[Congressional Record (Bound Edition), Volume 152 (2006), Part 1]
[Senate]
[Pages 581-629]
[From the U.S. Government Publishing Office, www.gpo.gov]




                     DEFICIT REDUCTION ACT OF 2005

  The SPEAKER pro tempore (Mr. Foley). The pending business is the vote 
on adoption of House Resolution 653 on which the yeas and nays are 
ordered.
  The Clerk read the title of the resolution.
  The SPEAKER pro tempore. The question is on the resolution.
  This will be a 5-minute vote.
  The vote was taken by electronic device, and there were--yeas 216, 
nays 214, not voting 3, as follows:

                              [Roll No. 4]

                               YEAS--216

     Aderholt
     Akin
     Alexander
     Bachus
     Baker
     Barrett (SC)
     Bartlett (MD)
     Barton (TX)
     Bass
     Beauprez
     Biggert
     Bilirakis
     Bishop (UT)
     Blackburn
     Blunt
     Boehlert
     Boehner
     Bonilla
     Bonner
     Bono
     Boozman
     Boustany
     Bradley (NH)
     Brady (TX)
     Brown (SC)
     Brown-Waite, Ginny
     Burgess
     Burton (IN)
     Buyer
     Calvert
     Camp (MI)
     Campbell (CA)
     Cannon
     Cantor
     Capito
     Carter
     Castle
     Chabot
     Chocola
     Coble
     Cole (OK)
     Conaway
     Crenshaw
     Cubin
     Culberson
     Davis (KY)
     Davis, Jo Ann
     Davis, Tom
     Deal (GA)
     DeLay
     Dent
     Diaz-Balart, L.
     Diaz-Balart, M.
     Doolittle
     Drake
     Dreier
     Duncan
     Ehlers
     Emerson
     English (PA)
     Everett
     Feeney
     Ferguson
     Fitzpatrick (PA)
     Flake
     Foley
     Forbes
     Fortenberry
     Fossella
     Foxx
     Franks (AZ)
     Frelinghuysen
     Gallegly
     Garrett (NJ)
     Gibbons
     Gilchrest
     Gillmor
     Gingrey
     Gohmert
     Goode
     Goodlatte
     Granger
     Graves
     Green (WI)
     Gutknecht
     Hall
     Harris
     Hart
     Hastert
     Hastings (WA)
     Hayes
     Hayworth
     Hefley
     Hensarling
     Herger
     Hobson
     Hoekstra
     Hostettler
     Hulshof
     Hunter
     Hyde
     Inglis (SC)
     Issa
     Jenkins
     Jindal
     Johnson (CT)
     Johnson, Sam
     Keller
     Kelly
     Kennedy (MN)
     King (IA)
     King (NY)
     Kingston
     Kirk
     Kline
     Knollenberg
     Kolbe
     Kuhl (NY)
     LaHood
     Latham
     Lewis (CA)
     Lewis (KY)
     Linder
     LoBiondo
     Lucas
     Lungren, Daniel E.
     Mack
     Manzullo
     Marchant
     McCaul (TX)
     McCotter
     McCrery
     McHenry
     McKeon
     McMorris
     Mica
     Miller (FL)
     Miller (MI)
     Moran (KS)
     Murphy
     Musgrave
     Myrick
     Neugebauer
     Northup
     Norwood
     Nunes
     Nussle
     Osborne
     Otter
     Oxley
     Pearce
     Pence
     Peterson (PA)
     Petri
     Pickering
     Pitts
     Platts
     Poe
     Pombo
     Porter
     Price (GA)
     Pryce (OH)
     Putnam
     Radanovich
     Regula
     Rehberg
     Reichert
     Renzi
     Reynolds
     Rogers (AL)
     Rogers (KY)
     Rogers (MI)
     Rohrabacher
     Ros-Lehtinen
     Royce
     Ryan (WI)
     Ryun (KS)
     Saxton
     Schmidt
     Schwarz (MI)
     Sensenbrenner
     Sessions
     Shadegg
     Shaw
     Shays
     Sherwood
     Shimkus
     Shuster
     Simpson
     Smith (TX)
     Sodrel
     Souder
     Stearns
     Sullivan
     Tancredo
     Taylor (NC)
     Terry
     Thomas
     Thornberry
     Tiahrt
     Tiberi
     Turner
     Upton
     Walden (OR)
     Walsh
     Wamp
     Weldon (FL)
     Weldon (PA)
     Weller
     Westmoreland
     Whitfield
     Wicker
     Wilson (SC)
     Wolf
     Young (AK)
     Young (FL)

                               NAYS--214

     Abercrombie
     Ackerman
     Allen
     Andrews
     Baca
     Baird
     Baldwin
     Barrow
     Bean

[[Page 582]]


     Becerra
     Berkley
     Berman
     Berry
     Bishop (GA)
     Bishop (NY)
     Boren
     Boswell
     Boucher
     Boyd
     Brady (PA)
     Brown (OH)
     Brown, Corrine
     Butterfield
     Capps
     Capuano
     Cardin
     Cardoza
     Carnahan
     Carson
     Case
     Chandler
     Clay
     Cleaver
     Clyburn
     Conyers
     Cooper
     Costa
     Costello
     Cramer
     Crowley
     Cuellar
     Cummings
     Davis (AL)
     Davis (CA)
     Davis (FL)
     Davis (IL)
     Davis (TN)
     DeFazio
     DeGette
     Delahunt
     DeLauro
     Dicks
     Dingell
     Doggett
     Doyle
     Edwards
     Emanuel
     Engel
     Eshoo
     Etheridge
     Evans
     Farr
     Fattah
     Filner
     Ford
     Frank (MA)
     Gerlach
     Gonzalez
     Gordon
     Green, Al
     Green, Gene
     Grijalva
     Gutierrez
     Harman
     Hastings (FL)
     Herseth
     Higgins
     Hinchey
     Hinojosa
     Holden
     Holt
     Honda
     Hooley
     Hoyer
     Inslee
     Israel
     Jackson (IL)
     Jackson-Lee (TX)
     Jefferson
     Johnson (IL)
     Johnson, E. B.
     Jones (NC)
     Jones (OH)
     Kanjorski
     Kaptur
     Kennedy (RI)
     Kildee
     Kilpatrick (MI)
     Kind
     Kucinich
     Langevin
     Lantos
     Larsen (WA)
     Larson (CT)
     LaTourette
     Leach
     Lee
     Levin
     Lewis (GA)
     Lipinski
     Lofgren, Zoe
     Lowey
     Lynch
     Maloney
     Markey
     Marshall
     Matheson
     Matsui
     McCarthy
     McCollum (MN)
     McDermott
     McGovern
     McHugh
     McIntyre
     McKinney
     McNulty
     Meehan
     Meek (FL)
     Meeks (NY)
     Melancon
     Michaud
     Millender-McDonald
     Miller (NC)
     Miller, George
     Mollohan
     Moore (KS)
     Moore (WI)
     Moran (VA)
     Murtha
     Nadler
     Napolitano
     Neal (MA)
     Ney
     Oberstar
     Obey
     Olver
     Ortiz
     Owens
     Pallone
     Pascrell
     Pastor
     Paul
     Payne
     Pelosi
     Peterson (MN)
     Pomeroy
     Price (NC)
     Rahall
     Ramstad
     Rangel
     Reyes
     Ross
     Rothman
     Roybal-Allard
     Ruppersberger
     Rush
     Ryan (OH)
     Sabo
     Salazar
     Sanchez, Linda T.
     Sanchez, Loretta
     Sanders
     Schakowsky
     Schiff
     Schwartz (PA)
     Scott (GA)
     Scott (VA)
     Serrano
     Sherman
     Simmons
     Skelton
     Slaughter
     Smith (NJ)
     Smith (WA)
     Snyder
     Solis
     Spratt
     Stark
     Strickland
     Stupak
     Sweeney
     Tanner
     Tauscher
     Taylor (MS)
     Thompson (CA)
     Thompson (MS)
     Tierney
     Towns
     Udall (CO)
     Udall (NM)
     Van Hollen
     Velazquez
     Visclosky
     Wasserman Schultz
     Waters
     Watson
     Watt
     Waxman
     Weiner
     Wexler
     Wilson (NM)
     Woolsey
     Wu
     Wynn

                             NOT VOTING--3

     Blumenauer
     Istook
     Miller, Gary


                Announcement by the Speaker Pro Tempore

  The SPEAKER pro tempore (during the vote). Members are advised there 
are 2 minutes remaining.

                              {time}  1711

  So the resolution was agreed to.
  The result of the vote was announced as above recorded.
  A motion to reconsider was laid on the table.
  The SPEAKER pro tempore. Pursuant to House Resolution 653, the House 
concurs in the Senate amendment to the House amendment to S. 1932.
  The text of the Senate amendment to the House amendment is as 
follows:

       In lieu of the matter proposed to be inserted by the House 
     amendment to the text of the bill, insert:

     SECTION 1. SHORT TITLE.

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

     SEC. 2. TABLE OF TITLES.

       The table of titles is as follows:

                    TITLE I--AGRICULTURE PROVISIONS

           TITLE II--HOUSING AND DEPOSIT INSURANCE PROVISIONS

       TITLE III--DIGITAL TELEVISION TRANSITION AND PUBLIC SAFETY

                  TITLE IV--TRANSPORTATION PROVISIONS

                           TITLE V--MEDICARE

                      TITLE VI--MEDICAID AND SCHIP

            TITLE VII--HUMAN RESOURCES AND OTHER PROVISIONS

          TITLE VIII--EDUCATION AND PENSION BENEFIT PROVISIONS

                      TITLE IX--LIHEAP PROVISIONS

                 TITLE X--JUDICIARY RELATED PROVISIONS

                    TITLE I--AGRICULTURE PROVISIONS

     SECTION 1001. SHORT TITLE.

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

                     Subtitle A--Commodity Programs

     SEC. 1101. NATIONAL DAIRY MARKET LOSS PAYMENTS.

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

     SEC. 1102. ADVANCE DIRECT PAYMENTS.

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

     SEC. 1103. COTTON COMPETITIVENESS PROVISIONS.

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

                        Subtitle B--Conservation

     SEC. 1201. WATERSHED REHABILITATION PROGRAM.

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

     SEC. 1202. CONSERVATION SECURITY PROGRAM.

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

     SEC. 1203. ENVIRONMENTAL QUALITY INCENTIVES PROGRAM.

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

                           Subtitle C--Energy

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

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

                     Subtitle D--Rural Development

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

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

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

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

[[Page 583]]



     SEC. 1403. RURAL BUSINESS INVESTMENT PROGRAM.

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

     SEC. 1404. RURAL BUSINESS STRATEGIC INVESTMENT GRANTS.

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

     SEC. 1405. RURAL FIREFIGHTERS AND EMERGENCY PERSONNEL GRANTS.

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

                          Subtitle E--Research

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

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

           TITLE II--HOUSING AND DEPOSIT INSURANCE PROVISIONS

                   Subtitle A--FHA Asset Disposition

     SEC. 2001. DEFINITIONS.

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

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

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

     SEC. 2003. UP-FRONT GRANTS.

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

                     Subtitle B--Deposit Insurance

     SEC. 2101. SHORT TITLE.

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

     SEC. 2102. MERGING THE BIF AND SAIF.

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

     SEC. 2103. INCREASE IN DEPOSIT INSURANCE COVERAGE.

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

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

     The values used in the calculation under subclause (II) shall 
     be, as of the date of the calculation, the values most 
     recently published by the Department of Commerce.

[[Page 584]]

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

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

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

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

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

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

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

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

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

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

       (a) In General.--Section 7(b)(3) of the Federal Deposit 
     Insurance Act (12 U.S.C. 1817(b)(3)) is amended to read as 
     follows:
       ``(3) Designated reserve ratio.--
       ``(A) Establishment.--
       ``(i) In general.--Before the beginning of each calendar 
     year, the Board of Directors shall designate the reserve 
     ratio applicable with respect to the Deposit Insurance Fund 
     and publish the reserve ratio so designated.
       ``(ii) Rulemaking requirement.--Any change to the 
     designated reserve ratio shall be made by the Board of 
     Directors by regulation after notice and opportunity for 
     comment.
       ``(B) Range.--The reserve ratio designated by the Board of 
     Directors for any year--
       ``(i) may not exceed 1.5 percent of estimated insured 
     deposits; and
       ``(ii) may not be less than 1.15 percent of estimated 
     insured deposits.

[[Page 585]]

       ``(C) Factors.--In designating a reserve ratio for any 
     year, the Board of Directors shall--
       ``(i) take into account the risk of losses to the Deposit 
     Insurance Fund in such year and future years, including 
     historic experience and potential and estimated losses from 
     insured depository institutions;
       ``(ii) take into account economic conditions generally 
     affecting insured depository institutions so as to allow the 
     designated reserve ratio to increase during more favorable 
     economic conditions and to decrease during less favorable 
     economic conditions, notwithstanding the increased risks of 
     loss that may exist during such less favorable conditions, as 
     determined to be appropriate by the Board of Directors;
       ``(iii) seek to prevent sharp swings in the assessment 
     rates for insured depository institutions; and
       ``(iv) take into account such other factors as the Board of 
     Directors may determine to be appropriate, consistent with 
     the requirements of this subparagraph.
       ``(D) Publication of proposed change in ratio.--In 
     soliciting comment on any proposed change in the designated 
     reserve ratio in accordance with subparagraph (A), the Board 
     of Directors shall include in the published proposal a 
     thorough analysis of the data and projections on which the 
     proposal is based.''.
       (b) Effective Date.--This section and the amendments made 
     by this section shall take effect on the date that the final 
     regulations required under section 9(a)(1) take effect.

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

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

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

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

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

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

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

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

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

       ``(F) Considerations.--In making a determination under 
     subparagraph (E), the Board shall consider--
       ``(i) national and regional conditions and their impact on 
     insured depository institutions;
       ``(ii) potential problems affecting insured depository 
     institutions or a specific group or type of depository 
     institution;
       ``(iii) the degree to which the contingent liability of the 
     Corporation for anticipated failures of insured institutions 
     adequately addresses concerns over funding levels in the 
     Deposit Insurance Fund; and
       ``(iv) any other factors that the Board determines are 
     appropriate.
       ``(G) Review of determination.--
       ``(i) Annual review.--A determination to suspend or limit 
     dividends under subparagraph (E) shall be reviewed by the 
     Board of Directors annually.
       ``(ii) Action by board.--Based on each annual review under 
     clause (i), the Board of Directors shall either renew or 
     remove a determination to suspend or limit dividends under 
     subparagraph (E), or shall make a new determination in 
     accordance with this paragraph. Unless justified under the 
     terms of the renewal or new determination, the Corporation 
     shall be required to provide cash dividends under 
     subparagraph (A) or (B), as appropriate.
       ``(3) One-time credit based on total assessment base at 
     year-end 1996.--
       ``(A) In general.--Before the end of the 270-day period 
     beginning on the date of the enactment of the Federal Deposit 
     Insurance Reform Act of 2005, the Board of Directors shall, 
     by regulation after notice and opportunity for comment, 
     provide for a credit to each eligible insured depository 
     institution (or a successor insured depository institution), 
     based on the assessment base of the institution on December 
     31, 1996, as compared to the combined aggregate assessment 
     base of all eligible insured depository institutions, taking 
     into account such factors as the Board of Directors may 
     determine to be appropriate.
       ``(B) Credit limit.--The aggregate amount of credits 
     available under subparagraph (A) to all eligible insured 
     depository institutions shall equal the amount that the 
     Corporation could collect if the Corporation imposed an 
     assessment of 10.5 basis points on the combined assessment 
     base of the Bank Insurance Fund and the Savings Association 
     Insurance Fund as of December 31, 2001.
       ``(C) Eligible insured depository institution defined.--For 
     purposes of this paragraph, the term `eligible insured 
     depository institution' means any insured depository 
     institution that--
       ``(i) was in existence on December 31, 1996, and paid a 
     deposit insurance assessment prior to that date; or
       ``(ii) is a successor to any insured depository institution 
     described in clause (i).
       ``(D) Application of credits.--
       ``(i) In general.--Subject to clause (ii), the amount of a 
     credit to any eligible insured depository institution under 
     this paragraph shall be applied by the Corporation, subject 
     to subsection (b)(3)(E), to the assessments imposed on

[[Page 586]]

     such institution under subsection (b) that become due for 
     assessment periods beginning after the effective date of 
     regulations prescribed under subparagraph (A).
       ``(ii) Temporary restriction on use of credits.--The amount 
     of a credit to any eligible insured depository institution 
     under this paragraph may not be applied to more than 90 
     percent of the assessments imposed on such institution under 
     subsection (b) that become due for assessment periods 
     beginning in fiscal years 2008, 2009, and 2010.
       ``(iii) Regulations.--The regulations prescribed under 
     subparagraph (A) shall establish the qualifications and 
     procedures governing the application of assessment credits 
     pursuant to clause (i).
       ``(E) Limitation on amount of credit for certain depository 
     institutions.--In the case of an insured depository 
     institution that exhibits financial, operational, or 
     compliance weaknesses ranging from moderately severe to 
     unsatisfactory, or is not adequately capitalized (as defined 
     in section 38) at the beginning of an assessment period, the 
     amount of any credit allowed under this paragraph against the 
     assessment on that depository institution for such period may 
     not exceed the amount calculated by applying to that 
     depository institution the average assessment rate on all 
     insured depository institutions for such assessment period.
       ``(F) Successor defined.--The Corporation shall define the 
     term `successor' for purposes of this paragraph, by 
     regulation, and may consider any factors as the Board may 
     deem appropriate.
       ``(4) Administrative review.--
       ``(A) In general.--The regulations prescribed under 
     paragraphs (2)(D) and (3) shall include provisions allowing 
     an insured depository institution a reasonable opportunity to 
     challenge administratively the amount of the credit or 
     dividend determined under paragraph (2) or (3) for such 
     institution.
       ``(B) Administrative review.--Any review under subparagraph 
     (A) of any determination of the Corporation under paragraph 
     (2) or (3) shall be final and not subject to judicial 
     review.''.
       (b) Definition of Reserve Ratio.--Section 3(y) of the 
     Federal Deposit Insurance Act (12 U.S.C. 1813(y)) (as amended 
     by section 2105(b) of this subtitle) is amended by adding at 
     the end the following new paragraph:
       ``(3) Reserve ratio.--The term `reserve ratio', when used 
     with regard to the Deposit Insurance Fund other than in 
     connection with a reference to the designated reserve ratio, 
     means the ratio of the net worth of the Deposit Insurance 
     Fund to the value of the aggregate estimated insured 
     deposits.''.

