[United States Statutes at Large, Volume 120, 109th Congress, 2nd Session]
[From the U.S. Government Publishing Office, www.gpo.gov]

120 STAT. 4

Public Law 109-171
109th Congress

An Act


 
To provide for reconciliation pursuant to section 202(a) of the
concurrent resolution on the budget for fiscal year 2006 (H. Con. Res.
95).  NOTE: Feb. 8, 2006 -  [S. 1932]

Be it enacted by the Senate and House of Representatives of the
United States of America in Congress  NOTE: Deficit Reduction Act of
2005. 42 USC 1305 note.  assembled,

SECTION 1. SHORT TITLE.

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

SEC. 2. TABLE OF TITLES.

The table of titles is as follows:

TITLE I--AGRICULTURE PROVISIONS

TITLE II--HOUSING AND DEPOSIT INSURANCE PROVISIONS

TITLE III--DIGITAL TELEVISION TRANSITION AND PUBLIC SAFETY

TITLE IV--TRANSPORTATION PROVISIONS

TITLE V--MEDICARE

TITLE VI--MEDICAID AND SCHIP

TITLE VII--HUMAN RESOURCES AND OTHER PROVISIONS

TITLE VIII--EDUCATION AND PENSION BENEFIT PROVISIONS

TITLE IX--LIHEAP PROVISIONS

TITLE X--JUDICIARY RELATED PROVISIONS

TITLE  NOTE: Agricultural Reconciliation Act of 2005. 7 USC 7901
note.  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)  NOTE: Effective dates.  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

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120 STAT. 5

``(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)  NOTE: 7 USC 7937 note.  Effective Date.--The amendments made
by this section take effect on August 1, 2006.

Subtitle B--Conservation

SEC. 1201. WATERSHED REHABILITATION PROGRAM.

The  NOTE: Termination date.  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--

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120 STAT. 6

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

SEC. 1403. RURAL BUSINESS INVESTMENT PROGRAM.

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

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120 STAT. 7

section and unobligated as of October 1, 2006, is hereby cancelled
effective on that date.

SEC. 1404. RURAL BUSINESS STRATEGIC INVESTMENT GRANTS.

The  NOTE: Termination date.  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)  NOTE: Termination date.  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)  NOTE: Effective dates.  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.  NOTE: 12 USC 1701z-11 note.  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

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120 STAT. 8

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.  NOTE: 12 USC 1701z-11 note.  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

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120 STAT. 9

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)  NOTE: 12 USC 1701z-11 note.  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  NOTE: Federal Deposit Insurance Reform Act of 2005. Banks and
banking. 12 USC 1811 note. 12 USC 1821 note.  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--

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120 STAT. 10

(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)  NOTE: Deadlines.  In general.--By
April 1 of 2010, and the 1st day of each
subsequent 5-year period, the Board of Directors
and the National Credit Union Administration Board
shall jointly consider the factors set forth under
clause (v), and, upon determining that an
inflation adjustment is appropriate, shall jointly
prescribe the amount by which the standard maximum
deposit insurance amount and the standard maximum
share insurance amount (as defined in section
207(k) of the Federal Credit Union Act) applicable
to any depositor at an insured depository
institution shall be increased by calculating the
product of--
``(I) $100,000; and
``(II) the ratio of the published
annual value of the Personal Consumption
Expenditures Chain-Type Price Index (or
any successor index thereto), published
by the Department of Commerce, for the
calendar year preceding the year in
which the adjustment is calculated under
this clause, to the published annual
value of such index for the calendar
year preceding the date this
subparagraph takes effect under the
Federal Deposit Insurance Reform Act of
2005.
The values used in the calculation under subclause
(II) shall be, as of the date of the calculation,
the values most recently published by the
Department of Commerce.
``(ii) Rounding.--If the amount determined
under clause (ii) for any period is not a multiple
of $10,000, the amount so determined shall be
rounded down to the nearest $10,000.
``(iii) Publication and report to the
congress.--Not later than April 5 of any calendar
year in which an adjustment is required to be
calculated under clause (i) to the standard
maximum deposit insurance amount and the standard
maximum share insurance amount under such clause,
the Board of Directors and the National Credit
Union Administration Board shall--
``(I)  NOTE: Federal Register,
publication.  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)

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120 STAT. 11

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)  NOTE: Effective dates.  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

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120 STAT. 12

``$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)  NOTE: 12 USC 1821 note.  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.''.

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120 STAT. 13

(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)  NOTE: Applicability.  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.

