to parents of targeted 
     low-income children, would be permitted to offer a premium 
     assistance subsidy to eligible parents in the same manner as 
     that State offers such subsidy to eligible child(ren). The 
     amount of the premium subsidy would be increased to take into 
     account the cost of enrollment of the parent in the ESI 
     coverage, or at state option, the cost of the enrollment of 
     the child's family (if the states determines that it is cost-
     effective).
       Each state has the option to establish an employer/family 
     premium assistance purchasing pool for employers with less 
     than 250 employees who have at least one CHIP-eligible 
     employee (pregnant woman) or child.
       The state, or a state designated entity, will identify and 
     offer access to not less than two privately delivered health 
     products that meet the CHIP benefits benchmark.
       States that provide ESI coverage to parents of targeted 
     low-income children, would be permitted to offer a premium 
     assistance subsidy to eligible parents in the same manner as 
     that State offers such subsidy to eligible child(ren). The 
     amount of the premium subsidy would be increased to take into 
     account the cost of enrollment of the parent in the ESI 
     coverage, or at state option, the cost of the enrollment of 
     the child's family (if the states determines that it is cost-
     effective).
       This provision would not limit the state's authority to 
     offer premium assistance under the Medicaid HIPP program, a 
     section 1115 demonstration waiver, or any other authority in 
     effect prior to the enactment of this Act. States would be 
     required to inform parents about the availability of premium 
     assistance subsidies for CHIP eligible children in qualified 
     employer-sponsored insurance, how the family would elect such 
     subsides during the application process and ensure that 
     parents are fully informed of the choices for receiving child 
     health assistance under the CHIP or through the receipt of a 
     premium assistance subsidy.
       The provision would also allow States to provide premium 
     assistance subsidies for enrollment of targeted low-income 
     children in coverage under a group health plan or health 
     insurance coverage offered through an employer if it is 
     determined that such coverage is actuarially equivalent to 
     CHIP benchmark benefits coverage, or CHIP benchmark-
     equivalent coverage. Plans that meet the CHIP benefit 
     coverage requirements would not be required to provide 
     supplemental coverage for benefits and cost-sharing 
     protections as required under CHIP. Such provisions would be 
     applied to Medicaid-eligible children and to the parents of 
     Medicaid-eligible children in the same manner as they are 
     applied to CHIP.
       Finally, the provision would require the General 
     Accountability Office to submit a report to the appropriate 
     committees of Congress on cost and coverage issues relating 
     to any State premium assistance programs for which federal 
     matching payments are made under Medicaid, CHIP, or the 
     Section 1115 waiver authority. Such report will be due to 
     Congress no later than January 1, 2009.


      Section 402. Outreach, education, and enrollment assistance

     Current Law
       SCHIP states plans are required to include a description of 
     the procedures in place to provide outreach to children 
     eligible for SCHIP child health assistance, or other public 
     or private health programs to (1) inform these families of 
     the availability of SCHIP coverage, and (2) to assist them in 
     enrolling such children in SCHIP. In addition, states are 
     required to provide a description of the state's efforts to 
     ensure coordination between SCHIP and other public and 
     private health coverage.
       There is a limit on federal spending for SCHIP 
     administrative expenses, which include activities such as 
     data collection and

[[Page S10184]]

     reporting, as well as outreach and education. For federal 
     matching purposes, a 10% cap applies to state administrative 
     expenses. This cap is tied to the dollar amount that a state 
     draws down from its annual allotment to cover benefits under 
     SCHIP, as opposed to 10% of a state's total annual allotment. 
     In other words, no more than 10% of the federal funds that a 
     state draws down for SCHIP benefit expenditures can be used 
     for administrative expenses.
     Explanation of Provision
       The provision would require states to include a description 
     of the procedures in place to provide outreach, education, 
     and enrollment assistance for families of children likely to 
     be eligible for premium assistance subsidies under CHIP or a 
     waiver approved under Section 1115. For employers likely to 
     provide qualified employer-sponsored coverage, the state is 
     required to include the specific resources the State intends 
     to apply to educate employers about the availability of 
     premium assistance subsidies under the CHIP state plan. 
     Expenditures for such outreach activities would not be 
     subject to the 10 percent limit on spending for 
     administrative costs associated with the CHIP program.

   Subtitle B--Coordinating Premium Assistance With Private Coverage


Section 411. Special enrollment period under group health plans in case 
    of termination of Medicaid or CHIP coverage or eligibility for 
          assistance in purchase of employment-based coverage