     SEC. 2108. DEPOSIT INSURANCE FUND RESTORATION PLANS.

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

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

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

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

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

     SEC. 2109. REGULATIONS REQUIRED.

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

       TITLE III--DIGITAL TELEVISION TRANSITION AND PUBLIC SAFETY

     SEC. 3001. SHORT TITLE; DEFINITION.

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

     SEC. 3002. ANALOG SPECTRUM RECOVERY: FIRM DEADLINE.

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

     SEC. 3003. AUCTION OF RECOVERED SPECTRUM.

       (a) Deadline for Auction.--Section 309(j) of the 
     Communications Act of 1934 (47 U.S.C. 309(j)) is amended--
       (1) by redesignating the second paragraph (15) of such 
     section (as added by section 203(b) of the Commercial 
     Spectrum Enhancement Act (Pub. L. 108-494; 118 Stat. 3993)), 
     as paragraph (16) of such section; and
       (2) in the first paragraph (15) of such section (as added 
     by section 3(a) of the Auction Reform Act of 2002 (Pub. L. 
     107-195; 116 Stat. 716)), by adding at the end of 
     subparagraph (C) the following new clauses:
       ``(v) Additional deadlines for recovered analog spectrum.--
     Notwithstanding subparagraph (B), the Commission shall 
     conduct the auction of the licenses for recovered analog 
     spectrum by commencing the bidding not later than January 28, 
     2008, and shall deposit the proceeds of such auction in 
     accordance with paragraph (8)(E)(ii) not later than June 30, 
     2008.

[[Page 587]]

       ``(vi) Recovered analog spectrum.--For purposes of clause 
     (v), the term `recovered analog spectrum' means the spectrum 
     between channels 52 and 69, inclusive (between frequencies 
     698 and 806 megahertz, inclusive) reclaimed from analog 
     television service broadcasting under paragraph (14), other 
     than--

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

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

     SEC. 3004. RESERVATION OF AUCTION PROCEEDS.

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

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

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

     SEC. 3006. PUBLIC SAFETY INTEROPERABLE COMMUNICATIONS.

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

     SEC. 3007. NYC 9/11 DIGITAL TRANSITION.

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

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

       (a) Creation of Program.--The Assistant Secretary shall 
     make payments of not to exceed $10,000,000, in the aggregate, 
     during the fiscal year 2008 and 2009 period from the Digital 
     Television Transition and Public Safety Fund established 
     under section 309(j)(8)(E) of the Communications Act of 1934 
     (47 U.S.C. 309(j)(8)(E)) to implement and administer a 
     program through which each eligible low-power television 
     station may receive compensation toward the cost of the 
     purchase of a digital-to-analog conversion device that 
     enables it to convert the incoming digital signal of its 
     corresponding full-power television station to analog format 
     for transmission on the low-power television station's analog 
     channel. An eligible low-power television station

[[Page 588]]

     may receive such compensation only if it submits a request 
     for such compensation on or before February 17, 2009. 
     Priority compensation shall be given to eligible low-power 
     television stations in which the license is held by a non-
     profit corporation and eligible low-power television stations 
     that serve rural areas of fewer than 10,000 viewers.
       (b) Credit.--The Assistant Secretary may borrow from the 
     Treasury beginning October 1, 2006 such sums as may be 
     necessary, but not to exceed $10,000,000, to implement this 
     section. The Assistant Secretary shall reimburse the 
     Treasury, without interest, as funds are deposited into the 
     Digital Television Transition and Public Safety Fund.
       (c) Eligible Stations.--For purposes of this section, the 
     term ``eligible low-power television station'' means a low-
     power television broadcast station, Class A television 
     station, television translator station, or television booster 
     station--
       (1) that is itself broadcasting exclusively in analog 
     format; and
       (2) that has not purchased a digital-to-analog conversion 
     device prior to the date of enactment of the Digital 
     Television Transition and Public Safety Act of 2005.

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

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

     SEC. 3010. NATIONAL ALERT AND TSUNAMI WARNING PROGRAM.

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

     SEC. 3011. ENHANCE 911.

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

     SEC. 3012. ESSENTIAL AIR SERVICE PROGRAM.

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

     SEC. 3013. SUPPLEMENTAL LICENSE FEES.

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

                  TITLE IV--TRANSPORTATION PROVISIONS

     SEC. 4001. EXTENSION OF VESSEL TONNAGE DUTIES.

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

                           TITLE V--MEDICARE

               Subtitle A--Provisions Relating to Part A

     SEC. 5001. HOSPITAL QUALITY IMPROVEMENT.

       (a) Submission of Hospital Data.--Section 1886(b)(3)(B) of 
     the Social Security Act (42 U.S.C. 1395ww(b)(3)(B)) is 
     amended--
       (1) in clause (i)--
       (A) in subclause (XIX), by striking ``2007'' and inserting 
     ``2006''; and
       (B) in subclause (XX), by striking ``for fiscal year 2008 
     and each subsequent fiscal year,'' and inserting ``for each 
     subsequent fiscal year, subject to clause (viii),'';
       (2) in clause (vii)--
       (A) in subclause (I), by striking ``for each of fiscal 
     years 2005 through 2007'' and inserting ``for fiscal years 
     2005 and 2006''; and
       (B) in subclause (II), by striking ``Each'' and inserting 
     ``For fiscal years 2005 and 2006, each''; and
       (3) by adding at the end the following new clauses:
       ``(viii)(I) For purposes of clause (i) for fiscal year 2007 
     and each subsequent fiscal year, in the case of a subsection 
     (d) hospital that does not submit, to the Secretary in 
     accordance with this clause, data required to be submitted on 
     measures selected under this clause with respect to such a 
     fiscal year, the applicable percentage increase under clause 
     (i) for such fiscal year shall be reduced by 2.0 percentage 
     points. Such reduction shall apply only with respect to the 
     fiscal year involved and the Secretary shall not take into 
     account such reduction in computing the applicable percentage 
     increase under clause (i) for a subsequent fiscal year, and 
     the Secretary and the Medicare Payment Advisory Commission 
     shall carry out the requirements under section 5001(b) of the 
     Deficit Reduction Act of 2005.
       ``(II) Each subsection (d) hospital shall submit data on 
     measures selected under this clause to the Secretary in a 
     form and manner, and at a time, specified by the Secretary 
     for purposes of this clause.
       ``(III) The Secretary shall expand, beyond the measures 
     specified under clause (vii)(II) and consistent with the 
     succeeding subclauses, the set of measures that the Secretary 
     determines to be appropriate for the measurement of the 
     quality of care furnished by hospitals in inpatient settings.
       ``(IV) Effective for payments beginning with fiscal year 
     2007, in expanding the number of measures under subclause 
     (III), the Secretary shall begin to adopt the baseline set of 
     performance measures as set forth in the November 2005 report 
     by the Institute of Medicine of the National Academy of 
     Sciences under section 238(b) of the Medicare Prescription 
     Drug, Improvement, and Modernization Act of 2003.
       ``(V) Effective for payments beginning with fiscal year 
     2008, the Secretary shall add other measures that reflect 
     consensus among affected parties and, to the extent feasible 
     and practicable, shall include measures set forth by one or 
     more national consensus building entities.
       ``(VI) For purposes of this clause and clause (vii), the 
     Secretary may replace any measures or indicators in 
     appropriate cases, such as where all hospitals are 
     effectively in compliance or the measures or indicators have 
     been subsequently shown not to represent the best clinical 
     practice.
       ``(VII) The Secretary shall establish procedures for making 
     data submitted under this clause available to the public. 
     Such procedures shall ensure that a hospital has the 
     opportunity to review the data that are to be made public 
     with respect to the hospital prior to such data being made 
     public. The Secretary shall report quality measures of 
     process, structure, outcome, patients' perspectives on care, 
     efficiency, and costs of care that relate to services 
     furnished in inpatient settings in hospitals on the Internet 
     website of the Centers for Medicare & Medicaid Services.''.
       (b) Plan for Hospital Value Based Purchasing Program.--
       (1) In general.--The Secretary of Health and Human Services 
     shall develop a plan to implement a value based purchasing 
     program for payments under the Medicare program for 
     subsection (d) hospitals beginning with fiscal year 2009.
       (2) Details.--Such a plan shall include consideration of 
     the following issues:
       (A) The on-going development, selection, and modification 
     process for measures of quality and efficiency in hospital 
     inpatient settings.

[[Page 589]]

       (B) The reporting, collection, and validation of quality 
     data.
       (C) The structure of value based payment adjustments, 
     including the determination of thresholds or improvements in 
     quality that would substantiate a payment adjustment, the 
     size of such payments, and the sources of funding for the 
     value based payments.
       (D) The disclosure of information on hospital performance.

     In developing such a plan, the Secretary shall consult with 
     relevant affected parties and shall consider experience with 
     such demonstrations that are relevant to the value based 
     purchasing program under this subsection.
       (c) Quality Adjustment in DRG Payments for Certain Hospital 
     Acquired Infections.--
       (1) In general.--Section 1886(d)(4) of the Social Security 
     Act (42 U.S.C. 1395ww(d)(4)) is amended by adding at the end 
     the following new subparagraph:
       ``(D)(i) For discharges occurring on or after October 1, 
     2008, the diagnosis-related group to be assigned under this 
     paragraph for a discharge described in clause (ii) shall be a 
     diagnosis-related group that does not result in higher 
     payment based on the presence of a secondary diagnosis code 
     described in clause (iv).
       ``(ii) A discharge described in this clause is a discharge 
     which meets the following requirements:
       ``(I) The discharge includes a condition identified by a 
     diagnosis code selected under clause (iv) as a secondary 
     diagnosis.
       ``(II) But for clause (i), the discharge would have been 
     classified to a diagnosis-related group that results in a 
     higher payment based on the presence of a secondary diagnosis 
     code selected under clause (iv).
       ``(III) At the time of admission, no code selected under 
     clause (iv) was present.
       ``(iii) As part of the information required to be reported 
     by a hospital with respect to a discharge of an individual in 
     order for payment to be made under this subsection, for 
     discharges occurring on or after October 1, 2007, the 
     information shall include the secondary diagnosis of the 
     individual at admission.
       ``(iv) By not later than October 1, 2007, the Secretary 
     shall select diagnosis codes associated with at least two 
     conditions, each of which codes meets all of the following 
     requirements (as determined by the Secretary):
       ``(I) Cases described by such code have a high cost or high 
     volume, or both, under this title.
       ``(II) The code results in the assignment of a case to a 
     diagnosis-related group that has a higher payment when the 
     code is present as a secondary diagnosis.
       ``(III) The code describes such conditions that could 
     reasonably have been prevented through the application of 
     evidence-based guidelines.

     The Secretary may from time to time revise (through addition 
     or deletion of codes) the diagnosis codes selected under this 
     clause so long as there are diagnosis codes associated with 
     at least two conditions selected for discharges occurring 
     during any fiscal year.
       ``(v) In selecting and revising diagnosis codes under 
     clause (iv), the Secretary shall consult with the Centers for 
     Disease Control and Prevention and other appropriate 
     entities.
       ``(vi) Any change resulting from the application of this 
     subparagraph shall not be taken into account in adjusting the 
     weighting factors under subparagraph (C)(i) or in applying 
     budget neutrality under subparagraph (C)(iii).''.
       (2) No judicial review.--Section 1886(d)(7)(B) of such Act 
     (42 U.S.C. 1395ww(d)(7)(B)) is amended by inserting before 
     the period the following: ``, including the selection and 
     revision of codes under paragraph (4)(D)''.

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

       (a) In General.--Section 1886(d)(5)(F)(vi) of the Social 
     Security Act (42 U.S.C. 1395ww(d)(5)(F)(vi)) is amended by 
     adding after and below subclause (II) the following:

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

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

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

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

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

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

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

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

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

[[Page 590]]



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

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

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

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

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

       (a) Establishment.--
       (1) In general.--By not later than January 1, 2008, the 
     Secretary of Health and Human Services (in this section 
     referred to as the ``Secretary'') shall establish a 
     demonstration program for purposes of understanding costs and 
     outcomes across different post-acute care sites. Under such 
     program, with respect to diagnoses specified by the 
     Secretary, an individual who receives treatment from a 
     provider for such a diagnosis shall receive a single 
     comprehensive assessment on the date of discharge from a 
     subsection (d) hospital (as defined in section 1886(d)(1)(B) 
     of the Social Security Act (42 U.S.C. 1395ww(d)(1)(B))) of 
     the needs of the patient and the clinical characteristics of 
     the diagnosis to determine the appropriate placement of

[[Page 591]]

     such patient in a post-acute care site. The Secretary shall 
     use a standardized patient assessment instrument across all 
     post-acute care sites to measure functional status and other 
     factors during the treatment and at discharge from each 
     provider. Participants in the program shall provide 
     information on the fixed and variable costs for each 
     individual. An additional comprehensive assessment shall be 
     provided at the end of the episode of care.
       (2) Number of sites.--The Secretary shall conduct the 
     demonstration program under this section with sufficient 
     numbers to determine statistically reliable results.
       (3) Duration.--The Secretary shall conduct the 
     demonstration program under this section for a 3-year period.
       (b) Waiver Authority.--The Secretary may waive such 
     requirements of titles XI and XVIII of the Social Security 
     Act (42 U.S.C. 1301 et seq.; 42 U.S.C. 1395 et seq.) as may 
     be necessary for the purpose of carrying out the 
     demonstration program under this section.
       (c) Report.--Not later than 6 months after the completion 
     of the demonstration program under this section, the 
     Secretary shall submit to Congress a report on such program, 
     that includes the results of the program and recommendations 
     for such legislation and administrative action as the 
     Secretary determines to be appropriate.
       (d) Funding.--The Secretary shall provide for the transfer 
     from the Federal Hospital Insurance Trust Fund established 
     under section 1817 of the Social Security Act (42 U.S.C. 
     1395i), $6,000,000 for the costs of carrying out the 
     demonstration program under this section.

               Subtitle B--Provisions Relating to Part B

                     CHAPTER 1--PAYMENT PROVISIONS

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

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

       ``(I) In general.--Except as provided in clause (iii), 
     payment for the item shall be made on a monthly basis for the 
     rental of the item during the period of medical need (but 
     payments under this clause may not extend over a period of 
     continuous use (as determined by the Secretary) of longer 
     than 36 months).
       ``(II) Payment amount.--Subject to subparagraph (B), the 
     amount recognized for the item, for each of the first 3 
     months of such period, is 10 percent of the purchase price 
     recognized under paragraph (8) with respect to the item, and, 
     for each of the remaining months of such period, is 7.5 
     percent of such purchase price.

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

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

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

     SEC. 5102. ADJUSTMENTS IN PAYMENT FOR IMAGING SERVICES.

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

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

       (b) Reduction in Physician Fee Schedule to OPD Payment 
     Amount for Imaging Services.--Section 1848 of such Act (42 
     U.S.C. 1395w-4) is amended--
       (1) in subsection (b), by adding at the end the following 
     new paragraph:
       ``(4) Special rule for imaging services.--
       ``(A) In general.--In the case of imaging services 
     described in subparagraph (B) furnished on or after January 
     1, 2007, if--
       ``(i) the technical component (including the technical 
     component portion of a global fee) of the service established 
     for a year under the fee schedule described in paragraph (1) 
     without application of the geographic adjustment factor 
     described in paragraph (1)(C), exceeds
       ``(ii) the Medicare OPD fee schedule amount established 
     under the prospective payment system for hospital outpatient 
     department services under paragraph (3)(D) of section 1833(t) 
     for such service for such year, determined without regard to 
     geographic adjustment under paragraph (2)(D) of such section,

     the Secretary shall substitute the amount described in clause 
     (ii), adjusted by the geographic adjustment factor described 
     in paragraph (1)(C), for the fee schedule amount for such 
     technical component for such year.
       ``(B) Imaging services described.--For purposes of 
     subparagraph (A), imaging services described in this 
     subparagraph are imaging and computer-assisted imaging 
     services, including X-ray, ultrasound (including 
     echocardiography), nuclear medicine (including positron 
     emission tomography), magnetic resonance imaging, computed 
     tomography, and fluoroscopy, but excluding diagnostic and 
     screening mammography.''; and
       (2) in subsection (c)(2)(B)(v), as added by subsection 
     (a)(3), by adding at the end the following new subclause:

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

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

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

     the Secretary shall substitute under subparagraph (A) the 
     amount described in clause (ii) for the standard overhead 
     amount for such service referred to in clause (i).''.