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120 STAT. 14

``(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)  NOTE: 12 USC 1817 note.  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)  NOTE: Notice.  Rulemaking
requirement.--Any change to the designated reserve
ratio shall be made by the Board of Directors by
regulation after notice and opportunity for
comment.
``(B) Range.--The reserve ratio designated by the
Board of Directors for any year--
``(i) may not exceed 1.5 percent of estimated
insured deposits; and
``(ii) may not be less than 1.15 percent of
estimated insured deposits.
``(C) Factors.--In designating a reserve ratio for
any year, the Board of Directors shall--
``(i) take into account the risk of losses to
the Deposit Insurance Fund in such year and future
years, including historic experience and potential
and estimated losses from insured depository
institutions;
``(ii) take into account economic conditions
generally affecting insured depository
institutions so as to allow the designated reserve
ratio to increase during more favorable economic
conditions and to decrease during less favorable
economic conditions, notwithstanding the increased
risks of loss that may exist during such less
favorable conditions, as determined to be
appropriate by the Board of Directors;
``(iii) seek to prevent sharp swings in the
assessment rates for insured depository
institutions; and
``(iv) take into account such other factors as
the Board of Directors may determine to be
appropriate, consistent with the requirements of
this subparagraph.
``(D) Publication of proposed change in ratio.--In
soliciting comment on any proposed change in the
designated reserve ratio in accordance with subparagraph
(A),

[[Page 15]]
120 STAT. 15

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)  NOTE: 12 USC 1817 note.  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

[[Page 16]]
120 STAT. 16

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.

[[Page 17]]
120 STAT. 17

``(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)  NOTE: Regulations.  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.--

[[Page 18]]
120 STAT. 18

``(A) In general.--Before the end of the 270-day
period beginning on the date of the enactment of the
Federal Deposit Insurance Reform Act of 2005, the Board
of Directors shall, by regulation after notice and
opportunity for comment, provide for a credit to each
eligible insured depository institution (or a successor
insured depository institution), based on the assessment
base of the institution on December 31, 1996, as
compared to the combined aggregate assessment base of
all eligible insured depository institutions, taking
into account such factors as the Board of Directors may
determine to be appropriate.
``(B) Credit limit.--The aggregate amount of credits
available under subparagraph (A) to all eligible insured
depository institutions shall equal the amount that the
Corporation could collect if the Corporation imposed an
assessment of 10.5 basis points on the combined
assessment base of the Bank Insurance Fund and the
Savings Association Insurance Fund as of December 31,
2001.
``(C) Eligible insured depository institution
defined.--For purposes of this paragraph, the term
`eligible insured depository institution' means any
insured depository institution that--
``(i) was in existence on December 31, 1996,
and paid a deposit insurance assessment prior to
that date; or
``(ii) is a successor to any insured
depository institution described in clause (i).
``(D) Application of credits.--
``(i) In general.--Subject to clause (ii), the
amount of a credit to any eligible insured
depository institution under this paragraph shall
be applied by the Corporation, subject to
subsection (b)(3)(E), to the assessments imposed
on such institution under subsection (b) that
become due for assessment periods beginning after
the effective date of regulations prescribed under
subparagraph (A).
``(ii) Temporary restriction on use of
credits.--The amount of a credit to any eligible
insured depository institution under this
paragraph may not be applied to more than 90
percent of the assessments imposed on such
institution under subsection (b) that become due
for assessment periods beginning in fiscal years
2008, 2009, and 2010.
``(iii) Regulations.--The regulations
prescribed under subparagraph (A) shall establish
the qualifications and procedures governing the
application of assessment credits pursuant to
clause (i).
``(E) Limitation on amount of credit for certain
depository institutions.--In the case of an insured
depository institution that exhibits financial,
operational, or compliance weaknesses ranging from
moderately severe to unsatisfactory, or is not
adequately capitalized (as defined in section 38) at the
beginning of an assessment period, the amount of any
credit allowed under this paragraph against the
assessment on that depository institution for such
period may not exceed the amount calculated by applying
to that depository institution the average

[[Page 19]]
120 STAT. 19

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  NOTE: Deadline.  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

[[Page 20]]
120 STAT. 20

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)  NOTE: Deadline. Federal Register,
publication.  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.  NOTE: 12 USC 1817 note. Deadline.  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)  NOTE: Applicability.  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

[[Page 21]]
120 STAT. 21

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  NOTE: Digital Television Transition and Public Safety Act of
2005. 47 USC 309 note.  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

[[Page 22]]
120 STAT. 22

(iv) by striking ``the date on which the
digital television service transition period
terminates, as determined by the Commission'' and
inserting ``February 17, 2009'';
(B) in paragraph (2), by striking ``746 megahertz''
and inserting ``698 megahertz''.

SEC. 3003. AUCTION OF RECOVERED SPECTRUM.