     Current Law
       Under the Internal Revenue Code, a group health plan is 
     required to provide special enrollment opportunities to 
     qualified individuals. Special enrollment refers to the 
     opportunity given to qualified individuals to enroll in a 
     health plan without having to wait until a late enrollment 
     opportunity or open season. Such individuals must have lost 
     eligibility for other group coverage, or lost employer 
     contributions towards health coverage, or added a dependent 
     due to marriage, birth, adoption, or placement for adoption. 
     In addition, the individual must meet the health plan's 
     substantive eligibility requirements, such as being a full-
     time worker or satisfying a waiting period. Health plans must 
     give qualified individuals at least 30 days after the 
     qualifying event (e.g., loss of eligibility) to make a 
     request for special enrollment.
       The same special enrollment opportunities apply to group 
     health plans and health insurance issuers offering group 
     health insurance under the Employee Retirement Income 
     Security Act.
       The Employee Retirement Income Security Act specifies the 
     persons who may bring civil action to enforce the provisions 
     under this statute. Such persons include a plan participant 
     or beneficiary, a fiduciary, the Secretary of Labor, and a 
     State. Current law allows the Secretary to assess a maximum 
     financial penalty.against a plan administrator or employer 
     for certain violations, including failure to meet the 
     existing notice requirement.
     Explanation of Provision
       The provision would require (under the Internal Revenue 
     Code) a group health plan to permit an eligible but not 
     enrolled employee (or dependent(s) of such an employee) to 
     enroll for coverage under the group health plan if either of 
     the following conditions are met: (1) the employee or 
     dependent(s) is/are covered under Medicaid or CHIP, and 
     coverage of the employee or dependent(s) is terminated as a 
     result of loss of eligibility and the employee requests 
     coverage under the group health plan not later than 60 days 
     after the date of coverage termination, or (2) the employee 
     or dependent(s) becomes eligible for assistance, with respect 
     to coverage under the group health plan under Medicaid or 
     CHIP (including under any waiver or demonstration project), 
     if the employee requests coverage under the group health plan 
     no later than 60 days after the date the employee or 
     dependent is determined to be eligible for such assistance.
       Each employer that maintains a group health plan in a State 
     that provides premium assistance under Medicaid or CHIP would 
     be required to provide each employee a written notice of the 
     potential opportunities for premium assistance available in 
     the State under Medicaid and CHIP. For compliance purposes, 
     the employer may use any State-specific model notice issued 
     by the Secretary of Labor or the Secretary of Health and 
     Human Services in accordance with the model notice 
     requirements established under this section of the bill.
       The plan administer of the group health plan would be 
     required to disclose to the State, upon request, information 
     about the benefits available under the group health plan so 
     as to permit the State to make a determination concerning 
     cost-effectiveness, and in order for the State to provide 
     supplemental benefits if required.
       The provision includes conforming amendments. A group 
     health plan and a health insurance issuer offering group 
     health insurance (under the Employee Retirement Income 
     Security Act) would be required to permit an eligible but not 
     enrolled employee (or dependent(s) of such an employee) to 
     enroll for coverage under the group health plan if either of 
     the following conditions are met: (1) the employee or 
     dependent(s) is/are covered under Medicaid or CHIP, and 
     coverage of the employee or dependent(s) is terminated as a 
     result of loss of eligibility and the employee requests 
     coverage under the group health plan not later than 60 days 
     after the date of coverage termination, or (2) the employee 
     or dependent(s) becomes eligible for assistance, with respect 
     to coverage under the group health plan under Medicaid or 
     CHIP (including under any waiver or demonstration project), 
     if the employee requests coverage under the group health plan 
     not later than 60 days after the date the employee or 
     dependent is determined to be eligible for such assistance.
       Each employer that maintains a group health plan in a State 
     that provides premium assistance under Medicaid or CHIP would 
     be required to provide each employee a written notice of the 
     potential opportunities for premium assistance available in 
     the State under Medicaid and CHIP. Not later than 1 year 
     after the date of enactment, the Secretary of Labor and the 
     Secretary of Health and Human Services (HHS), in consultation 
     with State Medicaid Directors and State CHIP Directors, would 
     be required to develop model notices to enable employers to 
     comply with notice requirements in a timely manner. Model 
     notices would include information regarding how an employee 
     would contact the State for information regarding premium 
     assistance and how to apply for such assistance.
       The plan administer of the group health plan would be 
     required to disclose to the State, upon request, information 
     about the benefits available under the group health plan so 
     as to permit the State to make a determination concerning 
     cost-effectiveness, and in order for the State to provide 
     supplemental benefits if required.
       The HHS Secretary and the Labor Secretary would be required 
     to jointly establish a Medicaid, CHIP, and Employer-Sponsored 
     Coverage Coordination Working Group not later than 60 days 
     after the date of enactment. The purpose of the Working Group 
     would be to develop the model coverage coordination 
     disclosure form, and to identify the impediments to effective 
     coordination of coverage available to families. The purpose 
     of the disclosure form would be to allow the State to 
     determine the availability and cost-effectiveness of 
     coverage, and allow for coordination of coverage for 
     enrollees of such plans. The forms will include (1) 
     information that will allow for the determination of an 
     employee's eligibility for coverage under the group health 
     plan, (2) the name and contact information of the plan 
     administrator of the group health plan, (3) benefits offered 
     under the plan, (4) premiums and cost-sharing under the plan, 
     and (5) any other information relevant to coverage under the 
     plan.
       The Working Group would consist of no more than 30 members 
     and be composed of representatives from the Department of 
     Labor, the Department of Health and Human Services, State 
     directors of Medicaid and CHIP programs, employers (including 
     owners of small businesses and their trade or industry 
     representatives and certified human resource and payroll 
     professionals), plan administrations and plan sponsors of 
     group health plans, and children and other beneficiaries of 
     Medicaid and CHIP. Members would be required to serve without 
     compensation. The Department of Health and Human Services and 
     the Department of Labor would be required to jointly provide 
     appropriate administrative support to the Working Group, 
     including technical assistance. The Working Group would be 
     required to submit the model coverage coordination disclosure 
     form, along with a report containing recommendations for 
     appropriate measures to address impediments to effective 
     coordination of coverage between Medicaid, CHIP and group 
     health plans, to the Labor Secretary and the HHS Secretary no 
     later than 18 months after the date of enactment. The 
     Secretaries shall jointly submit a report regarding the 
     Working Group report recommendations to each chamber of the 
     Congress no later than 2 months after receipt of the report 
     from the Working Group. The Working Group shall terminate 30 
     days after the issuance of its report.
       The Labor Secretary and the HHS Secretary would be required 
     to develop the initial model notices, and the Labor Secretary 
     would provide such notices to employers no later than 1 year 
     after the date of enactment. Each employer would be required 
     to provide initial annual notices to its employees beginning 
     the first year after the date on which the model notices are 
     first issued. The model coverage coordination disclosure form 
     would also apply to requests made by States beginning the 
     first year after the date on which the model notices are 
     first issued.
       The provision would amend current law by allowing the Labor 
     Secretary to assess a civil penalty (up to $100 a day) 
     against an employer for failure to meet the new notice 
     requirement established under this section of the bill. Each 
     violation with respect to any employee would be treated as a 
     separate violation. The Labor Secretary would also be allowed 
     to assess a civil penalty (up to $100 a day) against a plan 
     administrator for failure to comply with the new disclosure 
     requirement established under this section of the bill. Each 
     violation with respect to any participant or beneficiary 
     would be treated as a separate violation.

 Title V--Strengthening Quality of Care and Health Outcomes of Children


 Section 501. Child health quality improvement activities for children 
                      enrolled in Medicaid or CHIP

     Current Law
       The Centers for Medicare and Medicaid Services (CMS) and 
     the Agency for

[[Page S10185]]