[[Page 592]]



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

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

     Such report shall include such recommendations on alternative 
     mechanisms to replace the sustainable growth rate system as 
     the Medicare Payment Advisory Commission determines 
     appropriate.
       (3) Funding.--Out of any funds in the Treasury not 
     otherwise appropriated, there are appropriated to the 
     Medicare Payment Advisory Commission $550,000, to carry out 
     this subsection.

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

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

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

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

     SEC. 5107. REVISIONS TO PAYMENTS FOR THERAPY SERVICES.

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

                        CHAPTER 2--MISCELLANEOUS

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

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

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

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

          ``Ultrasound Screening for Abdominal Aortic Aneurysm

       ``(bbb) The term `ultrasound screening for abdominal aortic 
     aneurysm' means--
       ``(1) a procedure using sound waves (or such other 
     procedures using alternative technologies, of commensurate 
     accuracy and cost, that the Secretary may specify) provided 
     for the early detection of abdominal aortic aneurysm; and
       ``(2) includes a physician's interpretation of the results 
     of the procedure.''.
       (b) Inclusion of Ultrasound Screening for Abdominal Aortic 
     Aneurysm in Initial Preventive Physical Examination.--Section 
     1861(ww)(2) of such Act (42 U.S.C. 1395x(ww)(2)) is amended 
     by adding at the end the following new subparagraph:
       ``(L) Ultrasound screening for abdominal aortic aneurysm as 
     defined in section 1861(bbb).''.
       (c) Payment for Ultrasound Screening for Abdominal Aortic 
     Aneurysm.--Section 1848(j)(3) of such Act (42 U.S.C. 1395w-
     4(j)(3)) is amended by inserting ``(2)(AA),'' after 
     ``(2)(W),''.
       (d) Frequency.--Section 1862(a)(1) of such Act (42 U.S.C. 
     1395y(a)(1)) is amended--
       (1) by striking ``and'' at the end of subparagraph (L);
       (2) by striking the semicolon at the end of subparagraph 
     (M) and inserting ``, and''; and
       (3) by adding at the end the following new subparagraph:
       ``(N) in the case of ultrasound screening for abdominal 
     aortic aneurysm which is performed more frequently than is 
     provided for under section 1861(s)(2)(AA);''.

[[Page 593]]

       (e) Non-Application of Part B Deductible.--Section 1833(b) 
     of such Act (42 U.S.C. 1395l(b)) is amended in the first 
     sentence--
       (1) by striking ``and'' before ``(6)''; and
       (2) by inserting ``, and (7) such deductible shall not 
     apply with respect to ultrasound screening for abdominal 
     aortic aneurysm (as defined in section 1861(bbb))'' before 
     the period at the end.
       (f) Effective Date.--The amendments made by this section 
     shall apply to services furnished on or after January 1, 
     2007.

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

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

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

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

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

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

            Subtitle C--Provisions Relating to Parts A and B

     SEC. 5201. HOME HEALTH PAYMENTS.

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

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

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

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

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

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

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

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

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

     SEC. 5204. MEDICARE INTEGRITY PROGRAM FUNDING.

       Section 1817(k)(4) of the Social Security Act (42 U.S.C. 
     1395i(k)(4)) is amended--
       (1) in subparagraph (B), by striking ``The amount'' and 
     inserting ``Subject to subparagraph (C), the amount''; and

[[Page 594]]

       (2) by adding at the end the following new subparagraph:
       ``(C) Adjustments.--The amount appropriated under 
     subparagraph (A) for a fiscal year is increased as follows:
       ``(i) For fiscal year 2006, $100,000,000.''.

               Subtitle D--Provisions Relating to Part C

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

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

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

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

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

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

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

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

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

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

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

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

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

     SEC. 5302. RURAL PACE PROVIDER GRANT PROGRAM.

       (a) Definitions.--In this section:
       (1) CMS.--The term ``CMS'' means the Centers for Medicare & 
     Medicaid Services.
       (2) PACE program.--The term ``PACE program'' has the 
     meaning given that term in sections 1894(a)(2) and 1934(a)(2) 
     of the Social Security Act (42 U.S.C. 1395eee(a)(2); 1396u-
     4(a)(2)).
       (3) PACE provider.--The term ``PACE provider'' has the 
     meaning given that term in section 1894(a)(3) or 1934(a)(3) 
     of the Social Security Act (42 U.S.C. 1395eee(a)(3); 1396u-
     4(a)(3)).
       (4) Rural area.--The term ``rural area'' has the meaning 
     given that term in section 1886(d)(2)(D) of the Social 
     Security Act (42 U.S.C. 1395ww(d)(2)(D)).
       (5) Rural pace pilot site.--The term ``rural PACE pilot 
     site'' means a PACE provider that has been approved to 
     provide services in a geographic service area that is, in 
     whole or in part, a rural area, and that has received a site 
     development grant under this section.
       (6) Secretary.--The term ``Secretary'' means the Secretary 
     of Health and Human Services.
       (b) Site Development Grants and Technical Assistance 
     Program.--
       (1) Site development grants.--
       (A) In general.--The Secretary shall establish a process 
     and criteria to award site development grants to qualified 
     PACE providers that have been approved to serve a rural area.
       (B) Amount per award.--A site development grant awarded 
     under subparagraph (A) to any individual rural PACE pilot 
     site shall not exceed $750,000.
       (C) Number of awards.--Not more than 15 rural PACE pilot 
     sites shall be awarded a site development grant under 
     subparagraph (A).
       (D) Use of funds.--Funds made available under a site 
     development grant awarded under subparagraph (A) may be used 
     for the following expenses only to the extent such expenses 
     are incurred in relation to establishing or delivering PACE 
     program services in a rural area:
       (i) Feasibility analysis and planning.
       (ii) Interdisciplinary team development.
       (iii) Development of a provider network, including contract 
     development.

[[Page 595]]

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

                      TITLE VI--MEDICAID AND SCHIP

                          Subtitle A--Medicaid

               CHAPTER 1--PAYMENT FOR PRESCRIPTION DRUGS

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

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

[[Page 596]]

       (d) Exclusion of Sales at a Nominal Price From 
     Determination of Best Price.--
       (1) Manufacturer reporting of sales.--Subsection 
     (b)(3)(A)(iii) of such section is amended by inserting before 
     the period at the end the following: ``, and, for calendar 
     quarters beginning on or after January 1, 2007 and only with 
     respect to the information described in subclause (III), for 
     covered outpatient drugs''.
       (2) Limitation on sales at a nominal price.--Subsection 
     (c)(1) of such section is amended by adding at the end the 
     following new subparagraph:
       ``(D) Limitation on sales at a nominal price.--
       ``(i) In general.--For purposes of subparagraph 
     (C)(ii)(III) and subsection (b)(3)(A)(iii)(III), only sales 
     by a manufacturer of covered outpatient drugs at nominal 
     prices to the following shall be considered to be sales at a 
     nominal price or merely nominal in amount:

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

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

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

       ``(iii) Nonapplication.--Clause (i) shall not apply with 
     respect to sales by a manufacturer at a nominal price of 
     covered outpatient drugs pursuant to a master agreement under 
     section 8126 of title 38, United States Code.''.
       (e) Retail Survey Prices; State Payment and Utilization 
     Rates; and Performance Rankings.--Such section is further 
     amended by inserting after subsection (e) the following new 
     subsection:
       ``(f) Survey of Retail Prices; State Payment and 
     Utilization Rates; and Performance Rankings.--
       ``(1) Survey of retail prices.--
       ``(A) Use of vendor.--The Secretary may contract services 
     for--
       ``(i) the determination on a monthly basis of retail survey 
     prices for covered outpatient drugs that represent a 
     nationwide average of consumer purchase prices for such 
     drugs, net of all discounts and rebates (to the extent any 
     information with respect to such discounts and rebates is 
     available); and
       ``(ii) the notification of the Secretary when a drug 
     product that is therapeutically and pharmaceutically 
     equivalent and bioequivalent becomes generally available.
       ``(B) Secretary response to notification of availability of 
     multiple source products.--If contractor notifies the 
     Secretary under subparagraph (A)(ii) that a drug product 
     described in such subparagraph has become generally 
     available, the Secretary shall make a determination, within 7 
     days after receiving such notification, as to whether the 
     product is now described in subsection (e)(4).
       ``(C) Use of competitive bidding.--In contracting for such 
     services, the Secretary shall competitively bid for an 
     outside vendor that has a demonstrated history in--
       ``(i) surveying and determining, on a representative 
     nationwide basis, retail prices for ingredient costs of 
     prescription drugs;
       ``(ii) working with retail pharmacies, commercial payers, 
     and States in obtaining and disseminating such price 
     information; and
       ``(iii) collecting and reporting such price information on 
     at least a monthly basis.

     In contracting for such services, the Secretary may waive 
     such provisions of the Federal Acquisition Regulation as are 
     necessary for the efficient implementation of this 
     subsection, other than provisions relating to confidentiality 
     of information and such other provisions as the Secretary 
     determines appropriate.
       ``(D) Additional provisions.--A contract with a vendor 
     under this paragraph shall include such terms and conditions 
     as the Secretary shall specify, including the following:
       ``(i) The vendor must monitor the marketplace and report to 
     the Secretary each time there is a new covered outpatient 
     drug generally available.
       ``(ii) The vendor must update the Secretary no less often 
     than monthly on the retail survey prices for covered 
     outpatient drugs.
       ``(iii) The contract shall be effective for a term of 2 
     years.
       ``(E) Availability of information to states.--Information 
     on retail survey prices obtained under this paragraph, 
     including applicable information on single source drugs, 
     shall be provided to States on at least a monthly basis. The 
     Secretary shall devise and implement a means for providing 
     access to each State agency designated under section 
     1902(a)(5) with responsibility for the administration or 
     supervision of the administration of the State plan under 
     this title of the retail survey price determined under this 
     paragraph.
       ``(2) Annual state report.--Each State shall annually 
     report to the Secretary information on--
       ``(A) the payment rates under the State plan under this 
     title for covered outpatient drugs;
       ``(B) the dispensing fees paid under such plan for such 
     drugs; and
       ``(C) utilization rates for noninnovator multiple source 
     drugs under such plan.
       ``(3) Annual state performance rankings.--
       ``(A) Comparative analysis.--The Secretary annually shall 
     compare, for the 50 most widely prescribed drugs identified 
     by the Secretary, the national retail sales price data 
     (collected under paragraph (1)) for such drugs with data on 
     prices under this title for each such drug for each State.
       ``(B) Availability of information.--The Secretary shall 
     submit to Congress and the States full information regarding 
     the annual rankings made under subparagraph (A).
       ``(4) Appropriation.--Out of any funds in the Treasury not 
     otherwise appropriated, there is appropriated to the 
     Secretary of Health and Human Services $5,000,000 for each of 
     fiscal years 2006 through 2010 to carry out this 
     subsection.''.
       (f) Miscellaneous Amendments.--
       (1) In general.--Sections 1927(g)(1)(B)(i)(II) and 
     1861(t)(2)(B)(ii)(I) of such Act are each amended by 
     inserting ``(or its successor publications)'' after ``United 
     States Pharmacopoeia-Drug Information''.
       (2) Paperwork reduction.--The last sentence of section 
     1927(g)(2)(A)(ii) of such Act (42 U.S.C. 1396r-
     8(g)(2)(A)(ii)) is amended by inserting before the period at 
     the end the following: ``, or to require verification of the 
     offer to provide consultation or a refusal of such offer''.
       (3) Effective date.--The amendments made by this subsection 
     shall take effect on the date of the enactment of this Act.
       (g) Effective Date.--Except as otherwise provided, the 
     amendments made by this section shall take effect on January 
     1, 2007, without regard to whether or not final regulations 
     to carry out such amendments have been promulgated by such 
     date.

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

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

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

       (a) Inclusion With Other Reported Average Manufacturer and 
     Best Prices.--Section 1927(b)(3)(A) of the Social Security 
     Act (42 U.S.C. 1396r-8(b)(3)(A)) is amended--
       (1) by striking clause (i) and inserting the following:

[[Page 597]]

       ``(i) not later than 30 days after the last day of each 
     rebate period under the agreement--

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

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

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

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

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

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

                CHAPTER 2--LONG-TERM CARE UNDER MEDICAID

              Subchapter A--Reform of Asset Transfer Rules

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

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

     ``The procedures established under subparagraph (D) shall 
     permit the facility in which the institutionalized individual 
     is residing to file an undue hardship waiver application on 
     behalf of the individual with the consent of the individual 
     or the personal representative of the individual.''.
       (2) Authority to make bed hold payments for hardship 
     applicants.--Such section is further amended by adding at the 
     end the following: ``While an application for an undue 
     hardship waiver is pending under subparagraph (D) in the case 
     of an individual who is a resident of a nursing facility, if 
     the application meets such criteria as the Secretary 
     specifies, the State may provide for payments for nursing 
     facility services in order to hold the bed for the individual 
     at the facility, but not in excess of payments for 30 
     days.''.

     SEC. 6012. DISCLOSURE AND TREATMENT OF ANNUITIES.

       (a) In General.--Section 1917 of the Social Security Act 
     (42 U.S.C. 1396p) is amended by redesignating subsection (e) 
     as subsection (f) and by inserting after subsection (d) the 
     following new subsection:
       ``(e)(1) In order to meet the requirements of this section 
     for purposes of section 1902(a)(18), a State shall require, 
     as a condition for the provision of medical assistance for 
     services described in subsection (c)(1)(C)(i) (relating to 
     long-term care services) for an individual, the application 
     of the individual for such assistance (including any 
     recertification of eligibility for such assistance) shall 
     disclose a description of any interest the individual or 
     community spouse has in an annuity (or similar financial 
     instrument, as may be specified by the Secretary), regardless 
     of whether the annuity is irrevocable or is treated as an 
     asset. Such application or recertification form shall include 
     a statement that under paragraph (2) the State becomes a 
     remainder beneficiary under such an annuity or similar 
     financial instrument by virtue of the provision of such 
     medical assistance.
       ``(2)(A) In the case of disclosure concerning an annuity 
     under subsection (c)(1)(F), the State shall notify the issuer 
     of the annuity of the right of the State under such 
     subsection as a preferred remainder beneficiary in the 
     annuity for medical assistance furnished to the individual. 
     Nothing in this paragraph shall be construed as preventing 
     such an issuer from notifying persons with any other 
     remainder interest of the State's remainder interest under 
     such subsection.
       ``(B) In the case of such an issuer receiving notice under 
     subparagraph (A), the State may require the issuer to notify 
     the State when there is a change in the amount of income or 
     principal being withdrawn from the amount that was being 
     withdrawn at the time of the most recent disclosure described 
     in paragraph (1). A State shall take such information into 
     account in determining the amount of the State's obligations 
     for medical assistance or in the individual's eligibility for 
     such assistance.
       ``(3) The Secretary may provide guidance to States on 
     categories of transactions that may be treated as a transfer 
     of asset for less than fair market value.
       ``(4) Nothing in this subsection shall be construed as 
     preventing a State from denying eligibility for medical 
     assistance for an individual based on the income or resources 
     derived from an annuity described in paragraph (1).''.
       (b) Requirement for State To Be Named as a Remainder 
     Beneficiary.--Section 1917(c)(1) of such Act (42 U.S.C. 
     1396p(c)(1)), is amended by adding at the end the following:
       ``(F) For purposes of this paragraph, the purchase of an 
     annuity shall be treated as the disposal of an asset for less 
     than fair market value unless--
       ``(i) the State is named as the remainder beneficiary in 
     the first position for at least the total amount of medical 
     assistance paid on behalf of the annuitant under this title; 
     or
       ``(ii) the State is named as such a beneficiary in the 
     second position after the community spouse or minor or 
     disabled child and is named in the first position if such 
     spouse or a representative of such child disposes of any such 
     remainder for less than fair market value.''.
       (c) Inclusion of Transfers To Purchase Balloon Annuities.--
     Section 1917(c)(1) of such Act (42 U.S.C. 1396p(c)(1)), as 
     amended by subsection (b), is amended by adding at the end 
     the following:

[[Page 598]]

       ``(G) For purposes of this paragraph with respect to a 
     transfer of assets, the term `assets' includes an annuity 
     purchased by or on behalf of an annuitant who has applied for 
     medical assistance with respect to nursing facility services 
     or other long-term care services under this title unless--
       ``(i) the annuity is--
       ``(I) an annuity described in subsection (b) or (q) of 
     section 408 of the Internal Revenue Code of 1986; or
       ``(II) purchased with proceeds from--
       ``(aa) an account or trust described in subsection (a), 
     (c), or (p) of section 408 of such Code;
       ``(bb) a simplified employee pension (within the meaning of 
     section 408(k) of such Code); or
       ``(cc) a Roth IRA described in section 408A of such Code; 
     or
       ``(ii) the annuity--
       ``(I) is irrevocable and nonassignable;
       ``(II) is actuarially sound (as determined in accordance 
     with actuarial publications of the Office of the Chief 
     Actuary of the Social Security Administration); and
       ``(III) provides for payments in equal amounts during the 
     term of the annuity, with no deferral and no balloon payments 
     made.''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to transactions (including the purchase of an 
     annuity) occurring on or after the date of the enactment of 
     this Act.

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

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

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

       (a) In General.--Section 1917 of the Social Security Act, 
     as amended by section 6012(a), is further amended by 
     redesignating subsection (f) as subsection (g) and by 
     inserting after subsection (e) the following new subsection:
       ``(f)(1)(A) Notwithstanding any other provision of this 
     title, subject to subparagraphs (B) and (C) of this paragraph 
     and paragraph (2), in determining eligibility of an 
     individual for medical assistance with respect to nursing 
     facility services or other long-term care services, the 
     individual shall not be eligible for such assistance if the 
     individual's equity interest in the individual's home exceeds 
     $500,000.
       ``(B) A State may elect, without regard to the requirements 
     of section 1902(a)(1) (relating to statewideness) and section 
     1902(a)(10)(B) (relating to comparability), to apply 
     subparagraph (A) by substituting for `$500,000', an amount 
     that exceeds such amount, but does not exceed $750,000.
       ``(C) The dollar amounts specified in this paragraph shall 
     be increased, beginning with 2011, from year to year based on 
     the percentage increase in the consumer price index for all 
     urban consumers (all items; United States city average), 
     rounded to the nearest $1,000.
       ``(2) Paragraph (1) shall not apply with respect to an 
     individual if--
       ``(A) the spouse of such individual, or
       ``(B) such individual's child who is under age 21, or (with 
     respect to States eligible to participate in the State 
     program established under title XVI) is blind or permanently 
     and totally disabled, or (with respect to States which are 
     not eligible to participate in such program) is blind or 
     disabled as defined in section 1614,

     is lawfully residing in the individual's home.
       ``(3) Nothing in this subsection shall be construed as 
     preventing an individual from using a reverse mortgage or 
     home equity loan to reduce the individual's total equity 
     interest in the home.
       ``(4) The Secretary shall establish a process whereby 
     paragraph (1) is waived in the case of a demonstrated 
     hardship.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to individuals who are determined eligible for 
     medical assistance with respect to nursing facility services 
     or other long-term care services based on an application 
     filed on or after January 1, 2006.

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

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

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

       (a) Requirement To Impose Partial Months of 
     Ineligibility.--Section 1917(c)(1)(E) of the Social Security 
     Act (42 U.S.C. 1396p(c)(1)(E)) is amended by adding at the 
     end the following:
       ``(iv) A State shall not round down, or otherwise disregard 
     any fractional period of ineligibility determined under 
     clause (i) or (ii) with respect to the disposal of assets.''.
       (b) Authority for States To Accumulate Multiple Transfers 
     Into One Penalty Period.--Section 1917(c)(1) of such Act (42 
     U.S.C. 1396p(c)(1)), as amended by subsections (b) and (c) of 
     section 6012, is amended by adding at the end the following:
       ``(H) Notwithstanding the preceding provisions of this 
     paragraph, in the case of an individual (or individual's 
     spouse) who makes multiple fractional transfers of assets in 
     more than 1 month for less than fair market value on or after 
     the applicable look-back date specified in subparagraph (B), 
     a State may determine the period of ineligibility applicable 
     to such individual under this paragraph by--
       ``(i) treating the total, cumulative uncompensated value of 
     all assets transferred by the individual (or individual's 
     spouse) during all months on or after the look-back date 
     specified in subparagraph (B) as 1 transfer for purposes of 
     clause (i) or (ii) (as the case may be) of subparagraph (E); 
     and
       ``(ii) beginning such period on the earliest date which 
     would apply under subparagraph (D) to any of such 
     transfers.''.
       (c) Inclusion of Transfer of Certain Notes and Loans 
     Assets.--Section 1917(c)(1) of such Act (42 U.S.C. 
     1396p(c)(1)), as amended by subsection (b), is amended by 
     adding at the end the following:
       ``(I) For purposes of this paragraph with respect to a 
     transfer of assets, the term `assets' includes funds used to 
     purchase a promissory note, loan, or mortgage unless such 
     note, loan, or mortgage--
       ``(i) has a repayment term that is actuarially sound (as 
     determined in accordance with actuarial publications of the 
     Office of the Chief Actuary of the Social Security 
     Administration);
       ``(ii) provides for payments to be made in equal amounts 
     during the term of the loan, with no deferral and no balloon 
     payments made; and
       ``(iii) prohibits the cancellation of the balance upon the 
     death of the lender.

     In the case of a promissory note, loan, or mortgage that does 
     not satisfy the requirements of clauses (i) through (iii), 
     the value of such note, loan, or mortgage shall be the 
     outstanding balance due as of the date of the individual's 
     application for medical assistance for services described in 
     subparagraph (C).''.
       (d) Inclusion of Transfers To Purchase Life Estates.--
     Section 1917(c)(1) of such Act (42 U.S.C. 1396p(c)(1)), as 
     amended by subsection (c), is amended by adding at the end 
     the following:
       ``(J) For purposes of this paragraph with respect to a 
     transfer of assets, the term `assets' includes the purchase 
     of a life estate interest in another individual's home unless 
     the purchaser resides in the home for a period of at least 1 
     year after the date of the purchase.''.
       (e) Effective Dates.--
       (1) In general.--Except as provided in paragraphs (2) and 
     (3), the amendments made by this section shall apply to 
     payments under title XIX of the Social Security Act (42 
     U.S.C. 1396 et seq.) for calendar quarters beginning on or 
     after the date of enactment of this Act, without regard to 
     whether or not final regulations to carry

[[Page 599]]

     out such amendments have been promulgated by such date.
       (2) Exceptions.--The amendments made by this section shall 
     not apply--
       (A) to medical assistance provided for services furnished 
     before the date of enactment;
       (B) with respect to assets disposed of on or before the 
     date of enactment of this Act; or
       (C) with respect to trusts established on or before the 
     date of enactment of this Act.
       (3) Extension of effective date for state law amendment.--
     In the case of a State plan under title XIX of the Social 
     Security Act (42 U.S.C. 1396 et seq.) which the Secretary of 
     Health and Human Services determines requires State 
     legislation in order for the plan to meet the additional 
     requirements imposed by the amendments made by a provision of 
     this section, the State plan shall not be regarded as failing 
     to comply with the requirements of such title solely on the 
     basis of its failure to meet these additional requirements 
     before the first day of the first calendar quarter beginning 
     after the close of the first regular session of the State 
     legislature that begins after the date of the enactment of 
     this Act. For purposes of the previous sentence, in the case 
     of a State that has a 2-year legislative session, each year 
     of the session is considered to be a separate regular session 
     of the State legislature.

           Subchapter B--Expanded Access to Certain Benefits

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

       (a) Expansion Authority.--
       (1) In general.--Section 1917(b) of the Social Security Act 
     (42 U.S.C. 1396p(b)) is amended--
       (A) in paragraph (1)(C)--
       (i) in clause (ii), by inserting ``and which satisfies 
     clause (iv), or which has a State plan amendment that 
     provides for a qualified State long-term care insurance 
     partnership (as defined in clause (iii))'' after ``1993,''; 
     and
       (ii) by adding at the end the following new clauses:
       ``(iii) For purposes of this paragraph, the term `qualified 
     State long-term care insurance partnership' means an approved 
     State plan amendment under this title that provides for the 
     disregard of any assets or resources in an amount equal to 
     the insurance benefit payments that are made to or on behalf 
     of an individual who is a beneficiary under a long-term care 
     insurance policy if the following requirements are met:
       ``(I) The policy covers an insured who was a resident of 
     such State when coverage first became effective under the 
     policy.
       ``(II) The policy is a qualified long-term care insurance 
     policy (as defined in section 7702B(b) of the Internal 
     Revenue Code of 1986) issued not earlier than the effective 
     date of the State plan amendment.
       ``(III) The policy meets the model regulations and the 
     requirements of the model Act specified in paragraph (5).
       ``(IV) If the policy is sold to an individual who--
       ``(aa) has not attained age 61 as of the date of purchase, 
     the policy provides compound annual inflation protection;
       ``(bb) has attained age 61 but has not attained age 76 as 
     of such date, the policy provides some level of inflation 
     protection; and
       ``(cc) has attained age 76 as of such date, the policy may 
     (but is not required to) provide some level of inflation 
     protection.
       ``(V) The State Medicaid agency under section 1902(a)(5) 
     provides information and technical assistance to the State 
     insurance department on the insurance department's role of 
     assuring that any individual who sells a long-term care 
     insurance policy under the partnership receives training and 
     demonstrates evidence of an understanding of such policies 
     and how they relate to other public and private coverage of 
     long-term care.
       ``(VI) The issuer of the policy provides regular reports to 
     the Secretary, in accordance with regulations of the 
     Secretary, that include notification regarding when benefits 
     provided under the policy have been paid and the amount of 
     such benefits paid, notification regarding when the policy 
     otherwise terminates, and such other information as the 
     Secretary determines may be appropriate to the administration 
     of such partnerships.
       ``(VII) The State does not impose any requirement affecting 
     the terms or benefits of such a policy unless the State 
     imposes such requirement on long-term care insurance policies 
     without regard to whether the policy is covered under the 
     partnership or is offered in connection with such a 
     partnership.

     In the case of a long-term care insurance policy which is 
     exchanged for another such policy, subclause (I) shall be 
     applied based on the coverage of the first such policy that 
     was exchanged. For purposes of this clause and paragraph (5), 
     the term `long-term care insurance policy' includes a 
     certificate issued under a group insurance contract.
       ``(iv) With respect to a State which had a State plan 
     amendment approved as of May 14, 1993, such a State satisfies 
     this clause for purposes of clause (ii) if the Secretary 
     determines that the State plan amendment provides for 
     consumer protection standards which are no less stringent 
     than the consumer protection standards which applied under 
     such State plan amendment as of December 31, 2005.
       ``(v) The regulations of the Secretary required under 
     clause (iii)(VI) shall be promulgated after consultation with 
     the National Association of Insurance Commissioners, issuers 
     of long-term care insurance policies, States with experience 
     with long-term care insurance partnership plans, other 
     States, and representatives of consumers of long-term care 
     insurance policies, and shall specify the type and format of 
     the data and information to be reported and the frequency 
     with which such reports are to be made. The Secretary, as 
     appropriate, shall provide copies of the reports provided in 
     accordance with that clause to the State involved.
       ``(vi) The Secretary, in consultation with other 
     appropriate Federal agencies, issuers of long-term care 
     insurance, the National Association of Insurance 
     Commissioners, State insurance commissioners, States with 
     experience with long-term care insurance partnership plans, 
     other States, and representatives of consumers of long-term 
     care insurance policies, shall develop recommendations for 
     Congress to authorize and fund a uniform minimum data set to 
     be reported electronically by all issuers of long-term care 
     insurance policies under qualified State long-term care 
     insurance partnerships to a secure, centralized electronic 
     query and report-generating mechanism that the State, the 
     Secretary, and other Federal agencies can access.''; and
       (B) by adding at the end the following:
       ``(5)(A) For purposes of clause (iii)(III), the model 
     regulations and the requirements of the model Act specified 
     in this paragraph are:
       ``(i) In the case of the model regulation, the following 
     requirements:
       ``(I) Section 6A (relating to guaranteed renewal or 
     noncancellability), other than paragraph (5) thereof, and the 
     requirements of section 6B of the model Act relating to such 
     section 6A.
       ``(II) Section 6B (relating to prohibitions on limitations 
     and exclusions) other than paragraph (7) thereof.
       ``(III) Section 6C (relating to extension of benefits).
       ``(IV) Section 6D (relating to continuation or conversion 
     of coverage).
       ``(V) Section 6E (relating to discontinuance and 
     replacement of policies).
       ``(VI) Section 7 (relating to unintentional lapse).
       ``(VII) Section 8 (relating to disclosure), other than 
     sections 8F, 8G, 8H, and 8I thereof.
       ``(VIII) Section 9 (relating to required disclosure of 
     rating practices to consumer).
       ``(IX) Section 11 (relating to prohibitions against post-
     claims underwriting).
       ``(X) Section 12 (relating to minimum standards).
       ``(XI) Section 14 (relating to application forms and 
     replacement coverage).
       ``(XII) Section 15 (relating to reporting requirements).
       ``(XIII) Section 22 (relating to filing requirements for 
     marketing).
       ``(XIV) Section 23 (relating to standards for marketing), 
     including inaccurate completion of medical histories, other 
     than paragraphs (1), (6), and (9) of section 23C.
       ``(XV) Section 24 (relating to suitability).
       ``(XVI) Section 25 (relating to prohibition against 
     preexisting conditions and probationary periods in 
     replacement policies or certificates).
       ``(XVII) The provisions of section 26 relating to 
     contingent nonforfeiture benefits, if the policyholder 
     declines the offer of a nonforfeiture provision described in 
     paragraph (4).
       ``(XVIII) Section 29 (relating to standard format outline 
     of coverage).
       ``(XIX) Section 30 (relating to requirement to deliver 
     shopper's guide).
       ``(ii) In the case of the model Act, the following:
       ``(I) Section 6C (relating to preexisting conditions).
       ``(II) Section 6D (relating to prior hospitalization).
       ``(III) The provisions of section 8 relating to contingent 
     nonforfeiture benefits.
       ``(IV) Section 6F (relating to right to return).
       ``(V) Section 6G (relating to outline of coverage).
       ``(VI) Section 6H (relating to requirements for 
     certificates under group plans).
       ``(VII) Section 6J (relating to policy summary).
       ``(VIII) Section 6K (relating to monthly reports on 
     accelerated death benefits).
       ``(IX) Section 7 (relating to incontestability period).
       ``(B) For purposes of this paragraph and paragraph (1)(C)--
       ``(i) the terms `model regulation' and `model Act' mean the 
     long-term care insurance model regulation, and the long-term 
     care insurance model Act, respectively, promulgated by the 
     National Association of Insurance Commissioners (as adopted 
     as of October 2000);
       ``(ii) any provision of the model regulation or model Act 
     listed under subparagraph (A) shall be treated as including 
     any other provision of such regulation or Act necessary to 
     implement the provision; and
       ``(iii) with respect to a long-term care insurance policy 
     issued in a State, the policy shall be deemed to meet 
     applicable requirements of the model regulation or the model 
     Act if the State plan amendment under paragraph (1)(C)(iii) 
     provides that the State insurance commissioner for the State 
     certifies (in a manner satisfactory to the Secretary) that 
     the policy meets such requirements.
       ``(C) Not later than 12 months after the National 
     Association of Insurance Commissioners issues a revision, 
     update, or other modification of a model regulation or model 
     Act provision specified in subparagraph (A), or of any 
     provision of such regulation or Act that is substantively 
     related to a provision specified in

[[Page 600]]

     such subparagraph, the Secretary shall review the changes 
     made to the provision, determine whether incorporating such 
     changes into the corresponding provision specified in such 
     subparagraph would improve qualified State long-term care 
     insurance partnerships, and if so, shall incorporate the 
     changes into such provision.''.
       (2) State reporting requirements.--Nothing in clauses 
     (iii)(VI) and (v) of section 1917(b)(1)(C) of the Social 
     Security Act (as added by paragraph (1)) shall be construed 
     as prohibiting a State from requiring an issuer of a long-
     term care insurance policy sold in the State (regardless of 
     whether the policy is issued under a qualified State long-
     term care insurance partnership under section 
     1917(b)(1)(C)(iii) of such Act) to require the issuer to 
     report information or data to the State that is in addition 
     to the information or data required under such clauses.
       (3) Effective date.--A State plan amendment that provides 
     for a qualified State long-term care insurance partnership 
     under the amendments made by paragraph (1) may provide that 
     such amendment is effective for long-term care insurance 
     policies issued on or after a date, specified in the 
     amendment, that is not earlier than the first day of the 
     first calendar quarter in which the plan amendment was 
     submitted to the Secretary of Health and Human Services.
       (b) Standards for Reciprocal Recognition Among Partnership 
     States.--In order to permit portability in long-term care 
     insurance policies purchased under State long-term care 
     insurance partnerships, the Secretary of Health and Human 
     Services shall develop, not later than January 1, 2007, and 
     in consultation with the National Association of Insurance 
     Commissioners, issuers of long-term care insurance policies, 
     States with experience with long-term care insurance 
     partnership plans, other States, and representatives of 
     consumers of long-term care insurance policies, standards for 
     uniform reciprocal recognition of such policies among States 
     with qualified State long-term care insurance partnerships 
     under which--
       (1) benefits paid under such policies will be treated the 
     same by all such States; and
       (2) States with such partnerships shall be subject to such 
     standards unless the State notifies the Secretary in writing 
     of the State's election to be exempt from such standards.
       (c) Annual Reports to Congress.--
       (1) In general.--The Secretary of Health and Human Services 
     shall annually report to Congress on the long-term care 
     insurance partnerships established in accordance with section 
     1917(b)(1)(C)(ii) of the Social Security Act (42 U.S.C. 
     1396p(b)(1)(C)(ii)) (as amended by subsection (a)(1)). Such 
     reports shall include analyses of the extent to which such 
     partnerships expand or limit access of individuals to long-
     term care and the impact of such partnerships on Federal and 
     State expenditures under the Medicare and Medicaid programs. 
     Nothing in this section shall be construed as requiring the 
     Secretary to conduct an independent review of each long-term 
     care insurance policy offered under or in connection with 
     such a partnership.
       (2) Appropriation.--Out of any funds in the Treasury not 
     otherwise appropriated, there is appropriated to the 
     Secretary of Health and Human Services, $1,000,000 for the 
     period of fiscal years 2006 through 2010 to carry out 
     paragraph (1).
       (d) National Clearinghouse for Long-Term Care 
     Information.--
       (1) Establishment.--The Secretary of Health and Human 
     Services shall establish a National Clearinghouse for Long-
     Term Care Information. The Clearinghouse may be established 
     through a contract or interagency agreement.
       (2) Duties.--
       (A) In general.--The National Clearinghouse for Long-Term 
     Care Information shall--
       (i) educate consumers with respect to the availability and 
     limitations of coverage for long-term care under the Medicaid 
     program and provide contact information for obtaining State-
     specific information on long-term care coverage, including 
     eligibility and estate recovery requirements under State 
     Medicaid programs;
       (ii) provide objective information to assist consumers with 
     the decisionmaking process for determining whether to 
     purchase long-term care insurance or to pursue other private 
     market alternatives for purchasing long-term care and provide 
     contact information for additional objective resources on 
     planning for long-term care needs; and
       (iii) maintain a list of States with State long-term care 
     insurance partnerships under the Medicaid program that 
     provide reciprocal recognition of long-term care insurance 
     policies issued under such partnerships.
       (B) Requirement.--In providing information to consumers on 
     long-term care in accordance with this subsection, the 
     National Clearinghouse for Long-Term Care Information shall 
     not advocate in favor of a specific long-term care insurance 
     provider or a specific long-term care insurance policy.
       (3) Appropriation.--Out of any funds in the Treasury not 
     otherwise appropriated, there is appropriated to carry out 
     this subsection, $3,000,000 for each of fiscal years 2006 
     through 2010.