     Healthcare Research and Quality (AHRQ) are both actively 
     involved in funding and implementing an array of quality 
     improvement initiatives, though only AHRQ has engaged in 
     activities specific to children.
       In November 2002, CMS started the Quality Initiative (QI), 
     a multi-faceted effort to improve health care quality. This 
     program includes the Nursing Home Quality Initiative, the 
     Home Health Quality Initiative, the National Voluntary 
     Hospital Quality Reporting Initiative, and the Physician 
     Focused Quality Initiative. The Medicare Prescription Drug, 
     Improvement, and Modernization Act of 2003 (MMA) included 
     provisions for hospitals to report data on quality 
     indicators. In addition, the MMA included a variety of 
     provisions designed to promote quality care, such as 
     demonstrations that focus on improving the treatment of 
     chronic illnesses and on identifying effective approaches for 
     rewarding superlative performance. In 2005, quality reporting 
     was expanded for inpatient hospital services and extended to 
     home health. The development of plans for value-based 
     purchasing in hospitals and home health settings was also 
     required. In 2006, quality reporting was extended to hospital 
     outpatient services and ambulatory service centers. 
     Additionally, the 2007 Physician Quality Reporting Initiative 
     (PQRI) implemented a voluntary quality reporting system for 
     physicians and other eligible professionals with incentive 
     payments for covered professional services tied to the 
     reporting of claims data.
       None of the CMS QI programs to date have focused on 
     children. Rather, most have focused on the general 
     population, adults with chronic conditions, or the frail 
     elderly.
       AHRQ has made quality improvement for children a priority 
     in recent years. In part, this is because of the high costs 
     incurred by children on Medicaid/SCHIP.
       Many AHRQ projects to implement and evaluate improved 
     health care strategies for the care of children are underway. 
     These include:
       1. Pediatric Quality Indicators that includes a set of 
     measures that can be used with hospital inpatient discharge 
     data to detect patient safety events and potentially 
     avoidable hospitalizations.
       2. The Consumer Assessment of Healthcare Providers and 
     Systems (CAHPS) program is a public-private initiative to 
     develop standardized surveys of patients' experiences with 
     ambulatory and facility-level care. Medicaid uses CAHPS to 
     measure quality of care for children with special health care 
     needs.
       3. AHRQ's Child Health Care Quality Toolbox lists tips and 
     tools for evaluating health care quality for children. It is 
     available to providers and consumers at www.ahrq.gov/
chtoolbx/index.htm.
       Other AHRQ-supported initiatives to improve the quality and 
     safety of health care for children and adolescents, focusing 
     on health care IT, and the development of pediatric 
     electronic medical records, among other quality improvement 
     activities.
     Explanation of Provision
       (a) Development of Child Health Quality Measures For 
     Children Enrolled in Medicaid or CHIP.
       The provision would add a new section to the Social 
     Security Act defining child health quality improvement 
     activities for children enrolled in Medicaid and CHIP. Not 
     later than January 1, 2009, the Secretary would be required 
     to identify and publish for general comment an initial 
     recommended core set of child health quality measures for use 
     by states with respect to Medicaid and CHIP, health insurance 
     issuers and managed care entities that enter into contracts 
     under Medicaid and CHIP, and providers under those two 
     programs.
       With consultation with specific groups (identified below), 
     the Secretary must identify existing quality of care measures 
     for children that are in use under public and privately 
     sponsored health care coverage arrangements, or that are part 
     of reporting systems that measure both the presence and 
     duration of health insurance coverage over time. Based on 
     such measures, the Secretary published an initial core set of 
     child health quality measures that includes, but is not 
     limited to, the following: (1) duration of insurance coverage 
     over a 12-month period, (2) availability of a full range of 
     preventive services, treatments, and services for acute 
     conditions, including services to promote healthy birth and 
     prevent and treat premature birth, and treatments to correct 
     or ameliorate the effects of chronic physical and mental 
     conditions, (3) availability of care in a range of ambulatory 
     and inpatient settings, and (4) measures that, taken 
     together, can be used to estimate the overall national 
     quality of health care for children and to perform 
     comparative analyses of pediatric health care quality and 
     racial, ethnic, and socioeconomic disparities in child health 
     and health care for children.
       Not later than 2 years after the enactment of the 
     Children's Health Insurance Program Reauthorization Act of 
     2007, the Secretary, in consultation with the states, must 
     develop a standardized format for reporting information and 
     procedures and approaches that encourage states to use the 
     initial core measurement set to voluntarily report 
     information regarding quality of pediatric care under 
     Medicaid and CHIP.
       In addition, the Secretary must disseminate information to 
     states regarding best practices with respect to measuring and 
     reporting quality of care for children, and must facilitate 
     adoption of such best practices. In developing these best 
     practices approaches, the Secretary must give particular 
     attention to state measurement techniques that ensure 
     timeliness and accuracy of provider reporting, encourage 
     provider reporting compliance and encourage successful 
     quality improvement strategies, and improve efficiency in 
     data collection using health information technology.
       Not later than January 1, 2010, and every 3 years 
     thereafter, the Secretary must report to Congress on (1) the 
     status of the Secretary's efforts to improve quality related 
     to the duration and stability of health insurance coverage 
     for children under Medicaid and CHIP, (2) the quality of 
     children's health care under those programs, including 
     preventive health services, health care for acute conditions, 
     chronic health care, and health services to ameliorate the 
     effects of physical and mental conditions, as well as to aid 
     in growth and development of children, and (3) quality of 
     children's health care, including clinical quality, health 
     care safety, family experience with health care, health 
     care in the most integrated setting, and elimination of 
     racial, ethnic, and socioeconomic disparities in health 
     and health care. In these reports to Congress, the 
     Secretary must also describe the status of voluntary 
     reporting by states under Medicaid and CHIP utilizing the 
     initial core set of quality measures, and provide any 
     recommendations for legislative changes needed to improve 
     quality of care provided to Medicaid and CHIP children, 
     including recommendations for quality reporting by states. 
     The Secretary must also provide technical assistance to 
     states to assist them in adopting and utilizing core child 
     health quality measures for their Medicaid and CHIP 
     programs.
       The provision defines ``core set'' to mean a group of 
     valid, reliable and evidence-based quality measures for 
     children that provide information regarding the quality of 
     health coverage and health care for children, address the 
     needs of children throughout the developmental age span, and 
     that allow purchasers, families, and health care providers to 
     understand the quality of care in relation to the preventive 
     needs of children, treatments aimed at managing and resolving 
     acute conditions, and diagnostic and treatment services to 
     correct or ameliorate physical, mental or developmental 
     conditions that could become chronic if left untreated or 
     poorly treated.
       (b) Advancing and Improving Pediatric Quality Measures.
       The provision would also require the Secretary to establish 
     a pediatric quality measures program not later than January 
     1, 2010. The purpose of this program would be to (1) improve 
     and strengthen the initial core child health care quality 
     measures, (2) expand on existing pediatric quality measures 
     used by both public and private purchasers and advance the 
     development of new and emerging measures, and (3) increase 
     the portfolio of evidence-based, consensus pediatric quality 
     measures available to public and private purchases of 
     children's health care services, providers and consumers.
       At a minimum, the pediatric quality measures developed 
     under this program must be (1) evidence-based and where 
     appropriate, risk-adjusted, (2) designed to identify and 
     eliminate racial and ethnic disparities in child health and 
     the provision of health care, (3) designed to ensure that the 
     data required for such measures is collected and reported in 
     a standard format that permits comparisons at the state, plan 
     and provider level, (4) periodically adjusted, and (5) 
     responsive to child health needs, services and stability of 
     coverage.
       In identifying gaps in existing pediatric quality measures 
     and establishing priorities for the development and use of 
     such measures, the Secretary must consult with a variety of 
     entities, including (1) states, (2) institutional and non-
     institutional providers that specialize in the care and 
     treatment of children, particularly those with special needs, 
     (3) dental professionals, including pediatric dental 
     professionals, (4) primary care providers for children and 
     families living in medically under-served areas, or who are 
     members of population subgroups at heightened risk for poor 
     health outcomes, (5) national organizations representing 
     consumers and purchasers of children's health care, (6) 
     national organizations and individuals with expertise in 
     pediatric health quality measurement, and (7) voluntary 
     consensus standard setting organizations and other 
     organizations involved in the advancement of evidence-based 
     measures of health care.
       In addition, the Secretary must award grants and contracts 
     for the development, testing, and validation of new, 
     emerging, and innovative evidence-based measures for 
     children's health care services across the domains of quality 
     identified above, and must also award grants and contracts 
     for the (1) development of consensus on evidence-based 
     measures for children's health care services, (2) 
     dissemination of such measures to public and private 
     purchasers of health care for children, and (3) updating of 
     such measures as necessary.
       Beginning no later than January 1, 2012 and annually 
     thereafter, the Secretary must publish recommended changes to 
     the core measures described above that must reflect the 
     testing, validation, and consensus process for the 
     development of pediatric quality measures also described 
     above.
       The term ``pediatric quality measure'' means a measurement 
     of clinical care that is capable of being examined through 
     the collection and analysis of relevant information, that is 
     developed in order to assess one or

[[Page S10186]]