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

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

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


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

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

     SEC. 6032. EMPLOYEE EDUCATION ABOUT FALSE CLAIMS RECOVERY.

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

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

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

     SEC. 6034. MEDICAID INTEGRITY PROGRAM.

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


                      ``MEDICAID INTEGRITY PROGRAM

       ``Sec. 1936. (a) In General.--There is hereby established 
     the Medicaid Integrity Program (in

[[Page 601]]

     this section referred to as the `Program') under which the 
     Secretary shall promote the integrity of the program under 
     this title by entering into contracts in accordance with this 
     section with eligible entities to carry out the activities 
     described in subsection (b).
       ``(b) Activities Described--Activities described in this 
     subsection are as follows:
       ``(1) Review of the actions of individuals or entities 
     furnishing items or services (whether on a fee-for-service, 
     risk, or other basis) for which payment may be made under a 
     State plan approved under this title (or under any waiver of 
     such plan approved under section 1115) to determine whether 
     fraud, waste, or abuse has occurred, is likely to occur, or 
     whether such actions have any potential for resulting in an 
     expenditure of funds under this title in a manner which is 
     not intended under the provisions of this title.
       ``(2) Audit of claims for payment for items or services 
     furnished, or administrative services rendered, under a State 
     plan under this title, including--
       ``(A) cost reports;
       ``(B) consulting contracts; and
       ``(C) risk contracts under section 1903(m).
       ``(3) Identification of overpayments to individuals or 
     entities receiving Federal funds under this title.
       ``(4) Education of providers of services, managed care 
     entities, beneficiaries, and other individuals with respect 
     to payment integrity and quality of care.
       ``(c) Eligible Entity and Contracting Requirements.--
       ``(1) In general.--An entity is eligible to enter into a 
     contract under the Program to carry out any of the activities 
     described in subsection (b) if the entity satisfies the 
     requirements of paragraphs (2) and (3).
       ``(2) Eligibility requirements.--The requirements of this 
     paragraph are the following:
       ``(A) The entity has demonstrated capability to carry out 
     the activities described in subsection (b).
       ``(B) In carrying out such activities, the entity agrees to 
     cooperate with the Inspector General of the Department of 
     Health and Human Services, the Attorney General, and other 
     law enforcement agencies, as appropriate, in the 
     investigation and deterrence of fraud and abuse in relation 
     to this title and in other cases arising out of such 
     activities.
       ``(C) The entity complies with such conflict of interest 
     standards as are generally applicable to Federal acquisition 
     and procurement.
       ``(D) The entity meets such other requirements as the 
     Secretary may impose.
       ``(3) Contracting requirements.--The entity has contracted 
     with the Secretary in accordance with such procedures as the 
     Secretary shall by regulation establish, except that such 
     procedures shall include the following:
       ``(A) Procedures for identifying, evaluating, and resolving 
     organizational conflicts of interest that are generally 
     applicable to Federal acquisition and procurement.
       ``(B) Competitive procedures to be used--
       ``(i) when entering into new contracts under this section;
       ``(ii) when entering into contracts that may result in the 
     elimination of responsibilities under section 202(b) of the 
     Health Insurance Portability and Accountability Act of 1996; 
     and
       ``(iii) at any other time considered appropriate by the 
     Secretary.
       ``(C) Procedures under which a contract under this section 
     may be renewed without regard to any provision of law 
     requiring competition if the contractor has met or exceeded 
     the performance requirements established in the current 
     contract.

     The Secretary may enter into such contracts without regard to 
     final rules having been promulgated.
       ``(4) Limitation on contractor liability.--The Secretary 
     shall by regulation provide for the limitation of a 
     contractor's liability for actions taken to carry out a 
     contract under the Program, and such regulation shall, to the 
     extent the Secretary finds appropriate, employ the same or 
     comparable standards and other substantive and procedural 
     provisions as are contained in section 1157.
       ``(d) Comprehensive Plan for Program Integrity.--
       ``(1) 5-year plan.--With respect to the 5-fiscal year 
     period beginning with fiscal year 2006, and each such 5-
     fiscal year period that begins thereafter, the Secretary 
     shall establish a comprehensive plan for ensuring the 
     integrity of the program established under this title by 
     combatting fraud, waste, and abuse.
       ``(2) Consultation.--Each 5-fiscal year plan established 
     under paragraph (1) shall be developed by the Secretary in 
     consultation with the Attorney General, the Director of the 
     Federal Bureau of Investigation, the Comptroller General of 
     the United States, the Inspector General of the Department of 
     Health and Human Services, and State officials with 
     responsibility for controlling provider fraud and abuse under 
     State plans under this title.
       ``(e) Appropriation.--
       ``(1) In general.--Out of any money in the Treasury of the 
     United States not otherwise appropriated, there are 
     appropriated to carry out the Medicaid Integrity Program 
     under this section, without further appropriation--
       ``(A) for fiscal year 2006, $5,000,000;
       ``(B) for each of fiscal years 2007 and 2008, $50,000,000; 
     and
       ``(C) for each fiscal year thereafter, $75,000,000.
       ``(2) Availability.--Amounts appropriated pursuant to 
     paragraph (1) shall remain available until expended.
       ``(3) Increase in cms staffing devoted to protecting 
     medicaid program integrity.--From the amounts appropriated 
     under paragraph (1), the Secretary shall increase by 100 the 
     number of full-time equivalent employees whose duties consist 
     solely of protecting the integrity of the Medicaid program 
     established under this section by providing effective support 
     and assistance to States to combat provider fraud and abuse.
       ``(4) Annual report.--Not later than 180 days after the end 
     of each fiscal year (beginning with fiscal year 2006), the 
     Secretary shall submit a report to Congress which 
     identifies--
       ``(A) the use of funds appropriated pursuant to paragraph 
     (1); and
       ``(B) the effectiveness of the use of such funds.''.
       (b) State Requirement To Cooperate With Integrity Program 
     Efforts.--Section 1902(a) of such Act (42 U.S.C. 1396a(a)), 
     as amended by section 6033(a), is amended--
       (1) in paragraph (67), by striking ``and'' at the end;
       (2) in paragraph (68), by striking the period at the end 
     and inserting ``; and''; and
       (3) by inserting after paragraph (68), the following:
       ``(69) provide that the State must comply with any 
     requirements determined by the Secretary to be necessary for 
     carrying out the Medicaid Integrity Program established under 
     section 1936.''.
       (c) Increased Funding for Medicaid Fraud and Abuse Control 
     Activities.--
       (1) In general.--Out of any money in the Treasury of the 
     United States not otherwise appropriated, there are 
     appropriated to the Office of the Inspector General of the 
     Department of Health and Human Services, without further 
     appropriation, $25,000,000 for each of fiscal years 2006 
     through 2010, for activities of such Office with respect to 
     the Medicaid program under title XIX of the Social Security 
     Act (42 U.S.C. 1396 et seq.).
       (2) Availability; amounts in addition to other amounts 
     appropriated for such activities.--Amounts appropriated 
     pursuant to paragraph (1) shall--
       (A) remain available until expended; and
       (B) be in addition to any other amounts appropriated or 
     made available to the Office of the Inspector General of the 
     Department of Health and Human Services for activities of 
     such Office with respect to the Medicaid program.
       (3) Annual report.--Not later than 180 days after the end 
     of each fiscal year (beginning with fiscal year 2006), the 
     Inspector General of the Department of Health and Human 
     Services shall submit a report to Congress which identifies--
       (A) the use of funds appropriated pursuant to paragraph 
     (1); and
       (B) the effectiveness of the use of such funds.
       (d) National Expansion of the Medicare-Medicaid (Medi-Medi) 
     Data Match Pilot Program.--
       (1) Requirement of the medicare integrity program.--Section 
     1893 of the Social Security Act (42 U.S.C. 1395ddd) is 
     amended--
       (A) in subsection (b), by adding at the end the following:
       ``(6) The Medicare-Medicaid Data Match Program in 
     accordance with subsection (g).''; and
       (B) by adding at the end the following:
       ``(g) Medicare-Medicaid Data Match Program.--
       ``(1) Expansion of program.--
       ``(A) In general.--The Secretary shall enter into contracts 
     with eligible entities for the purpose of ensuring that, 
     beginning with 2006, the Medicare-Medicaid Data Match Program 
     (commonly referred to as the `Medi-Medi Program') is 
     conducted with respect to the program established under this 
     title and State Medicaid programs under title XIX for the 
     purpose of--
       ``(i) identifying program vulnerabilities in the program 
     established under this title and the Medicaid program 
     established under title XIX through the use of computer 
     algorithms to look for payment anomalies (including billing 
     or billing patterns identified with respect to service, time, 
     or patient that appear to be suspect or otherwise 
     implausible);
       ``(ii) working with States, the Attorney General, and the 
     Inspector General of the Department of Health and Human 
     Services to coordinate appropriate actions to protect the 
     Federal and State share of expenditures under the Medicaid 
     program under title XIX, as well as the program established 
     under this title; and
       ``(iii) increasing the effectiveness and efficiency of both 
     such programs through cost avoidance, savings, and 
     recoupments of fraudulent, wasteful, or abusive expenditures.
       ``(B) Reporting requirements.--The Secretary shall make 
     available in a timely manner any data and statistical 
     information collected by the Medi-Medi Program to the 
     Attorney General, the Director of the Federal Bureau of 
     Investigation, the Inspector General of the Department of 
     Health and Human Services, and the States (including a 
     Medicaid fraud and abuse control unit described in section 
     1903(q)). Such information shall be disseminated no less 
     frequently than quarterly.
       ``(2) Limited waiver authority.--The Secretary shall waive 
     only such requirements of this section and of titles XI and 
     XIX as are necessary to carry out paragraph (1).''.
       (2) Funding.--Section 1817(k)(4) of such Act (42 U.S.C. 
     1395i(k)(4)), as amended by section 5204 of this Act, is 
     amended--
       (A) in subparagraph (A), by striking ``subparagraph (B)'' 
     and inserting ``subparagraphs (B), (C), and (D)''; and
       (B) by adding at the end the following:

[[Page 602]]

       ``(D) Expansion of the medicare-medicaid data match 
     program.--The amount appropriated under subparagraph (A) for 
     a fiscal year is further increased as follows for purposes of 
     carrying out section 1893(b)(6) for the respective fiscal 
     year:
       ``(i) $12,000,000 for fiscal year 2006.
       ``(ii) $24,000,000 for fiscal year 2007.
       ``(iii) $36,000,000 for fiscal year 2008.
       ``(iv) $48,000,000 for fiscal year 2009.
       ``(v) $60,000,000 for fiscal year 2010 and each fiscal year 
     thereafter.''.
       (e) Delayed Effective Date for Chapter.--Except as 
     otherwise provided in this chapter, in the case of a State 
     plan under title XIX of the Social Security Act which the 
     Secretary determines requires State legislation in order for 
     the plan to meet the additional requirements imposed by the 
     amendments made by a provision of this chapter, the State 
     plan shall not be regarded as failing to comply with the 
     requirements of such Act solely on the basis of its failure 
     to meet these additional requirements before the first day of 
     the first calendar quarter beginning after the close of the 
     first regular session of the State legislature that begins 
     after the date of enactment of this Act. For purposes of the 
     previous sentence, in the case of a State that has a 2-year 
     legislative session, each year of the session shall be 
     considered to be a separate regular session of the State 
     legislature.

     SEC. 6035. ENHANCING THIRD PARTY IDENTIFICATION AND PAYMENT.

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

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

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

     SEC. 6036. IMPROVED ENFORCEMENT OF DOCUMENTATION 
                   REQUIREMENTS.

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

          CHAPTER 4--FLEXIBILITY IN COST SHARING AND BENEFITS

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

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


        ``State option for alternative premiums and cost sharing

       ``Sec. 1916A. (a) State Flexibility.--
       ``(1) In general.--Notwithstanding sections 1916 and 
     1902(a)(10)(B), a State, at its option and through a State 
     plan amendment, may impose premiums and cost sharing for any 
     group of individuals (as specified by the State) and for any 
     type of services (other than drugs for which cost sharing may 
     be imposed under subsection (c)), and may vary such premiums 
     and cost sharing among such groups or types, consistent with 
     the limitations established under this section. Nothing in 
     this section shall be construed as superseding (or preventing 
     the application of) section 1916(g).
       ``(2) Definitions.--In this section:

[[Page 603]]

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

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

       (a) In General.--Section 1916A of the Social Security Act, 
     as inserted by section 6041(a), is amended by inserting after 
     subsection (b) the following new subsection:
       ``(c) Special Rules for Cost Sharing for Prescription 
     Drugs.--
       ``(1) In general.--In order to encourage beneficiaries to 
     use drugs (in this subsection referred to as `preferred 
     drugs') identified by the State as the least (or less) costly 
     effective prescription drugs within a class of drugs (as 
     defined by the State), with respect to one or more groups of 
     beneficiaries specified by the State, subject to paragraph 
     (2), the State may--
       ``(A) provide cost sharing (instead of the level of cost 
     sharing otherwise permitted under section 1916, but subject 
     to paragraphs (2) and (3)) with respect to drugs that are not 
     preferred drugs within a class; and
       ``(B) waive or reduce the cost sharing otherwise applicable 
     for preferred drugs within such class and shall not apply any 
     such cost sharing for such preferred drugs for individuals 
     for whom cost sharing may not otherwise be imposed under 
     subsection (b)(3)(B).
       ``(2) Limitations.--
       ``(A) By income group.--In no case may the cost sharing 
     under paragraph (1)(A) with respect to a non-preferred drug 
     exceed--
       ``(i) in the case of an individual whose family income does 
     not exceed 150 percent of the poverty line applicable to a 
     family of the size involved, the amount of nominal cost 
     sharing (as otherwise determined under section 1916); or
       ``(ii) in the case of an individual whose family income 
     exceeds 150 percent of the poverty line applicable to a 
     family of the size involved, 20 percent of the cost of the 
     drug.
       ``(B) Limitation to nominal for exempt populations.--In the 
     case of an individual who is otherwise not subject to cost 
     sharing due to the application of subsection (b)(3)(B), any 
     cost sharing under paragraph (1)(A) with respect to a non-
     preferred drug may not exceed a nominal amount (as otherwise 
     determined under section 1916).
       ``(C) Continued application of aggregate cap.--In addition 
     to the limitations imposed under subparagraphs (A) and (B), 
     any cost

[[Page 604]]

     sharing under paragraph (1)(A) continues to be subject to the 
     aggregate cap on cost sharing applied under paragraph (1) or 
     (2) of subsection (b), as the case may be.
       ``(3) Waiver.--In carrying out paragraph (1), a State shall 
     provide for the application of cost sharing levels applicable 
     to a preferred drug in the case of a drug that is not a 
     preferred drug if the prescribing physician determines that 
     the preferred drug for treatment of the same condition either 
     would not be as effective for the individual or would have 
     adverse effects for the individual or both.
       ``(4) Exclusion authority.--Nothing in this subsection 
     shall be construed as preventing a State from excluding 
     specified drugs or classes of drugs from the application of 
     paragraph (1).''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to cost sharing imposed for items and services 
     furnished on or after March 31, 2006.

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

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

     SEC. 6044. USE OF BENCHMARK BENEFIT PACKAGES.