     more aspects of pediatric health care quality in various 
     institutional and ambulatory health care settings, including 
     the structure of the clinical care system, the process of 
     care, the outcome of care, or patient experiences in care.
       (c) Annual State Reports Regarding State-Specific Quality 
     of Care Measures Applied Under Medicaid or CHIP.
       Each state with an approved state plan for Medicaid or CHIP 
     must report annually to the Secretary the following: (1) 
     state-specific child health quality measures, including 
     measures of duration and stability of insurance coverage; 
     quality with respect to preventive services and care for 
     acute and chronic conditions as well as services to 
     ameliorate the effects of physical and mental conditions, and 
     to aid in growth and development; clinical quality, health 
     care safety, family experience with health care, care 
     delivered in the most integrated setting, and elimination of 
     racial, ethnic and socioeconomic disparities in health care; 
     and other measures in the initial core quality measurement 
     set identified above, and (2) state-specific information on 
     the quality of care provided to children under Medicaid and 
     CHIP, including information collected through external 
     quality reviews of Medicaid managed care organizations (under 
     Section 1932) and Medicaid benchmark plans (under Section 
     1937), and CHIP benchmark plans (under Section 2103). Not 
     later than September 30, 2009, and annually thereafter, the 
     Secretary must collect, analyze and make publicly available 
     the information reported by states as described above.
       (d) Demonstration Projects for Improving the Quality of 
     Children's Health Care and the Use of Health Information 
     Technology.
       During FY2008 through FY2012, the Secretary must award not 
     more than 10 grants to states and child health providers to 
     conduct demonstration projects to evaluate promising ideas 
     for improving the quality of children's health care furnished 
     under Medicaid and CHIP. Such projects would include efforts 
     designed to: (1) experiment with and evaluate new measures of 
     the quality of children's health care (including testing the 
     validity and suitability for reporting of such measures), (2) 
     promote the use of health information technology in care 
     delivery for children, (3) evaluate provider-based models 
     that improve the delivery of services to children, including 
     care management for children with chronic conditions and the 
     use of evidence-based approaches to improve the 
     effectiveness, safety and efficiency of health care for 
     children, or (4) demonstrate the impact of the model 
     electronic health record format for children on improving 
     pediatric health, including the effects of chronic childhood 
     health conditions, and pediatric health care quality as well 
     as reducing health care costs.
       In awarding these grants, the Secretary must ensure that 
     (1) only one demonstration project funded by such a grant 
     shall be conducted in a state, and (2) such demonstration 
     projects must be conducted evenly between states with large 
     urban areas and states with large rural areas. Grants may be 
     conducted on a multi-state basis, as needed.
       Of the total amount appropriated for this new grant program 
     for a fiscal year (described below), $20 million must be used 
     to carry out these activities.
       (e) Demonstration Projects for Reducing Childhood Obesity
      Current Law
       Greater awareness of the obesity crisis and its long-term 
     social and economic implications has encouraged policy makers 
     to fund an array of programs aimed at promoting physical 
     activity and appropriate nutrition. While many of these have 
     been state-based efforts, the federal government has actively 
     funded obesity research as well as health promotion campaigns 
     and public health surveillance systems.
       Title III of the Public Health Service Act (42 USC) obliges 
     the Secretary of Health and Human Services to ``conduct . . . 
     encourage, cooperate with, and render assistance to other 
     appropriate public authorities, scientific institutions, and 
     scientists in the conduct of, and promote the coordination 
     of, research, investigations, experiments, and 
     demonstrations, and studies relating to the causes, 
     diagnosis, treatment, control, and prevention of physical and 
     mental diseases and impairments''. In carrying out these 
     responsibilities, the Secretary is authorized to make grants-
     in-aid to universities, hospitals, laboratories, other public 
     or private institutions, and to individuals for research 
     projects.
       The National Academy of Sciences (NAS) recently noted that 
     the fundamental problem plaguing national programs seeking to 
     address the obesity crisis is that these efforts ``remain 
     fragmented and small-scale''. Moreover, obesity prevention 
     programs remain largely uncoordinated. Although many federal 
     agencies are involved in overseeing different types of 
     obesity-related programs, including the Centers for 
     Disease Control and Prevention (CDC), the Department of 
     Agriculture, the National Institutes of Health, and 
     Department of Health and Human Services, NAS concluded 
     that the lack of a dedicated funding stream for obesity 
     prevention and inadequate coordination between federal 
     agencies has led to inefficient uses of resources or 
     unnecessary redundancies in programmatic efforts.
       Another problem is that many federal funding streams 
     available to support healthy lifestyles among children have 
     been very narrowly focused on small target populations or 
     they have only addressed obesity indirectly. Examples of the 
     former include efforts which have exclusively targeted low-
     income families (usually, Medicaid recipients); by contrast, 
     health education courses aimed at American Indians with Type 
     2 diabetes exemplify the types of federally-funded efforts 
     which have indirectly served as obesity prevention programs 
     but which have reached very limited numbers of individuals in 
     the aggregate.
     Explanation of Provision
       The Secretary, in consultation with the Administrator of 
     the Centers for Medicare a Medicaid Services, shall conduct a 
     demonstration project to develop a comprehensive and 
     systematic model for reducing childhood obesity by awarding 
     grants to eligible entities to carry out such a project. The 
     model will (1) identify behavioral risk factors for obesity 
     among children; (2) identify needed clinical preventive and 
     screening benefits among those children identified as target 
     individuals on the basis of such risk factors; (3) provide 
     ongoing support to such target individuals and their families 
     to reduce risk factors and promote the appropriate use of 
     preventive and screening benefits; and (4) be designed to 
     improve health outcomes, satisfaction, quality of life, and 
     appropriate use of items and services for which medical 
     assistance is available under CHIP and Medicaid.
       Eligible entities include a city, county, or Indian tribe; 
     a local or tribal educational agency; an accredited 
     university, college, or community college; a federally-
     qualified health center; a local health department; a health 
     care provider; a community-based organization; or any other 
     entity determined appropriate by the Secretary, including a 
     consortium or partnership.
       An eligible entity awarded a grant under this provision 
     shall use the funds to (1) carry out community-based 
     activities related to reducing childhood obesity, (2) carry 
     out age-appropriate school-based activities that are designed 
     to reduce childhood obesity, (3) carry out educational, 
     counseling, promotional, and training activities through the 
     local health care delivery systems, and (4) provide, through 
     qualified health professionals, training and supervision for 
     community health workers to engage in educational efforts 
     related to obesity.
       Not later than 3 years after the Secretary implements the 
     demonstration project under this subsection, the Secretary 
     shall submit to Congress a report that describes the project, 
     evaluates the effectiveness and cost effectiveness of the 
     project, evaluates beneficiary satisfaction under the 
     project, and includes any other information the Secretary 
     deems appropriate. $25 million is authorized for this 
     purpose.
       (f) Development of Model Electronic Health Record Format 
     for Children Enrolled in Medicaid or CHIP.
       Not later than January 1, 2009, the Secretary must 
     establish a program to encourage the development and 
     dissemination of a model electronic health record format for 
     children enrolled under state plans for Medicaid or CHIP. 
     Such an electronic health record would be (1) subject to 
     state laws, accessible to parents, caregivers and other 
     consumers for the sole purpose of demonstrating compliance 
     with school or leisure activity requirements, (2) designed to 
     allow interoperable exchanges that conform with federal and 
     state privacy and security requirements, (3) structured in a 
     manner that permits parents and caregivers to view and 
     understand the extent to which the care their children 
     receive is clinically appropriate and of high quality, and 
     (4) capable of being incorporated into, and otherwise 
     compatible with, other standards developed for electronic 
     health records. Of the total amount appropriated for this new 
     grant program for a fiscal year, $5 million must be used to 
     carry out these activities.
       (g) Study of Pediatric Health and Health Care Quality 
     Measures.
       Not later than July 1, 2009, the Institute of Medicine must 
     study and report to Congress on the extent and quality of 
     efforts to measure child health status and the quality of 
     health care for children across the age span and in relation 
     to preventive care, treatments for acute conditions, and 
     treatments to ameliorate or correct physical, mental, and 
     developmental conditions in children. In conducting this 
     study, the IOM must: (1) consider all the major national 
     population-based reporting systems sponsored by the federal 
     government, including reporting requirements under federal 
     grant programs and national population surveys and estimates 
     conducted directly by the federal government, (2) identify 
     the information regarding child health and health care 
     quality that each system is designed to capture and generate, 
     the study and reporting periods covered by each system, and 
     the extent to which the information is made widely available 
     through publication, (3) identify gaps in knowledge related 
     to children's health status, health disparities among 
     subgroups of children, the effects of social conditions on 
     children's health status and use and effectiveness of health 
     care, and the relationship between child health status and 
     family income, family stability and preservation, and 
     children's school readiness and educational achievement and 
     attainment, and (4) make recommendations regarding improving 
     and strengthening the timeliness, quality, and public 
     transparency and accessibility of information about child 
     health and health care

[[Page S10187]]

     quality. Of the total amount appropriated for this new grant 
     program, up to $1 million must be used to carry out these 
     activities.
       (h) Rule of Construction.
       No evidence-based quality measure developed, published, or 
     used as a basis of measurement or reporting under this 
     section may be used to establish an irrebuttable presumption 
     regarding either the medical necessity of care or the maximum 
     permissible coverage for any individual child who is eligible 
     for and receiving assistance under Medicaid or CHIP.
       (i) Appropriations.
       An appropriation of $45 million for FY2008 through FY2012 
     would be made for the purpose of carrying out the provisions 
     of this section. Such funds would remain available until 
     expended.
       The provision would also use the federal medical assistance 
     percentage (FMAP) applicable to a given state to determine 
     the federal share of costs incurred by states for the 
     development or modification of existing claims processing and 
     retrieval systems as is necessary for the efficient 
     collection and reporting on child health measures.


  Section 502. Improved information regarding access to overage under 
                                  CHIP

     Current Law
       Under SCHIP, states must assess the operation of the SCHIP 
     state plan in each fiscal Year, including the progress made 
     in reducing the number of uncovered low-income children. They 
     must also report to the Secretary of HHS, by January 1 
     following the end of the fiscal year, the results of that 
     assessment.
       Federal regulations stipulate that each annual report 
     include the following additional information: (1) progress in 
     meeting strategic objectives and performance goals identified 
     in the state SCHIP plan, (2) effectiveness of policies to 
     discourage the institution of public coverage for private 
     coverage, (3) identification of successes and barriers in 
     state plan design and implementation, and the approaches the 
     state is considering to overcome these barriers, (4) progress 
     in addressing any specific issues (such as outreach) that the 
     state plan proposed to periodically monitor and assess, (5) 
     an updated 3-year budget, including any changes in the 
     sources of non-federal share of state pan expenditures, (6) 
     identification of total state expenditures for family 
     coverage and total number of children and adults, 
     respectively, provided family coverage during the preceding 
     fiscal year, and (7) current income standards and 
     methodologies for its SCHIP Medicaid expansion program, 
     separate SCHIP program, and its regular Medicaid program, as 
     appropriate.
     Explanation of Provision
       (a) Inclusion of Process and Access Measures in Annual 
     State Reports.
       The provision would require each state to include the 
     following information in its annual CHIP report to the 
     Secretary of HHS: (1) eligibility criteria, enrollment, and 
     retention data (including information on continuity of 
     coverage or duration of benefits), (2) data regarding the 
     extent to which the state uses process measures with respect 
     to determining the eligibility of children, including 
     measures such as 12-months of continuous eligibility, self-
     declaration of income for applications or renewals, or 
     presumptive eligibility, (3) data regarding denials of 
     eligibility and redeterminations of eligibility, (4) data 
     regarding access to primary and specialty services, access to 
     networks of care, and care coordination provided under the 
     state CHIP plan, using quality of care and consumer 
     satisfaction measures included in the Consumer Assessment of 
     Healthcare Providers and Systems (CAHPS) survey, (5) if the 
     state provides child health assistance in the form of premium 
     assistance for the purchase of coverage under a group health 
     plan, data regarding the provision of such assistance, 
     including the extent to which employer-sponsored health 
     insurance coverage is available for children eligible for 
     CHIP, the range of the monthly amount of such assistance 
     provided on behalf or a child or family, the number of 
     children or families provided such assistance on a monthly 
     basis, the income of the children or families provided such 
     assistance, the benefits and cost-sharing protection provided 
     under the state CHIP plan to supplement the coverage 
     purchased with such premium assistance, the effective 
     strategies the state engages in to reduce any administrative 
     barriers to the provision of such assistance, and, the 
     effects, if any, of the provision of such assistance on 
     preventing the coverage under CHIP from substituting for 
     coverage provided under employer-sponsored health insurance 
     offered in the state, and (6) to the extent applicable, a 
     description of any state activities that are designed to 
     reduce the number of uncovered children in the state, 
     including through a state health insurance connector program 
     or support for innovative private health coverage 
     initiatives.
       (b) GAG Study and Report on Access to Primary and Specialty 
     Services.
       The provision would require GAO to conduct a study of 
     children's access to primary and specialty services under 
     Medicaid and CHIP, including (1) the extent to which 
     providers are willing to treat children eligible for such 
     programs, (2) information on such children's access to 
     networks of care, (3) geographic availability of primary and 
     specialty services under such programs, (4) the extent to 
     which care coordination is provided for children's care under 
     Medicaid and CHIP, and (5) as appropriate, information on the 
     degree of availability of services for children under such 
     programs.
       In addition, not later than 2 years after the date of 
     enactment of this Act, GAO must submit a report to the 
     appropriate committees of Congress on this study that 
     includes recommendations for such federal and state 
     legislative and administrative changes as GAO determines are 
     necessary to address any barriers to access to children's 
     care under Medicaid and CHIP that may exist.


Section 503. Application of certain managed care quality safeguards to 
                                  CHIP

     Current Law
       A number of sections of the Social Security Act apply to 
     states under title XXI (SCHIP) in the same manner as they 
     apply to a state under title XIX (Medicaid). These include:
       Section 1902(a)(4)(C) (relating to conflict of interest 
     standards).
       Paragraphs (2), (16), and (17) of section 1903(i) (relating 
     to limitations on payment).
       Section 1903(w) (relating to limitations on provider taxes 
     and donations).
       Section 1920A (relating to presumptive eligibility for 
     children).
     Explanation of Provision
       The provision would add the same requirements for CHIP 
     managed care entities as currently exist under Medicaid. 
     Specifically, the provision would add reference to Medicaid's 
     statutory requirements on: the process for plan enrollment, 
     termination, and change of enrollment; the type of 
     information provided to enrollees and potential enrollees on 
     providers, covered services, enrollee rights, and other forms 
     of information; beneficiary protections; quality assurance 
     standards; protections against fraud and abuse; and sanctions 
     against managed care plans for noncompliance.

                        Title VI--Miscellaneous


  Section 601. Technical correction regarding current State authority 
                             under Medicaid

     Current Law
       States may provide SCHIP through an expansion of their 
     Medicaid programs. Expenditures for such populations of 
     targeted low-income children are matched at the enhanced FMAP 
     rate and are paid out of SCHIP allotments.
     Explanation of Provision
       With respect to expenditures for Medicaid for fiscal years 
     2007 and 2008 only, a state may elect (1) to cover optional 
     poverty-related children and, may apply less restrictive 
     income methodologies to such individuals (via authority in 
     Section 1902(r) or through Section 1931 (b )(2)( C)), for 
     which the regular Medicaid FMAP, rather than the enhanced 
     FMAP applicable to CHIP, would be used to determine the 
     federal share of such expenditures, or (2) to receive the 
     regular Medicaid FMAP, rather than the enhanced CHIP FMAP, 
     for CHIP children under an expansion of the state's Medicaid 
     program. This provision would be repealed as of October 1, 
     2008 (i.e., the beginning of fiscal year 2009). States 
     electing these options would be ``held harmless'' for related 
     expenditures in FY2007 and FY2008, once this repeal takes 
     effect.