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


                ``State flexibility in benefit packages

       ``Sec. 1937. (a) State Option of Providing Benchmark 
     Benefits.--
       ``(1) Authority.--
       ``(A) In general.--Notwithstanding any other provision of 
     this title, a State, at its option as a State plan amendment, 
     may provide for medical assistance under this title to 
     individuals within one or more groups of individuals 
     specified by the State through enrollment in coverage that 
     provides--
       ``(i) benchmark coverage described in subsection (b)(1) or 
     benchmark equivalent coverage described in subsection (b)(2); 
     and
       ``(ii) for any child under 19 years of age who is covered 
     under the State plan under section 1902(a)(10)(A), wrap-
     around benefits to the benchmark coverage or benchmark 
     equivalent coverage consisting of early and periodic 
     screening, diagnostic, and treatment services defined in 
     section 1905(r).
       ``(B) Limitation.--The State may only exercise the option 
     under subparagraph (A) for an individual eligible under an 
     eligibility category that had been established under the 
     State plan on or before the date of the enactment of this 
     section.
       ``(C) Option of wrap-around benefits.--In the case of 
     coverage described in subparagraph (A), a State, at its 
     option, may provide such wrap-around or additional benefits 
     as the State may specify.
       ``(D) Treatment as medical assistance.--Payment of premiums 
     for such coverage under this subsection shall be treated as 
     payment of other insurance premiums described in the third 
     sentence of section 1905(a).
       ``(2) Application.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     a State may require that a full-benefit eligible individual 
     (as defined in subparagraph (C)) within a group obtain 
     benefits under this title through enrollment in coverage 
     described in paragraph (1)(A). A State may apply the previous 
     sentence to individuals within 1 or more groups of such 
     individuals.
       ``(B) Limitation on application.--A State may not require 
     under subparagraph (A) an individual to obtain benefits 
     through enrollment described in paragraph (1)(A) if the 
     individual is within one of the following categories of 
     individuals:
       ``(i) Mandatory pregnant women.--The individual is a 
     pregnant woman who is required to be covered under the State 
     plan under section 1902(a)(10)(A)(i).
       ``(ii) Blind or disabled individuals.--The individual 
     qualifies for medical assistance under the State plan on the 
     basis of being blind or disabled (or being treated as being 
     blind or disabled) without regard to whether the individual 
     is eligible for supplemental security income benefits under 
     title XVI on the basis of being blind

[[Page 605]]

     or disabled and including an individual who is eligible for 
     medical assistance on the basis of section 1902(e)(3).
       ``(iii) Dual eligibles.--The individual is entitled to 
     benefits under any part of title XVIII.
       ``(iv) Terminally ill hospice patients.--The individual is 
     terminally ill and is receiving benefits for hospice care 
     under this title.
       ``(v) Eligible on basis of institutionalization.--The 
     individual is an inpatient in a hospital, nursing facility, 
     intermediate care facility for the mentally retarded, or 
     other medical institution, and is required, as a condition of 
     receiving services in such institution under the State plan, 
     to spend for costs of medical care all but a minimal amount 
     of the individual's income required for personal needs.
       ``(vi) Medically frail and special medical needs 
     individuals.--The individual is medically frail or otherwise 
     an individual with special medical needs (as identified in 
     accordance with regulations of the Secretary).
       ``(vii) Beneficiaries qualifying for long-term care 
     services.--The individual qualifies based on medical 
     condition for medical assistance for long-term care services 
     described in section 1917(c)(1)(C).
       ``(viii) Children in foster care receiving child welfare 
     services and children receiving foster care or adoption 
     assistance.--The individual is an individual with respect to 
     whom aid or assistance is made available under part B of 
     title IV to children in foster care and individuals with 
     respect to whom adoption or foster care assistance is made 
     available under part E of such title, without regard to age.
       ``(ix) TANF and section 1931 parents.--The individual 
     qualifies for medical assistance on the basis of eligibility 
     to receive assistance under a State plan funded under part A 
     of title IV (as in effect on or after the welfare reform 
     effective date defined in section 1931(i)).
       ``(x) Women in the breast or cervical cancer program.--The 
     individual is a woman who is receiving medical assistance by 
     virtue of the application of sections 
     1902(a)(10)(A)(ii)(XVIII) and 1902(aa).
       ``(xi) Limited services beneficiaries.--The individual--

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

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

     The actuary preparing the opinion shall select and specify in 
     the memorandum the standardized set and population to be used 
     under subparagraphs (C) and (D).
       ``(4) Coverage of rural health clinic and fqhc services.--
     Notwithstanding the previous provisions of this section, a 
     State may not provide for medical assistance through 
     enrollment of an individual with benchmark coverage or 
     benchmark equivalent coverage under this section unless--
       ``(A) the individual has access, through such coverage or 
     otherwise, to services described in subparagraphs (B) and (C) 
     of section 1905(a)(2); and
       ``(B) payment for such services is made in accordance with 
     the requirements of section 1902(bb).''.
       (b) Effective Date.--The amendment made by subsection (a) 
     takes effect on March 31, 2006.

               CHAPTER 5--STATE FINANCING UNDER MEDICAID

     SEC. 6051. MANAGED CARE ORGANIZATION PROVIDER TAX REFORM.

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

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

       (a) In General.--Section 1915(g) of the Social Security Act 
     (42 U.S.C. 1396n(g)(2)) is amended

[[Page 606]]

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

     SEC. 6053. ADDITIONAL FMAP ADJUSTMENTS.

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

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

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

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

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

                      CHAPTER 6--OTHER PROVISIONS

                  Subchapter A--Family Opportunity Act

     SEC. 6061. SHORT TITLE OF SUBCHAPTER.

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

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

       (a) State Option To Allow Families of Disabled Children To 
     Purchase Medicaid Coverage for Such Children.--
       (1) In general.--Section 1902 of the Social Security Act 
     (42 U.S.C. 1396a) is amended--
       (A) in subsection (a)(10)(A)(ii)--
       (i) by striking ``or'' at the end of subclause (XVII);
       (ii) by adding ``or'' at the end of subclause (XVIII); and
       (iii) by adding at the end the following new subclause:

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

       (B) by adding at the end the following new subsection:
       ``(cc)(1) Individuals described in this paragraph are 
     individuals--
       ``(A) who are children who have not attained 19 years of 
     age and are born--
       ``(i) on or after January 1, 2001 (or, at the option of a 
     State, on or after an earlier date), in the case of the 
     second, third, and fourth quarters of fiscal year 2007;
       ``(ii) on or after October 1, 1995 (or, at the option of a 
     State, on or after an earlier date), in the case of each 
     quarter of fiscal year 2008; and
       ``(iii) after October 1, 1989, in the case of each quarter 
     of fiscal year 2009 and each quarter of any fiscal year 
     thereafter;

[[Page 607]]

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

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

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

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

       Section 501 of the Social Security Act (42 U.S.C. 701) is 
     amended by adding at the end the following new subsection:
       ``(c)(1)(A) For the purpose of enabling the Secretary 
     (through grants, contracts, or otherwise) to provide for 
     special projects of regional

[[Page 608]]

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

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

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

    Subchapter B--Money Follows the Person Rebalancing Demonstration

     SEC. 6071. MONEY FOLLOWS THE PERSON REBALANCING 
                   DEMONSTRATION.

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

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

       (v) includes appropriate risk management techniques that 
     recognize the roles and sharing of responsibilities in 
     obtaining services in a self-directed manner and assure the 
     appropriateness

[[Page 609]]

     of such plan based upon the resources and capabilities of the 
     individual or the individual's authorized representative; and
       (vi) may include an individualized budget which identifies 
     the dollar value of the services and supports under the 
     control and direction of the individual or the individual's 
     authorized representative.
       (C) Budget process.--With respect to individualized budgets 
     described in subparagraph (B)(vi), the State application 
     under subsection (c)--
       (i) describes the method for calculating the dollar values 
     in such budgets based on reliable costs and service 
     utilization;
       (ii) defines a process for making adjustments in such 
     dollar values to reflect changes in individual assessments 
     and service plans; and
       (iii) provides a procedure to evaluate expenditures under 
     such budgets.
       (9) State.--The term ``State'' has the meaning given such 
     term for purposes of title XIX of the Social Security Act.
       (c) State Application.--A State seeking approval of an MFP 
     demonstration project shall submit to the Secretary, at such 
     time and in such format as the Secretary requires, an 
     application meeting the following requirements and containing 
     such additional information, provisions, and assurances, as 
     the Secretary may require:
       (1) Assurance of a public development process.--The 
     application contains an assurance that the State has engaged, 
     and will continue to engage, in a public process for the 
     design, development, and evaluation of the MFP demonstration 
     project that allows for input from eligible individuals, the 
     families of such individuals, authorized representatives of 
     such individuals, providers, and other interested parties.
       (2) Operation in connection with qualified hcb program to 
     assure continuity of services.--The State will conduct the 
     MFP demonstration project for eligible individuals in 
     conjunction with the operation of a qualified HCB program 
     that is in operation (or approved) in the State for such 
     individuals in a manner that assures continuity of Medicaid 
     coverage for such individuals so long as such individuals 
     continue to be eligible for medical assistance.
       (3) Demonstration project period.--The application shall 
     specify the period of the MFP demonstration project, which 
     shall include at least 2 consecutive fiscal years in the 5-
     fiscal-year period beginning with fiscal year 2007.
       (4) Service area.--The application shall specify the 
     service area or areas of the MFP demonstration project, which 
     may be a statewide area or 1 or more geographic areas of the 
     State.
       (5) Targeted groups and numbers of individuals served.--The 
     application shall specify--
       (A) the target groups of eligible individuals to be 
     assisted to transition from an inpatient facility to a 
     qualified residence during each fiscal year of the MFP 
     demonstration project;
       (B) the projected numbers of eligible individuals in each 
     targeted group of eligible individuals to be so assisted 
     during each such year; and
       (C) the estimated total annual qualified expenditures for 
     each fiscal year of the MFP demonstration project.
       (6) Individual choice, continuity of care.--The application 
     shall contain assurances that--
       (A) each eligible individual or the individual's authorized 
     representative will be provided the opportunity to make an 
     informed choice regarding whether to participate in the MFP 
     demonstration project;
       (B) each eligible individual or the individual's authorized 
     representative will choose the qualified residence in which 
     the individual will reside and the setting in which the 
     individual will receive home and community-based long-term 
     care services;
       (C) the State will continue to make available, so long as 
     the State operates its qualified HCB program consistent with 
     applicable requirements, home and community-based long-term 
     care services to each individual who completes participation 
     in the MFP demonstration project for as long as the 
     individual remains eligible for medical assistance for such 
     services under such qualified HCB program (including meeting 
     a requirement relating to requiring a level of care provided 
     in an inpatient facility and continuing to require such 
     services, and, if the State applies a more stringent level of 
     care standard as a result of implementing the State plan 
     option permitted under section 1915(i) of the Social Security 
     Act, meeting the requirement for at least the level of care 
     which had resulted in the individual's admission to the 
     institution).
       (7) Rebalancing.--The application shall--
       (A) provide such information as the Secretary may require 
     concerning the dollar amounts of State Medicaid expenditures 
     for the fiscal year, immediately preceding the first fiscal 
     year of the State's MFP demonstration project, for long-term 
     care services and the percentage of such expenditures that 
     were for institutional long-term care services or were for 
     home and community-based long-term care services;
       (B)(i) specify the methods to be used by the State to 
     increase, for each fiscal year during the MFP demonstration 
     project, the dollar amount of such total expenditures for 
     home and community-based long-term care services and the 
     percentage of such total expenditures for long-term care 
     services that are for home and community-based long-term care 
     services; and
       (ii) describe the extent to which the MFP demonstration 
     project will contribute to accomplishment of objectives 
     described in subsection (a).
       (8) Money follows the person.--The application shall 
     describe the methods to be used by the State to eliminate any 
     legal, budgetary, or other barriers to flexibility in the 
     availability of Medicaid funds to pay for long-term care 
     services for eligible individuals participating in the 
     project in the appropriate settings of their choice, 
     including costs to transition from an institutional setting 
     to a qualified residence.
       (9) Maintenance of effort and cost-effectiveness.--The 
     application shall contain or be accompanied by such 
     information and assurances as may be required to satisfy the 
     Secretary that--
       (A) total expenditures under the State Medicaid program for 
     home and community-based long-term care services will not be 
     less for any fiscal year during the MFP demonstration project 
     than for the greater of such expenditures for--
       (i) fiscal year 2005; or
       (ii) any succeeding fiscal year before the first year of 
     the MFP demonstration project; and
       (B) in the case of a qualified HCB program operating under 
     a waiver under subsection (c) or (d) of section 1915 of the 
     Social Security Act (42 U.S.C. 1396n), but for the amount 
     awarded under a grant under this section, the State program 
     would continue to meet the cost-effectiveness requirements of 
     subsection (c)(2)(D) of such section or comparable 
     requirements under subsection (d)(5) of such section, 
     respectively.
       (10) Waiver requests.--The application shall contain or be 
     accompanied by requests for any modification or adjustment of 
     waivers of Medicaid requirements described in subsection 
     (d)(3), including adjustments to the maximum numbers of 
     individuals included and package of benefits, including one-
     time transitional services, provided.
       (11) Quality assurance and quality improvement.--The 
     application shall include--
       (A) a plan satisfactory to the Secretary for quality 
     assurance and quality improvement for home and community-
     based long-term care services under the State Medicaid 
     program, including a plan to assure the health and welfare of 
     individuals participating in the MFP demonstration project; 
     and
       (B) an assurance that the State will cooperate in carrying 
     out activities under subsection (f) to develop and implement 
     continuous quality assurance and quality improvement systems 
     for home and community-based long-term care services.
       (12) Optional program for self-directed services.--If the 
     State elects to provide for any home and community-based 
     long-term care services as self-directed services (as defined 
     in subsection (b)(8)) under the MFP demonstration project, 
     the application shall provide the following:
       (A) Meeting requirements.--A description of how the project 
     will meet the applicable requirements of such subsection for 
     the provision of self-directed services.
       (B) Voluntary election.--A description of how eligible 
     individuals will be provided with the opportunity to make an 
     informed election to receive self-directed services under the 
     project and after the end of the project.
       (C) State support in service plan development.--
     Satisfactory assurances that the State will provide support 
     to eligible individuals who self-direct in developing and 
     implementing their service plans.
       (D) Oversight of receipt of services.--Satisfactory 
     assurances that the State will provide oversight of eligible 
     individual's receipt of such self-directed services, 
     including steps to assure the quality of services provided 
     and that the provision of such services are consistent with 
     the service plan under such subsection.
     Nothing in this section shall be construed as requiring a 
     State to make an election under the project to provide for 
     home and community-based long-term care services as self-
     directed services, or as requiring an individual to elect to 
     receive self-directed services under the project.
       (13) Reports and evaluation.--The application shall provide 
     that--
       (A) the State will furnish to the Secretary such reports 
     concerning the MFP demonstration project, on such timetable, 
     in such uniform format, and containing such information as 
     the Secretary may require, as will allow for reliable 
     comparisons of MFP demonstration projects across States; and
       (B) the State will participate in and cooperate with the 
     evaluation of the MFP demonstration project.
       (d) Secretary's Award of Competitive Grants.--
       (1) In general.--The Secretary shall award grants under 
     this section on a competitive basis to States selected from 
     among those with applications meeting the requirements of 
     subsection (c), in accordance with the provisions of this 
     subsection.
       (2) Selection and modification of state applications.--In 
     selecting State applications for the awarding of such a 
     grant, the Secretary--
       (A) shall take into consideration the manner in which, and 
     extent to which, the State proposes to achieve the objectives 
     specified in subsection (a);
       (B) shall seek to achieve an appropriate national balance 
     in the numbers of eligible individuals, within different 
     target groups of eligible individuals, who are assisted to 
     transition to qualified residences under MFP demonstration 
     projects, and in the geographic distribution of States 
     operating MFP demonstration projects;
       (C) shall give preference to State applications proposing--
       (i) to provide transition assistance to eligible 
     individuals within multiple target groups; and

[[Page 610]]