         Section 602. Payment Error Rate Measurement (``PERM'')

     Current Law
       P.L. 107-300 requires the heads of Federal agencies 
     annually to review programs they oversee that are susceptible 
     to significant erroneous payments, and to estimate the amount 
     of improper payments, to report those estimates to Congress, 
     and to submit a report on actions the agency is taking to 
     reduce erroneous expenditures.
       The Center for Medicare and Medicaid Services (CMS), the 
     federal agency within HHS that administers the Medicaid and 
     SCHIP programs, issued an interim final rule with comment 
     period on August 28, 2006, regarding Payment Error Rate 
     Measurement (PERM) for the Medicaid and SCHIP programs. This 
     rule was effective on October 1, 2006. In addition to P.L. 
     107-300, this regulation points to Sections 1102, 1902(a)(6) 
     and 2107(b)(1) of the Social Security Act which contains the 
     Secretary's general rulemaking authority and obligation of 
     the states to provide information, as the Secretary may 
     require, to monitor program performance. Section 
     1902(a)(27)(B) also requires states to require providers to 
     furnish State Medicaid Agencies and the Secretary with 
     information regarding payments claimed by Medicaid providers 
     for furnishing Medicaid services. Payment error rates will be 
     calculated for fee-for-service (FFS) claims, managed care 
     claims and for eligibility determinations. The preamble to 
     this regulation notes that CMS will hire Federal contractors 
     to review Medicaid and SCHIP FFS and managed care claims and 
     to calculate the state-specific and national error rates for 
     both programs. States will calculate the state-specific 
     eligibility error rates. Based on those rates, the Federal 
     contractor will calculate the national eligibility error rate 
     for each program. CMS plans to sample a subset of states each 
     year rather than measure every state every year.
       With respect to Medicaid and SCHIP eligibility reviews 
     under PERM, states selected for review in a given year must 
     conduct reviews of a statistically valid random sample of 
     beneficiary claims to determine if improper payments were 
     made based on errors in the state agency's eligibility 
     determinations. States must have a CMS-approved sampling 
     plan. In addition to reporting error

[[Page S10188]]

     rates, states must also submit a corrective action plan based 
     on its error rate analysis, and must return overpayments of 
     federal funds.
       Medicaid Eligibility Quality Control (MEQC) is operated by 
     State Medicaid agencies to monitor and improve the 
     administration of its Medicaid program. The traditional MEQC 
     program is based on State reviews of Medicaid beneficiaries 
     identified through a statistically reliable statewide sample 
     of cases selected from the eligibility files. These reviews 
     are conducted to determine whether the sampled cases meet 
     applicable Title XIX eligibility requirements and to 
     determine if a State has made erroneous excess payments in 
     its program. ``Erroneous excess payments for medical 
     assistance'' reflect: a) payments made on behalf of 
     ineligible individuals and families, and b) overpayments on 
     behalf of eligible individuals and families by reason of 
     error in determining the amount of expenditures for medical 
     care required of an individual or family as a condition of 
     eligibility.
       The SCHIP statute specifies that federal SCHIP funds can be 
     used for SCHIP health insurance coverage, called child health 
     assistance that meets certain requirements. States may also 
     provide benefits to SCHIP children, called targeted low-
     income children, through enrollment in Medicaid. Apart from 
     these benefit payments, SCHIP payments for four other 
     specific health care activities can be made, including: (1) 
     other child health assistance for targeted low-income 
     children; (2) health services initiatives to improve the 
     health of targeted low-income children and other low-income 
     children; (3) outreach activities; and (4) other reasonable 
     administrative costs. For a given fiscal year, SCHIP statute 
     specifies that payments for these four other specific health 
     care activities cannot exceed 10% of the total amount of 
     expenditures for benefits (excluding payments for services 
     rendered during periods of presumptive eligibility under 
     Medicaid) and other specific health care activities combined.
     Explanation of Provision
       The provision would apply a federal matching rate of 90 
     percent to expenditures related to administration of PERM 
     requirements applicable to CHIP.
       The provision would also exclude from the 10% cap on CHIP 
     administrative costs all expenditures related to the 
     administration of PERM requirements applicable to CHIP in 
     accordance with P.L. 107-300, existing regulations, and any 
     related or successor guidance or regulations.
       In addition, the Secretary must not calculate or publish 
     any national or state-specific error rate based on the 
     application of PERM requirements to CHIP until after the date 
     that is 6 months after the date on which a final rule 
     implementing such requirements (described below) is in effect 
     for all states. Any calculation of a national error rate or a 
     state specific error rate after such a final rule is in 
     effect for all states may only be inclusive of errors, as 
     defined in such final rule or in guidance issued within a 
     reasonable time frame after the effective date for such final 
     rule that includes detailed guidance for the specific 
     methodology for error determinations.
       The final rule implementing the PERM requirements must 
     include: (1) clearly defined criteria for errors for both 
     states and providers, (2) a clearly defined process for 
     appealing error determinations by review contractors, and (3) 
     clearly defined responsibilities and deadlines for states in 
     implementing any corrective action plans.
       After the final PERM rule is in effect for all states, a 
     state for which the PERM requirements were first in effect 
     under an interim final rule for FY2007 may elect to accept 
     any payment error rate determined in whole or in part for the 
     state on the basis of data for that fiscal year or may elect 
     to not have an payment error rate determined on the basis of 
     such data and, instead, must be treated as if FY2010 were the 
     first year for which the PERM requirements apply to the 
     state.
       If the final PERM rule is not in effect for all states by 
     July 1, 2008, a state for which the PERM requirements were 
     first in effect under an interim final rule for FY2008 may 
     elect to accept any payment error rate determined in whole or 
     in part for the state on the basis of data for that fiscal 
     year, or may elect to not have any payment error rate 
     determined on the basis of such data and, instead, must be 
     treated as if FY2011 were the first fiscal year for which the 
     PERM requirements apply to the state.
       In addition, the provision would require the Secretary to 
     review the Medicaid Eligibility Quality Control (MEQC) 
     requirements with the PERM requirements and coordinate 
     consistent implementation of both sets of requirements, while 
     reducing redundancies. A state may elect, for purposes of 
     determining the erroneous excess payments for medical 
     assistance ratio applicable to the state under MEQC, to 
     substitute data resulting from the application of PERM 
     requirements after the final PERM rule is in effect for all 
     states for the data used for the MEQC requirements.
       The Secretary must also establish state-specific sample 
     sizes for application of the PERM requirements with respect 
     to CHIP for FY2009 and thereafter, on the basis of 
     information as the Secretary determines is appropriate. In 
     establishing such sample sizes, the Secretary must, to the 
     greatest extent possible (1) minimize the administrative cost 
     burden on states under Medicaid and CHIP, and (2) maintain 
     state flexibility to manage these programs.


    Section 603. Elimination of counting Medicaid child presumptive 
             eligibility costs against Title XXI Allotment

     Current Law
       Under Medicaid presumptive eligibility rules, states are 
     allowed to temporarily enroll (for up to 2 months) children 
     whose family income appears to be below applicable Medicaid 
     income standards, until a formal determination of eligibility 
     is made. Payments on behalf of Medicaid children during 
     periods of presumptive eligibility are matched at the regular 
     Medicaid FMAP, but are paid out of state SCHIP allotments.
     Explanation of Provision
       The provision would strike the language in existing CHIP 
     statute that sets the federal share of costs incurred during 
     periods of presumptive eligibility for children at the 
     Medicaid FMAP rate, and also strikes the language that allows 
     payment out of CHIP allotments for Medicaid benefits received 
     by Medicaid children during periods of presumptive 
     eligibility.


                 Section 604. Improving data collection

     Current Law
       As discussed in Section 102, the percentage of the SCHIP 
     appropriation that is allotted to individual states is based 
     primarily on state-level estimates of (1) the number of low-
     income children and (2) the number of uninsured low-income 
     children, based on a three-year average of the Annual Social 
     and Economic (ASEC) Supplements (formerly known as the March 
     supplements) to the Census Bureau's Current Population Survey 
     (CPS). Based on these CPS estimates, some states' share of 
     the available national allotment in the second year of SCHIP 
     (FY1999) was going to differ markedly from the prior year's 
     (e.g., a share of the available national allotment in FY1999 
     that would have been approximately 40% lower or higher than 
     in FY1998). As a result, legislation was enacted to base the 
     FY1999 SCHIP allotments on the states' share of the available 
     national allotment as calculated for FY1998.
       Separate legislation was also enacted to add two new floors 
     and a ceiling to ensure that a state's share of the available 
     national allotment did not change by more than certain 
     amounts, as compared to the state's prior-year share and the 
     state's FY1998/FY1999 share.
       Another piece of legislation was also enacted that required 
     appropriate adjustments to the CPS (1) to produce 
     statistically reliable annual state data on the number of 
     low-income children who do not have health insurance 
     coverage, so that real changes in the uninsurance rates of 
     children can reasonably be detected; (2) to produce data that 
     categorizes such children by family income, age, and race or 
     ethnicity; and (3) where appropriate, to expand the sample 
     size used in the state sampling units, to expand the number 
     of sampling units in a state, and to include an appropriate 
     verification element. For this purpose, $10 million was 
     appropriated annually, beginning in FY2000. Because of this 
     legislation, the number of sampled households in the ASEC CPS 
     increased by about 50% (34,500 households). Even with the 
     sample expansion, the margins of error of the state-level 
     estimates of the number of low-income children, and 
     particularly the estimates of low-income children without 
     health insurance, can be relatively high, especially in 
     smaller states.
     Explanation of Provision
       Besides the $10 million provided annually for the CPS since 
     FY2000, an additional $10 million (for a total of $20 million 
     additionally) is appropriated. In addition to the current-law 
     requirements of the additional appropriation, for data 
     collection beginning in FY2008, in appropriate consultation 
     with the HHS Secretary, the Secretary of Commerce shall do 
     the following:
       Make appropriate adjustments to the CPS to develop more 
     accurate state-specific estimates of the number of children 
     enrolled in CHIP or Medicaid;
       Make appropriate adjustments to the CPS to improve the 
     survey estimates used to compile the state-specific and 
     national number of low-income children without health 
     insurance for purposes of determining annual CHIP allotments, 
     and for making payments to states from the CHIP Incentive 
     Pool, the CHIP Contingency Fund, and, to the extent 
     applicable to a State, from the block grant set aside for 
     CHIP payments on behalf of parents in FY2010 through FY2012;
       Include health insurance survey information in the American 
     Community Survey (ACS) related to children;
       Assess whether ACS estimates, once such survey data are 
     first available, produce more reliable estimates than the CPS 
     for CHIP allotments and payments;
       On the basis of that assessment, recommend to the HHS 
     Secretary whether ACS estimates should be used in lieu of, or 
     in some combination with, CPS estimates for CHIP purposes; 
     and
       Continue making the adjustments to expansion of the sample 
     size used in State sampling units, the number of sampling 
     units in a State, and using an appropriate verification 
     element.
       If the Commerce Secretary recommends to the HHS Secretary 
     that ACS estimates should be used instead of, or in 
     combination with, CPS estimates for CHIP purposes, the HHS 
     Secretary may provide a transition period for using ACS 
     estimates, provided that

[[Page S10189]]

     the transition is implemented in a way that avoids adverse 
     impacts on states.


        Section 605. Deficit Reduction Act Technical Correction

       State Flexibility in Benefit Packages.
     Current Law
       Under the Early and Periodic, Screening, Diagnostic and 
     Treatment (EPSDT) benefit under Medicaid, most children under 
     age 21 receive comprehensive basic screening services (i.e., 
     well-child visits including age-appropriate immunizations) as 
     well as dental, vision and hearing services. In addition, 
     EPSDT guarantees access to all federally coverable services 
     necessary to treat a problem or condition among eligible 
     individuals.
       Under Medicaid, categorically needy (CN) eligibility groups 
     include families with children, the elderly, certain 
     individuals with disabilities, and certain other pregnant 
     women and children who meet applicable financial eligibility 
     standards. Some CN eligibility groups must be covered while 
     others are optional. Medically needy (MN) groups include the 
     same types of individuals, but different, typically higher 
     financial standards apply. All MN eligibility groups are 
     optional.
       The Deficit Reduction Act of 2005 (DRA; P.L. 109-171) gave 
     states the option to provide Medicaid to state-specified 
     groups through enrollment in benchmark and benchmark-
     equivalent coverage which is nearly identical to plans 
     available under SCHIP (described above). For any child under 
     age 19 in one of the major mandatory and optional CN 
     eligibility groups (defined in Section 1902(a)(10)(A)), wrap-
     around benefits to the DRA benchmark and benchmark-equivalent 
     coverage includes EPSDT (described above). In traditional 
     Medicaid, EPSDT is available to individuals under age 21 in 
     CN groups, and may be offered to individuals under 21 in MN 
     groups.
       DRA identifies a number of groups as exempt from mandatory 
     enrollment in benchmark or benchmark equivalent plans. One 
     such exempted group is children in foster care receiving 
     child welfare services under Part B of title IV of the Social 
     Security Act and children receiving foster care or adoption 
     assistance under Part E of such title.
     Explanation of Provision
       The provision would require that EPSDT be covered for any 
     individual under age 21 who is eligible for Medicaid through 
     the state plan under one of the major mandatory and optional 
     CN groups and is enrolled in benchmark or benchmark-
     equivalent plans authorized under DRA. The provision would 
     also give states flexibility in providing coverage of EPSDT 
     services through the issuer of benchmark or benchmark-
     equivalent coverage or otherwise.
       The provision would also make a correction to the reference 
     to children in foster care receiving child welfare services.
       Finally, not later than 30 days after the date the 
     Secretary approves a state plan amendment to provide 
     benchmark or benchmark-equivalent coverage under Medicaid, 
     the Secretary must publish in the Federal Register and on the 
     internet website of CMS, a list of the provisions in Title 
     XIX that the Secretary has determined do not apply in order 
     to enable the state to carry out such a state plan amendment 
     and the reason for each such determination.
       The amendments made by this provision would become 
     effective as if included in Section 6044(a) of the DRA (i.e., 
     March 31, 2006).


        Section 606. Elimination of confusing program references

     Current Law
       P.L. 106-113 directed the Secretary of HHS or any other 
     Federal officer or employee, with respect to references to 
     the program under Title XXI of the Social Security Act, in 
     any publication or official communication to use the term 
     ``SCHIP'' instead of ``CHIP'' and to use the term ``State 
     children's health insurance program'' instead of ``children's 
     health insurance program.''
     Explanation of Provision
       The provision would repeal the section in P.L 106-113 
     providing the program references to ``SCHIP'' and ``State 
     children's health insurance program'' for official 
     publication and communication purposes.