       (ii) to provide eligible individuals with the opportunity 
     to receive home and community-based long-term care services 
     as self-directed services, as defined in subsection (b)(8); 
     and
       (D) shall take such objectives into consideration in 
     setting the annual amounts of State grant awards under this 
     section.
       (3) Waiver authority.--The Secretary is authorized to waive 
     the following provisions of title XIX of the Social Security 
     Act, to the extent necessary to enable a State initiative to 
     meet the requirements and accomplish the purposes of this 
     section:
       (A) Statewideness.--Section 1902(a)(1), in order to permit 
     implementation of a State initiative in a selected area or 
     areas of the State.
       (B) Comparability.--Section 1902(a)(10)(B), in order to 
     permit a State initiative to assist a selected category or 
     categories of individuals described in subsection (b)(2)(A).
       (C) Income and resources eligibility.--Section 
     1902(a)(10)(C)(i)(III), in order to permit a State to apply 
     institutional eligibility rules to individuals transitioning 
     to community-based care.
       (D) Provider agreements.--Section 1902(a)(27), in order to 
     permit a State to implement self-directed services in a cost-
     effective manner.
       (4) Conditional approval of outyear grant.--In awarding 
     grants under this section, the Secretary shall condition the 
     grant for the second and any subsequent fiscal years of the 
     grant period on the following:
       (A) Numerical benchmarks.--The State must demonstrate to 
     the satisfaction of the Secretary that it is meeting 
     numerical benchmarks specified in the grant agreement for--
       (i) increasing State Medicaid support for home and 
     community-based long-term care services under subsection 
     (c)(5); and
       (ii) numbers of eligible individuals assisted to transition 
     to qualified residences.
       (B) Quality of care.--The State must demonstrate to the 
     satisfaction of the Secretary that it is meeting the 
     requirements under subsection (c)(11) to assure the health 
     and welfare of MFP demonstration project participants.
       (e) Payments to States; Carryover of Unused Grant 
     Amounts.--
       (1) Payments.--For each calendar quarter in a fiscal year 
     during the period a State is awarded a grant under subsection 
     (d), the Secretary shall pay to the State from its grant 
     award for such fiscal year an amount equal to the lesser of--
       (A) the MFP-enhanced FMAP (as defined in paragraph (5)) of 
     the amount of qualified expenditures made during such 
     quarter; or
       (B) the total amount remaining in such grant award for such 
     fiscal year (taking into account the application of paragraph 
     (2)).
       (2) Carryover of unused amounts.--Any portion of a State 
     grant award for a fiscal year under this section remaining at 
     the end of such fiscal year shall remain available to the 
     State for the next 4 fiscal years, subject to paragraph (3).
       (3) Reawarding of certain unused amounts.--In the case of a 
     State that the Secretary determines pursuant to subsection 
     (d)(4) has failed to meet the conditions for continuation of 
     a MFP demonstration project under this section in a 
     succeeding year or years, the Secretary shall rescind the 
     grant awards for such succeeding year or years, together with 
     any unspent portion of an award for prior years, and shall 
     add such amounts to the appropriation for the immediately 
     succeeding fiscal year for grants under this section.
       (4) Preventing duplication of payment.--The payment under a 
     MFP demonstration project with respect to qualified 
     expenditures shall be in lieu of any payment with respect to 
     such expenditures that could otherwise be paid under 
     Medicaid, including under section 1903(a) of the Social 
     Security Act. Nothing in the previous sentence shall be 
     construed as preventing the payment under Medicaid for such 
     expenditures in a grant year after amounts available to pay 
     for such expenditures under the MFP demonstration project 
     have been exhausted.
       (5) MFP-enhanced fmap.--For purposes of paragraph (1)(A), 
     the ``MFP-enhanced FMAP'', for a State for a fiscal year, is 
     equal to the Federal medical assistance percentage (as 
     defined in the first sentence of section 1905(b)) for the 
     State increased by a number of percentage points equal to 50 
     percent of the number of percentage points by which (A) such 
     Federal medical assistance percentage for the State, is less 
     than (B) 100 percent; but in no case shall the MFP-enhanced 
     FMAP for a State exceed 90 percent.
       (f) Quality Assurance and Improvement; Technical 
     Assistance; Oversight.--
       (1) In general.--The Secretary, either directly or by grant 
     or contract, shall provide for technical assistance to, and 
     oversight of, States for purposes of upgrading quality 
     assurance and quality improvement systems under Medicaid home 
     and community-based waivers, including--
       (A) dissemination of information on promising practices;
       (B) guidance on system design elements addressing the 
     unique needs of participating beneficiaries;
       (C) ongoing consultation on quality, including assistance 
     in developing necessary tools, resources, and monitoring 
     systems; and
       (D) guidance on remedying programmatic and systemic 
     problems.
       (2) Funding.--From the amounts appropriated under 
     subsection (h)(1) for the portion of fiscal year 2007 that 
     begins on January 1, 2007, and ends on September 30, 2007, 
     and for fiscal year 2008, not more than $2,400,000 shall be 
     available to the Secretary to carry out this subsection 
     during the period that begins on January 1, 2007, and ends on 
     September 30, 2011.
       (g) Research and Evaluation.--
       (1) In general.--The Secretary, directly or through grant 
     or contract, shall provide for research on, and a national 
     evaluation of, the program under this section, including 
     assistance to the Secretary in preparing the final report 
     required under paragraph (2). The evaluation shall include an 
     analysis of projected and actual savings related to the 
     transition of individuals to qualified residences in each 
     State conducting an MFP demonstration project.
       (2) Final report.--The Secretary shall make a final report 
     to the President and Congress, not later than September 30, 
     2011, reflecting the evaluation described in paragraph (1) 
     and providing findings and conclusions on the conduct and 
     effectiveness of MFP demonstration projects.
       (3) Funding.--From the amounts appropriated under 
     subsection (h)(1) for each of fiscal years 2008 through 2011, 
     not more than $1,100,000 per year shall be available to the 
     Secretary to carry out this subsection.
       (h) Appropriations.--
       (1) In general.--There are appropriated, from any funds in 
     the Treasury not otherwise appropriated, for grants to carry 
     out this section--
       (A) $250,000,000 for the portion of fiscal year 2007 
     beginning on January 1, 2007, and ending on September 30, 
     2007;
       (B) $300,000,000 for fiscal year 2008;
       (C) $350,000,000 for fiscal year 2009;
       (D) $400,000,000 for fiscal year 2010; and
       (E) $450,000,000 for fiscal year 2011.
       (2) Availability.--Amounts made available under paragraph 
     (1) for a fiscal year shall remain available for the awarding 
     of grants to States by not later than September 30, 2011.

                      Subchapter C--Miscellaneous

     SEC. 6081. MEDICAID TRANSFORMATION GRANTS.

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

[[Page 611]]

     of July 1, 2004, was more than 105 percent of the population 
     of the respective State (as so determined) as of April 1, 
     2000.
       ``(C) Form and manner of payment.--Payment to a State under 
     this subsection shall be made in the same manner as other 
     payments under section 1903(a). There is no requirement for 
     State matching funds to receive payments under this 
     subsection.
       ``(5) Medication risk management program.--
       ``(A) In general.--For purposes of this subsection, the 
     term `medication risk management program' means a program for 
     targeted beneficiaries that ensures that covered outpatient 
     drugs are appropriately used to optimize therapeutic outcomes 
     through improved medication use and to reduce the risk of 
     adverse events.
       ``(B) Elements.--Such program may include the following 
     elements:
       ``(i) The use of established principles and standards for 
     drug utilization review and best practices to analyze 
     prescription drug claims of targeted beneficiaries and 
     identify outlier physicians.
       ``(ii) On an ongoing basis provide outlier physicians--

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

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

     SEC. 6082. HEALTH OPPORTUNITY ACCOUNTS.

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


                     ``health opportunity accounts

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

[[Page 612]]

     is participating in a State demonstration program and is 
     enrolled with a Medicaid managed care organization, the State 
     shall enter into an arrangement with the organization under 
     which the individual may obtain demonstration program 
     Medicaid services from any provider described in clause (ii) 
     of subparagraph (A) at payment rates that do not exceed the 
     payment rates that may be imposed under that clause.
       ``(C) Computation.--The payment rates described in 
     subparagraphs (A) and (B) shall be computed without regard to 
     any cost sharing that would be otherwise applicable under 
     sections 1916 and 1916A.
       ``(D) Definitions.--For purposes of this paragraph:
       ``(i) The term `demonstration program Medicaid services' 
     means, with respect to an individual participating in a State 
     demonstration program, services for which the individual 
     would be provided medical assistance under this title but for 
     the application of the deductible described in paragraph 
     (1)(A).
       ``(ii) The term `participating provider' means--

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

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

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

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

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

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

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

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

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

       ``(iii) Exception from 25 percent savings to government for 
     private contributions.--Clause (i)(II) shall not apply to the 
     portion of the account that is attributable to contributions 
     described in paragraph (2)(A)(ii). For purposes of accounting 
     for such contributions, withdrawals from a health opportunity 
     account shall first be attributed to contributions described 
     in paragraph (2)(A)(i).
       ``(iv) Condition for non-health withdrawals.--No withdrawal 
     may be made from an account under clause (ii)(II) unless the 
     account holder has participated in the program under this 
     section for at least 1 year.
       ``(v) No requirement for continuation of coverage.--An 
     account holder of a health opportunity account, after 
     becoming ineligible for medical assistance under this title, 
     is not required to purchase high-deductible or other 
     insurance as a condition of maintaining or using the account.

[[Page 613]]

       ``(4) Administration.--A State may coordinate 
     administration of health opportunity accounts through the use 
     of a third party administrator and reasonable expenditures 
     for the use of such administrator shall be reimbursable to 
     the State in the same manner as other administrative 
     expenditures under section 1903(a)(7).
       ``(5) Treatment.--Amounts in, or contributed to, a health 
     opportunity account shall not be counted as income or assets 
     for purposes of determining eligibility for benefits under 
     this title.
       ``(6) Unauthorized withdrawals.--A State may establish 
     procedures--
       ``(A) to penalize or remove an individual from the health 
     opportunity account based on nonqualified withdrawals by the 
     individual from such an account; and
       ``(B) to recoup costs that derive from such nonqualified 
     withdrawals.''.

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

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

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

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

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

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

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

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

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

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

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

       ``(F) Assessment.--The independent assessment required 
     under subparagraph (E)(ii) shall include the following:
       ``(i) An objective evaluation of an individual's inability 
     to perform 2 or more activities of daily living (as defined 
     in section 7702B(c)(2)(B) of the Internal Revenue Code of 
     1986) or the need for significant assistance to perform such 
     activities.

[[Page 614]]

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

       ``(I) is developed--

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

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

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

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

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

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

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

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

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

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

       (a) Exemption From Certain Requirements.--Section 1915 of 
     the Social Security Act

[[Page 615]]

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

                           Subtitle B--SCHIP

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

       (a) In General.--Section 2104 of the Social Security Act 
     (42 U.S.C. 1397dd) is amended by inserting after subsection 
     (c) the following:
       ``(d) Additional Allotments To Eliminate Funding 
     Shortfalls.--
       ``(1) Appropriation; allotment authority.--For the purpose 
     of providing additional allotments to shortfall States 
     described in paragraph (2), there is appropriated, out of any 
     money in the Treasury not otherwise appropriated, 
     $283,000,000 for fiscal year 2006.
       ``(2) Shortfall states described.--For purposes of 
     paragraph (1), a shortfall State described in this paragraph 
     is a State with a State child health plan approved under this 
     title for which the Secretary estimates, on the basis of the 
     most recent data available to the Secretary as of December 
     16, 2005, that the projected expenditures under such plan for 
     such State for fiscal year 2006 will exceed the sum of--
       ``(A) the amount of the State's allotments for each of 
     fiscal years 2004 and 2005 that will not be expended by the 
     end of fiscal year 2005;
       ``(B) the amount, if any, that is to be redistributed to 
     the State during fiscal year 2006 in accordance with 
     subsection (f); and
       ``(C) the amount of the State's allotment for fiscal year 
     2006.
       ``(3) Allotments.--In addition to the allotments provided 
     under subsections (b) and (c), subject to paragraph (4), of 
     the amount available for the additional allotments under 
     paragraph (1) for fiscal year 2006, the Secretary shall 
     allot--
       ``(A) to each shortfall State described in paragraph (2) 
     such amount as the Secretary determines will eliminate the 
     estimated shortfall described in such paragraph for the 
     State; and
       ``(B) to each commonwealth or territory described in 
     subsection (c)(3), the same proportion as the proportion of 
     the commonwealth's or territory's allotment under subsection 
     (c) (determined without regard to subsection (f)) to 1.05 
     percent of the amount appropriated under paragraph (1).
       ``(4) Use of additional allotment.--Additional allotments 
     provided under this subsection are only available for amounts 
     expended under a State plan approved under this title for 
     child health assistance for targeted low-income children.
       ``(5) 1-year availability; no redistribution of unexpended 
     additional allotments.--Notwithstanding subsections (e) and 
     (f), amounts allotted to a State pursuant to this subsection 
     for fiscal year 2006 shall only remain available for 
     expenditure by the State through September 30, 2006. Any 
     amounts of such allotments that remain unexpended as of such 
     date shall not be subject to redistribution under subsection 
     (f) and shall revert to the Treasury on October 1, 2006.''.
       (b) Conforming amendments.--Section 2104 of the Social 
     Security Act (42 U.S.C. 1397dd) is amended--
       (1) in subsection (a), by inserting ``subject to subsection 
     (d),'' after ``under this section,'';
       (2) in subsection (b)(1), by inserting ``and subsection 
     (d)'' after ``Subject to paragraph (4)''; and
       (3) in subsection (c)(1), by inserting ``subject to 
     subsection (d),'' after ``for a fiscal year,''.
       (c) Effective Date.--The amendments made by this section 
     apply to items and services furnished on or after October 1, 
     2005, without regard to whether or not regulations 
     implementing such amendments have been issued.

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

       (a) Prohibition on Use of SCHIP Funds.--Section 2107 of the 
     Social Security Act (42 U.S.C. 1397gg) is amended by adding 
     at the end the following:
       ``(f) Limitation of Waiver Authority.--Notwithstanding 
     subsection (e)(2)(A) and section 1115(a), the Secretary may 
     not approve a waiver, experimental, pilot, or demonstration 
     project

[[Page 616]]

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

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

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

                       Subtitle C--Katrina Relief

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

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

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

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

     SEC. 6203. IMPLEMENTATION FUNDING.

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

            TITLE VII--HUMAN RESOURCES AND OTHER PROVISIONS

     SEC. 7001. REFERENCES.

       Except as otherwise expressly provided, wherever in this 
     title an amendment or repeal is expressed in terms of an 
     amendment to, or repeal of, a section or other provision, the 
     amendment

[[Page 617]]

     or repeal shall be considered to be made to a section or 
     other provision of the Social Security Act.

                            Subtitle A--TANF

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

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

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

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

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

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

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

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

       ``(I) describes--

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

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

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

       ``(I) Public advertising campaigns on the value of marriage 
     and the skills needed to increase marital stability and 
     health.
       ``(II) Education in high schools on the value of marriage, 
     relationship skills, and budgeting.
       ``(III) Marriage education, marriage skills, and 
     relationship skills programs, that may include parenting 
     skills, financial management,

[[Page 618]]

     conflict resolution, and job and career advancement, for non-
     married pregnant women and non-married expectant fathers.
       ``(IV) Pre-marital education and marriage skills training 
     for engaged couples and for couples or individuals interested 
     in marriage.
       ``(V) Marriage enhancement and marriage skills training 
     programs for married couples.
       ``(VI) Divorce reduction programs that teach relationship 
     skills.
       ``(VII) Marriage mentoring programs which use married 
     couples as role models and mentors in at-risk communities.
       ``(VIII) Programs to reduce the disincentives to marriage 
     in means-tested aid programs, if offered in conjunction with 
     any activity described in this subparagraph.

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

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

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

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

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

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

                         Subtitle B--Child Care

     SEC. 7201. ENTITLEMENT FUNDING.

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

                       Subtitle C--Child Support

     SEC. 7301. ASSIGNMENT AND DISTRIBUTION OF CHILD SUPPORT.

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

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

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

[[Page 619]]

       ``(B) Families that currently receive assistance.--
       ``(i) In general.--Notwithstanding paragraph (1), in the 
     case of a family that receives assistance from the State, a 
     State shall not be required to pay to the Federal Government 
     the Federal share of the excepted portion (as defined in 
     clause (ii)) of any amount collected on behalf of such family 
     during a month to the extent that--

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

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

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

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

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

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

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

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

     SEC. 7304. MAINTENANCE OF TECHNICAL ASSISTANCE FUNDING.

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

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

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

     SEC. 7306. INFORMATION COMPARISONS WITH INSURANCE DATA.

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

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

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

       (I) in subparagraph (A)--

[[Page 620]]

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

       (II) in subparagraph (B)--

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

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

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

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

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

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

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

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

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

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

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

                       Subtitle D--Child Welfare

     SEC. 7401. STRENGTHENING COURTS.

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

[[Page 621]]

       (1) by striking ``and'' at the end of paragraph (13);
       (2) by striking the period at the end of paragraph (14) and 
     inserting ``; and''; and
       (3) by adding at the end the following:
       ``(15) demonstrate substantial, ongoing, and meaningful 
     collaboration with State courts in the development and 
     implementation of the State plan under subpart 1, the State 
     plan approved under subpart 2, and the State plan approved 
     under part E, and in the development and implementation of 
     any program improvement plan required under section 1123A.''.
       (c) Use of Child Welfare Records in State Court 
     Proceedings.--Section 471 (42 U.S.C. 671) is amended--
       (1) in subsection (a)(8), by inserting ``subject to 
     subsection (c),'' after ``(8)''; and
       (2) by adding at the end the following:
       ``(c) Use of Child Welfare Records in State Court 
     Proceedings.--Subsection (a)(8) shall not be construed to 
     limit the flexibility of a State in determining State 
     policies relating to public access to court proceedings to 
     determine child abuse and neglect or other court hearings 
     held pursuant to part B or this part, except that such 
     policies shall, at a minimum, ensure the safety and well-
     being of the child, parents, and family.''.

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

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

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

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

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

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

                Subtitle E--Supplemental Security Income

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

        Section 1633 (42 U.S.C. 1383b) is amended by adding at the 
     end the following:
       ``(e)(1) The Commissioner of Social Security shall review 
     determinations, made by State agencies pursuant to subsection 
     (a) in connection with applications for benefits under this

[[Page 622]]

     title on the basis of blindness or disability, that 
     individuals who have attained 18 years of age are blind or 
     disabled as of a specified onset date. The Commissioner of 
     Social Security shall review such a determination before any 
     action is taken to implement the determination.
       ``(2)(A) In carrying out paragraph (1), the Commissioner of 
     Social Security shall review--
       ``(i) at least 20 percent of all determinations referred to 
     in paragraph (1) that are made in fiscal year 2006;
       ``(ii) at least 40 percent of all such determinations that 
     are made in fiscal year 2007; and
       ``(iii) at least 50 percent of all such determinations that 
     are made in fiscal year 2008 or thereafter.
       ``(B) In carrying out subparagraph (A), the Commissioner of 
     Social Security shall, to the extent feasible, select for 
     review the determinations which the Commissioner of Social 
     Security identifies as being the most likely to be 
     incorrect.''.