            Section 607. Mental Health Parity in CHIP Plans

     Current Law
       In 1996, Congress passed the Mental Health Parity Act 
     (MHPA) that established new federal standards for mental 
     health coverage offered by group health plans, most of which 
     are employment-based. Under provisions included in the 1997 
     Balanced Budget Act (P.L. 105-33), Medicaid managed care 
     plans and SCHIP programs must comply with the requirements of 
     MHPA.
       Medicaid expansions under SCHIP follow Medicaid rules. 
     Thus, when such expansions provide for enrollment in Medicaid 
     managed care plans, the MHPA applies. Separate state programs 
     under SCHIP follow SCHIP rules that have broader application 
     than the Medicaid rules. In separate state SCHIP programs, to 
     the extent that a health insurance issuer offers group health 
     insurance coverage, which can include, but is not limited to 
     managed care, the MHPA applies.
       Under MHPA, Medicaid and SCHIP plans may define what 
     constitutes mental health benefits (if any). The MHPA 
     prohibits group plans from imposing annual and lifetime 
     dollar limits on mental health coverage that are more 
     restrictive than those applicable to medical and surgical 
     coverage. Full parity is not required, that is, group plans 
     may still impose more restrictive treatment limits (e.g., 
     with respect to total number of outpatient visits or 
     inpatient days) or cost-sharing requirements on mental health 
     coverage compared to their medical and surgical services.
       Under Medicaid managed care, state Medicaid agencies 
     contract with managed care organizations (MCOs) to provide a 
     specified set of benefits to enrolled beneficiaries. These 
     MCOs may be paid under a variety of arrangements, but are 
     frequently reimbursed on the basis of a pre-determined 
     monthly fee (called a capitation rate) for each enrolled 
     beneficiary. The contracted benefits may include all, some, 
     or none of the mandatory and optional mental health services 
     covered under the state Medicaid plan. When Medicaid managed 
     care plans do not include all covered mental health benefits, 
     these additional services are sometimes ``carved out'' to a 
     separate, specialized behavioral health managed care entity 
     (usually subject to its own prepaid capitation rates), or may 
     be provided in the fee-for-service setting, in which Medicaid 
     providers are paid directly by the state Medicaid agency for 
     each covered service delivered to a Medicaid beneficiary. All 
     prepaid Medicaid managed care contracts that cover medical/
     surgical benefits and mental health benefits must comply with 
     the MHPA without exemptions. The MHPA does not apply to fee-
     for-service arrangements because state Medicaid agencies do 
     not meet the definition of a group health plan.
       With respect to covered benefits, separate SCHIP programs 
     tend to look more like private insurance models than like 
     Medicaid. That is, these programs are more likely to cover 
     traditional benefits (e.g., inpatient hospital services, 
     physician services) that would be found in employer-based 
     health insurance plans than certain service categories that 
     are largely unique to Medicaid (e.g., EPSDT, residential 
     treatment facilities, intermediate care facilities for the 
     mentally retarded or ICF/MRs, and institutions for mental 
     disease or IMDs). Most separate SCHIP programs also provide 
     services through managed care plans, although this situation 
     varies by state. Again, all or some covered mental health 
     services may be included in MCO contracts, or carved out to 
     specialized behavioral health managed care plans, or may be 
     provided on a fee-for-service basis.
       Under CHIP, states may provide coverage under their 
     Medicaid programs (MXP), create a new separate SCHIP program 
     (SSP), or both. Under SSPs, states may elect any of three 
     benefit options: (1) a benchmark plan, (2) a benchmark-
     equivalent plan, or (3) any other plan that the Secretary of 
     HHS deems would provide appropriate coverage for the target 
     population (called Secretary-approved benefit plans). 
     Benchmark plans include (1) the standard Blue Cross/Blue 
     Shield preferred provider option under FEHBP, (2) the 
     coverage generally available to state employees, and (3) the 
     coverage offered by the largest commercial HMO in the state.
       Benchmark-equivalent plans must cover basic benefits (i.e., 
     inpatient and outpatient hospital services, physician 
     services, lab/x-ray, and well-child care including 
     immunizations), and must include at least 75% of the 
     actuarial value of coverage under the selected benchmark plan 
     for specific additional benefits (i.e., prescription drugs, 
     mental health services, vision care and hearing services).
     Explanation of Provision
       This section prohibits discriminatory limits on mental 
     health care in separate CHIP plans by directing that any 
     financial requirements or treatment limitations that apply to 
     mental health or substance abuse services must be no more 
     restrictive than the financial requirements or treatment 
     limits that apply to other medical services. It also 
     eliminates a current law provision that authorizes states to 
     reduce the mental health coverage provided to 75 percent of 
     the coverage provided in CHIP benchmark plans.


                   Section 608. Dental Health Grants

     Current Law
       Under SCHIP, states may provide coverage under their 
     Medicaid programs (MXP), create a new separate SCHIP program 
     (SSP), or both. Under SSPs, states may elect any of three 
     benefit options: (1) a benchmark plan, (2) a benchmark-
     equivalent plan, or (3) any other plan that the Secretary of 
     HHS deems would provide appropriate coverage for the target 
     population (called Secretary-approved benefit plans). 
     Benchmark plans include (1) the standard Blue Cross/Blue 
     Shield preferred provider option under FEHBP, (2) the 
     coverage generally available to state employees, and (3) the 
     coverage offered by the largest commercial HMO in the state.
       Benchmark-equivalent plans must cover basic benefits (i.e., 
     inpatient and outpatient hospital services, physician 
     services, lab/x-ray, and well-child care including 
     immunizations), and must include at least 75% of the 
     actuarial value of coverage under the selected benchmark plan 
     for specific additional benefits (i.e., prescription drugs, 
     mental health services, vision care and hearing services).
       SCHIP regulations specify that, regardless of the type of 
     SCHIP health benefits coverage, states must provide coverage 
     of well-baby and well-child care (as defined by the state), 
     age-appropriate immunizations based on recommendations of the 
     Advisory Committee on Immunization Practices (ACIP), and 
     emergency services.

[[Page S10190]]

     Explanation of Provision
       This section provides up to $200 million in federal grants 
     for states to improve the availability of dental services and 
     strengthen dental coverage for children covered under CHIP. 
     States that receive grants would be required to maintain 
     prior levels of spending for dental services provided under 
     CHIP.


  Section 609. Application of Prospective Payment System for Services 
Provided by Federally-Qualified Health Centers and Rural Health Clinics

     Current Law
       Under current Medicaid law, federally-qualified health 
     centers (FQHCs) and rural health clinics (RHCs) are paid 
     based on a prospective payment system. Beginning in FY200l, 
     per visit payments were based on 100% of average costs during 
     1999 and 2000 adjusted for changes in the scope of services 
     furnished. (Special rules applied to entities first 
     established after 2000). For subsequent years, the per visit 
     payment for all FQHCs and RHCs equals the amounts for the 
     preceding fiscal year increased by the percentage increase in 
     the Medicare Economic Index applicable to primary care 
     services, and adjusted for any changes in the scope of 
     services furnished during that fiscal year. In managed care 
     contracts, states are required to make supplemental payments 
     to the facility equal to the difference between the 
     contracted amount and the cost-based amounts.
     Explanation of Provision
       This section would establish a prospective payment system 
     in CHIP for FQHCs and RHCs similar to the payment system 
     established by the Medicare, Medicaid, and SCHIP Benefits 
     Improvement and Protection Act of 2000 (BIPA) applicable 
     under Medicaid law. States that operate separate or 
     combination CHIP programs would be required to reimburse 
     FQHCs and RHCs based on the Medicaid Prospective Payment 
     System, starting in FY 09. A one-time appropriation of $5 
     million will be made available to the Secretary of HHS to be 
     provided to affected states to enable them to transition to 
     the new payment system on the affected states. The Secretary 
     would be required to monitor the impact of the application of 
     the payment system on states and report to Congress within 
     two years of implementation on any effect on access to 
     benefits, provider payment rates, or scope of benefits 
     offered by affected states.

                     Title VII--Revenue Provisions

                       Title VIII--Effective Date


                      Section 801. Effective date

     Current Law
       No provision.
     Explanation of Provision
       The effective date of this bill except with respect to 
     section 301 would be October 1, 2007, whether or not final 
     regulations to carry out provisions in the bill have been 
     promulgated by that date. In the case of both current state 
     CHIP and Medicaid plans, if the Secretary of HHS determines 
     that a state must pass new state legislation to implement the 
     requirements of this bill, the state's existing CHIP and/or 
     Medicaid plans, if applicable, would not be considered to be 
     out of compliance solely on the basis of its failure to meet 
     such 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 bill. In the case of a state that has a 
     2-year legislative session, each year of such session must be 
     considered to be a separate regular session of the state 
     legislature. With respect to section 301, the effective date 
     will be October 1, 2008.
                                 ______