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

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

       Subtitle F--Repeal of Continued Dumping and Subsidy Offset

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

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

                       Subtitle G--Effective Date

     SEC. 7701. EFFECTIVE DATE.

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

          TITLE VIII--EDUCATION AND PENSION BENEFIT PROVISIONS

                Subtitle A--Higher Education Provisions

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

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

     SEC. 8002. MODIFICATION OF 50/50 RULE.

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

     SEC. 8003. ACADEMIC COMPETITIVENESS GRANTS.

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

     ``SEC. 401A. ACADEMIC COMPETITIVENESS GRANTS.

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

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

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

[[Page 623]]

     authorized by subsection (d), then all of the excess funds 
     shall remain available for awarding grants under this section 
     during the subsequent fiscal year.
       ``(f) Recognition of Programs of Study.--The Secretary 
     shall recognize at least one rigorous secondary school 
     program of study in each State under subsection (c)(3)(A) and 
     (B) for the purpose of determining student eligibility under 
     such subsection.
       ``(g) Sunset Provision.--The authority to make grants under 
     this section shall expire at the end of academic year 2010-
     2011.''.

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

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

     SEC. 8005. LOAN LIMITS.

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

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

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

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

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

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

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

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

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

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

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

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

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

     SEC. 8008. ADDITIONAL LOAN TERMS AND CONDITIONS.

       (a) Disbursement.--Section 428(b)(1)(N) (20 U.S.C. 
     1078(b)(1)(N)) is amended--
       (1) by striking ``or'' at the end of clause (i); and

[[Page 624]]

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

     SEC. 8009. CONSOLIDATION LOAN CHANGES.

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

     SEC. 8010. REQUIREMENTS FOR DISBURSEMENTS OF STUDENT LOANS.

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

     SEC. 8011. SCHOOL AS LENDER.

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

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

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

[[Page 625]]

     that the proceeds described in subparagraph (A)(viii) are 
     used to supplement, and not to supplant, non-Federal funds 
     that would otherwise be used for need-based grant 
     programs.''.

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

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

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

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

     SEC. 8014. ADDITIONAL ADMINISTRATIVE PROVISIONS.

       (a) Insurance Percentage.--
       (1) Amendment.--Subparagraph (G) of section 428(b)(1) (20 
     U.S.C. 1078(b)(1)(G)) is amended to read as follows:
       ``(G) insures 98 percent of the unpaid principal of loans 
     insured under the program, except that--
       ``(i) such program shall insure 100 percent of the unpaid 
     principal of loans made with funds advanced pursuant to 
     section 428(j) or 439(q);
       ``(ii) for any loan for which the first disbursement of 
     principal is made on or after July 1, 2006, the preceding 
     provisions of this subparagraph shall be applied by 
     substituting `97 percent' for `98 percent'; and
       ``(iii) notwithstanding the preceding provisions of this 
     subparagraph, such program shall insure 100 percent of the 
     unpaid principal amount of exempt claims as defined in 
     subsection (c)(1)(G);''.
       (2) Effective date of amendment.--The amendment made by 
     this subsection shall apply with respect to loans for which 
     the first disbursement of principal is made on or after July 
     1, 2006.
       (b) Federal Default Fees.--
       (1) In general.--Subparagraph (H) of section 428(b)(1) (20 
     U.S.C. 1078(b)(1)(H)) is amended to read as follows:
       ``(H) provides--
       ``(i) for loans for which the date of guarantee of 
     principal is before July 1, 2006, for the collection of a 
     single insurance premium equal to not more than 1.0 percent 
     of the principal amount of the loan, by deduction 
     proportionately from each installment payment of the proceeds 
     of the loan to the borrower, and ensures that the proceeds of 
     the premium will not be used for incentive payments to 
     lenders; or
       ``(ii) for loans for which the date of guarantee of 
     principal is on or after July 1, 2006, for the collection, 
     and the deposit into the Federal Student Loan Reserve Fund 
     under section 422A of a Federal default fee of an amount 
     equal to 1.0 percent of the principal amount of the loan, 
     which fee shall be collected either by deduction from the 
     proceeds of the loan or by payment from other non-Federal 
     sources, and ensures that the proceeds of the Federal default 
     fee will not be used for incentive payments to lenders;''.
       (2) Unsubsidized loans.--Section 428H(h) (20 U.S.C. 1078-
     8(h)) is amended by adding at the end the following new 
     sentences: ``Effective for loans for which the date of 
     guarantee of principal is on or after July 1, 2006, in lieu 
     of the insurance premium authorized under the preceding 
     sentence, each State or nonprofit private institution or 
     organization having an agreement with the Secretary under 
     section 428(b)(1) shall collect and deposit into the Federal 
     Student Loan Reserve Fund under section 422A, a Federal 
     default fee of an amount equal to 1.0 percent of the 
     principal amount of the loan, which fee shall be collected 
     either by deduction from the proceeds of the loan or by 
     payment from other non-Federal sources. The Federal default 
     fee shall not be used for incentive payments to lenders.''.
       (3) Voluntary flexible agreements.--Section 428A(a)(1) (20 
     U.S.C. 1078-1(a)(1)) is amended--
       (A) by striking ``or'' at the end of subparagraph (A);
       (B) by striking the period at the end of subparagraph (B) 
     and inserting ``; or''; and
       (C) by adding at the end the following new subparagraph:
       ``(C) the Federal default fee required by section 
     428(b)(1)(H) and the second sentence of section 428H(h).''.
       (c) Treatment of Exempt Claims.--
       (1) Amendment.--Section 428(c)(1) (20 U.S.C. 1078(c)(1)) is 
     amended--
       (A) by redesignating subparagraph (G) as subparagraph (H), 
     and moving such subparagraph 2 em spaces to the left; and
       (B) by inserting after subparagraph (F) the following new 
     subparagraph:

[[Page 626]]

       ``(G)(i) Notwithstanding any other provisions of this 
     section, in the case of exempt claims, the Secretary shall 
     apply the provisions of--
       ``(I) the fourth sentence of subparagraph (A) by 
     substituting `100 percent' for `95 percent';
       ``(II) subparagraph (B)(i) by substituting `100 percent' 
     for `85 percent'; and
       ``(III) subparagraph (B)(ii) by substituting `100 percent' 
     for `75 percent'.
       ``(ii) For purposes of clause (i) of this subparagraph, the 
     term `exempt claims' means claims with respect to loans for 
     which it is determined that the borrower (or the student on 
     whose behalf a parent has borrowed), without the lender's or 
     the institution's knowledge at the time the loan was made, 
     provided false or erroneous information or took actions that 
     caused the borrower or the student to be ineligible for all 
     or a portion of the loan or for interest benefits thereon.''.
       (2) Effective date of amendments.--The amendments made by 
     this subsection shall apply with respect to loans for which 
     the first disbursement of principal is made on or after July 
     1, 2006.
       (d) Consolidation of Defaulted Loans.--Section 428(c) (20 
     U.S.C. 1078(c)) is further amended--
       (1) in paragraph (2)(A)--
       (A) by inserting ``(i)'' after ``including''; and
       (B) by inserting before the semicolon at the end the 
     following: ``and (ii) requirements establishing procedures to 
     preclude consolidation lending from being an excessive 
     proportion of guaranty agency recoveries on defaulted loans 
     under this part'';
       (2) in paragraph (2)(D), by striking ``paragraph (6)'' and 
     inserting ``paragraph (6)(A)''; and
       (3) in paragraph (6)--
       (A) by redesignating subparagraphs (A) and (B) as clauses 
     (i) and (ii), respectively;
       (B) by inserting ``(A)'' before ``For the purpose of 
     paragraph (2)(D),''; and
       (C) by adding at the end the following new subparagraphs:
       ``(B) A guaranty agency shall--
       ``(i) on or after October 1, 2006--
       ``(I) not charge the borrower collection costs in an amount 
     in excess of 18.5 percent of the outstanding principal and 
     interest of a defaulted loan that is paid off through 
     consolidation by the borrower under this title; and
       ``(II) remit to the Secretary a portion of the collection 
     charge under subclause (I) equal to 8.5 percent of the 
     outstanding principal and interest of such defaulted loan; 
     and
       ``(ii) on and after October 1, 2009, remit to the Secretary 
     the entire amount charged under clause (i)(I) with respect to 
     each defaulted loan that is paid off with excess 
     consolidation proceeds.
       ``(C) For purposes of subparagraph (B), the term `excess 
     consolidation proceeds' means, with respect to any guaranty 
     agency for any Federal fiscal year beginning on or after 
     October 1, 2009, the proceeds of consolidation of defaulted 
     loans under this title that exceed 45 percent of the agency's 
     total collections on defaulted loans in such Federal fiscal 
     year.''.
       (e) Documentation of Forbearance Agreements.--Section 
     428(c) (20 U.S.C. 1078(c)) is further amended--
       (1) in paragraph (3)(A)(i)--
       (A) by striking ``in writing''; and
       (B) by inserting ``and documented in accordance with 
     paragraph (10)'' after ``approval of the insurer''; and
       (2) by adding at the end the following new paragraph:
       ``(10) Documentation of forbearance agreements.--For the 
     purposes of paragraph (3), the terms of forbearance agreed to 
     by the parties shall be documented by confirming the 
     agreement of the borrower by notice to the borrower from the 
     lender, and by recording the terms in the borrower's file.''.
       (f) Voluntary Flexible Agreements.--Section 428A(a) (20 
     U.S.C. 1078-1(a)) is further amended--
       (1) in paragraph (1)(B), by striking ``unless the 
     Secretary'' and all that follows through ``designated 
     guarantor'';
       (2) by striking paragraph (2);
       (3) by redesignating paragraph (3) as paragraph (2); and
       (4) by striking paragraph (4).
       (g) Fraud; Repayment Required.--Section 428B(a)(1) (20 
     U.S.C. 1078-2(a)(1)) is further amended--
       (1) by striking ``and'' at the end of subparagraph (A);
       (2) by redesignating subparagraph (B) as subparagraph (C); 
     and
       (3) by inserting after subparagraph (A) the following new 
     subparagraph:
       ``(B) in the case of a graduate or professional student or 
     parent who has been convicted of, or has pled nolo contendere 
     or guilty to, a crime involving fraud in obtaining funds 
     under this title, such graduate or professional student or 
     parent has completed the repayment of such funds to the 
     Secretary, or to the holder in the case of a loan under this 
     title obtained by fraud; and''.
       (h) Default Reduction Program.--Section 428F(a)(1) (20 
     U.S.C. 1078-6(a)(1)) is amended--
       (1) in subparagraph (A), by striking ``consecutive payments 
     for 12 months'' and inserting ``9 payments made within 20 
     days of the due date during 10 consecutive months'';
       (2) by redesignating subparagraph (C) as subparagraph (D); 
     and
       (3) by inserting after subparagraph (B) the following new 
     subparagraph:
       ``(C) A guaranty agency may charge the borrower and retain 
     collection costs in an amount not to exceed 18.5 percent of 
     the outstanding principal and interest at the time of sale of 
     a loan rehabilitated under subparagraph (A).''.
       (i) Exceptional Performance Insurance Rate.--Section 
     428I(b)(1) (20 U.S.C. 1078-9(b)(1)) is amended--
       (1) in the heading, by striking ``100 percent'' and 
     inserting ``99 percent''; and
       (2) by striking ``100 percent of the unpaid'' and inserting 
     ``99 percent of the unpaid''.
       (j) Uniform Administrative and Claims Procedure.--Section 
     432(l)(1)(H) (20 U.S.C. 1082(l)(1)(H)) is amended by 
     inserting ``and anticipated graduation date'' after ``status 
     change''.
       (1) Section 428(a)(3)(A)(v) (20 U.S.C. 1078(a)(3)(A)(v)) is 
     amended--
       (A) by striking ``or'' at the end of subclause (I);
       (B) by striking the period at the end of subclause (II) and 
     inserting ``; or''; and
       (C) by adding after subclause (II) the following new 
     subclause:
       ``(III) in the case of a loan disbursed through an escrow 
     agent, 3 days before the first disbursement of the loan.''.
       (2) Section 428(c)(1)(A) (20 U.S.C. 1078(c)(1)(A)) is 
     amended by striking ``45 days'' in the last sentence and 
     inserting ``30 days''.
       (3) Section 428(i)(1) (20 U.S.C. 1078(i)(1)) is amended by 
     striking ``21 days'' in the third sentence and inserting ``10 
     days''.

     SEC. 8015. FUNDS FOR ADMINISTRATIVE EXPENSES.

       Section 458 is amended to read as follows:

     ``SEC. 458. FUNDS FOR ADMINISTRATIVE EXPENSES.

       ``(a) Administrative Expenses.--
       ``(1) Mandatory funds for fiscal year 2006.--For fiscal 
     year 2006, there shall be available to the Secretary, from 
     funds not otherwise appropriated, funds to be obligated for--
       ``(A) administrative costs under this part and part B, 
     including the costs of the direct student loan programs under 
     this part; and
       ``(B) account maintenance fees payable to guaranty agencies 
     under part B and calculated in accordance with subsections 
     (b) and (c),

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

     SEC. 8016. COST OF ATTENDANCE.

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

     SEC. 8017. FAMILY CONTRIBUTION.

       (a) Family Contribution for Dependent Students.--
       (1) Amendments.--Section 475 (20 U.S.C. 1087oo) is 
     amended--
       (A) in subsection (g)(2)(D), by striking ``$2,200'' and 
     inserting ``$3,000''; and

[[Page 627]]

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

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

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

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

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

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

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

     SEC. 8019. ADDITIONAL NEED ANALYSIS AMENDMENTS.

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

[[Page 628]]

     may be excluded from both estimated financial assistance and 
     cost of attendance, if that assistance is provided by a State 
     and is designated by such State to offset a specific 
     component of the cost of attendance. If that assistance is 
     excluded from either estimated financial assistance or cost 
     of attendance, it shall be excluded from both.''.

     SEC. 8020. GENERAL PROVISIONS.

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

     SEC. 8021. STUDENT ELIGIBILITY.

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

     SEC. 8022. INSTITUTIONAL REFUNDS.

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

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

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

     SEC. 8023. COLLEGE ACCESS INITIATIVE.

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

     ``SEC. 485D. COLLEGE ACCESS INITIATIVE.

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

     SEC. 8024. WAGE GARNISHMENT REQUIREMENT.

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

                          Subtitle B--Pensions

     SEC. 8201. INCREASES IN PBGC PREMIUMS.

       (a) Flat-Rate Premiums.--

[[Page 629]]

       (1) Single-employer plans.--
       (A) In general.--Clause (i) of section 4006(a)(3)(A) of the 
     Employee Retirement Income Security Act of 1974 (29 U.S.C. 
     1306(a)(3)(A)) is amended by striking ``$19'' and inserting 
     ``$30''.
       (B) Adjustment for inflation.--Section 4006(a)(3) of such 
     Act (29 U.S.C. 1306(a)(3)) is amended by adding at the end 
     the following new subparagraph:
       ``(F) For each plan year beginning in a calendar year after 
     2006, there shall be substituted for the premium rate 
     specified in clause (i) of subparagraph (A) an amount equal 
     to the greater of--
       ``(i) the product derived by multiplying the premium rate 
     specified in clause (i) of subparagraph (A) by the ratio of--
       ``(I) the national average wage index (as defined in 
     section 209(k)(1) of the Social Security Act) for the first 
     of the 2 calendar years preceding the calendar year in which 
     such plan year begins, to
       ``(II) the national average wage index (as so defined) for 
     2004; and
       ``(ii) the premium rate in effect under clause (i) of 
     subparagraph (A) for plan years beginning in the preceding 
     calendar year.

     If the amount determined under this subparagraph is not a 
     multiple of $1, such product shall be rounded to the nearest 
     multiple of $1.''.
       (2) Multiemployer plans.--
       (A) In general.--Section 4006(a)(3)(A) of such Act (29 
     U.S.C. 1306(a)(3)(A)) is amended--
       (i) in clause (iii)--

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

       (ii) by adding at the end the following:
       ``(iv) in the case of a multiemployer plan, for plan years 
     beginning after December 31, 2005, $8.00 for each individual 
     who is a participant in such plan during the applicable plan 
     year.''.
       (B) Adjustment for inflation.--Section 4006(a)(3) of such 
     Act (29 U.S.C. 1306(a)(3)), as amended by this subsection, is 
     amended by adding at the end the following new subparagraph:
       ``(G) For each plan year beginning in a calendar year after 
     2006, there shall be substituted for the premium rate 
     specified in clause (iv) of subparagraph (A) an amount equal 
     to the greater of--
       ``(i) the product derived by multiplying the premium rate 
     specified in clause (iv) of subparagraph (A) by the ratio 
     of--
       ``(I) the national average wage index (as defined in 
     section 209(k)(1) of the Social Security Act) for the first 
     of the 2 calendar years preceding the calendar year in which 
     such plan year begins, to
       ``(II) the national average wage index (as so defined) for 
     2004; and
       ``(ii) the premium rate in effect under clause (iv) of 
     subparagraph (A) for plan years beginning in the preceding 
     calendar year.

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

                      TITLE IX--LIHEAP PROVISIONS

     SEC. 9001. FUNDING AVAILABILITY.

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

                 TITLE X--JUDICIARY RELATED PROVISIONS

                  Subtitle A--Civil Filing Adjustments

     SEC. 10001. CIVIL CASE FILING FEE INCREASES.

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

                      Subtitle B--Bankruptcy Fees

     SEC. 11101. BANKRUPTCY FEES.

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

                          ____________________