(a) Deadline for Auction.--Section 309(j) of the Communications Act
of 1934 (47 U.S.C. 309(j)) is amended--
(1) by redesignating the second paragraph (15) of such
section (as added by section 203(b) of the Commercial Spectrum
Enhancement Act (Public Law 108-494; 118 Stat. 3993)), as
paragraph (16) of such section; and
(2) in the first paragraph (15) of such section (as added by
section 3(a) of the Auction Reform Act of 2002 (Public Law 107-
195; 116 Stat. 716)), by adding at the end of subparagraph (C)
the following new clauses:
``(v) Additional deadlines for recovered
analog spectrum.--Notwithstanding subparagraph
(B), the Commission shall conduct the auction of
the licenses for recovered analog spectrum by
commencing the bidding not later than January 28,
2008, and shall deposit the proceeds of such
auction in accordance with paragraph (8)(E)(ii)
not later than June 30, 2008.
``(vi) Recovered analog spectrum.--For
purposes of clause (v), the term `recovered analog
spectrum' means the spectrum between channels 52
and 69, inclusive (between frequencies 698 and 806
megahertz, inclusive) reclaimed from analog
television service broadcasting under paragraph
(14), other than--
``(I) the spectrum required by
section 337 to be made available for
public safety services; and
``(II) the spectrum auctioned prior
to the date of enactment of the Digital
Television Transition and Public Safety
Act of 2005.''.

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

SEC. 3004. RESERVATION OF AUCTION PROCEEDS.

Section 309(j)(8) of the Communications Act of 1934 (47 U.S.C.
309(j)(8)) is amended--
(1) in subparagraph (A), by striking ``subparagraph (B) or
subparagraph (D)'' and inserting ``subparagraphs (B), (D), and
(E)'';
(2) in subparagraph (C)(i), by inserting before the
semicolon at the end the following: ``, except as otherwise
provided in subparagraph (E)(ii)''; and
(3) by adding at the end the following new subparagraph:
``(E) Transfer of receipts.--
``(i) Establishment of fund.--There is
established in the Treasury of the United States a
fund to be known as the Digital Television
Transition and Public Safety Fund.
``(ii) Proceeds for funds.--Notwithstanding
subparagraph (A), the proceeds (including deposits
and upfront payments from successful bidders) from
the

[[Page 23]]
120 STAT. 23

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)  NOTE: Effective date.  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,

[[Page 24]]
120 STAT. 24

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)  NOTE: Applicability.  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)  NOTE: Deadline.  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)  NOTE: Effective date.  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,

[[Page 25]]
120 STAT. 25

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.  NOTE: New York. New Jersey.  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.  NOTE: Effective date.  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)  NOTE: Grants.  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

[[Page 26]]
120 STAT. 26

transmission on the low-power television station's analog channel.
An  NOTE: Deadline.  eligible low-power television station may receive
such compensation only if it submits a request for such compensation on
or before February 17, 2009. Priority compensation shall be given to
eligible low-power television stations in which the license is held by a
non-profit corporation and eligible low-power television stations that
serve rural areas of fewer than 10,000 viewers.

(b) Credit.--The Assistant Secretary may borrow from the Treasury
beginning October 1, 2006, such sums as may be necessary, but not to
exceed $10,000,000, to implement this section. The Assistant Secretary
shall reimburse the Treasury, without interest, as funds are deposited
into the Digital Television Transition and Public Safety Fund.
(c) Eligible Stations.--For purposes of this section, the term
``eligible low-power television station'' means a low-power television
broadcast station, Class A television station, television translator
station, or television booster station--
(1) that is itself broadcasting exclusively in analog
format; and
(2) that has not purchased a digital-to-analog conversion
device prior to the date of enactment of the Digital Television
Transition and Public Safety Act of 2005.

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

(a) Establishment.--The Assistant Secretary shall make payments of
not to exceed $65,000,000, in the aggregate, during fiscal year 2009
from the Digital Television Transition and Public Safety Fund
established under section 309(j)(8)(E) of the Communications Act of 1934
(47 U.S.C. 309(j)(8)(E)) to implement and administer a program through
which each licensee of an eligible low-power television station may
receive reimbursement for equipment to upgrade low-power television
stations from analog to digital in eligible rural communities, as that
term is defined in section 610(b)(2) of the Rural Electrification Act of
1937 (7 U.S.C. 950bb(b)(2)).  NOTE: Effective date.  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,

[[Page 27]]
120 STAT. 27

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--

[[Page 28]]
120 STAT. 28

(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.  NOTE: Applicability.  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.

[[Page 29]]
120 STAT. 29

``(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)  NOTE: Procedures. Public
information.  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.  NOTE: Reports.  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)  NOTE: 42 USC 1395ww note.  Plan for Hospital Value Based
Purchasing Program.--
(1) In general.--The Secretary of Health and Human Services
shall develop a plan to implement a value based purchasing
program for payments under the Medicare program for subsection
(d) hospitals beginning with fiscal year 2009.
(2) Details.--Such a plan shall include consideration of the
following issues:
(A) The on-going development, selection, and
modification process for measures of quality and
efficiency in hospital inpatient settings.
(B) The reporting, collection, and validation of
quality data.
(C) The structure of value based payment
adjustments, including the determination of thresholds
or improvements in quality that would substantiate a
payment adjustment, the size of such payments, and the
sources of funding for the value based payments.
(D) The disclosure of information on hospital
performance.

[[Page 30]]
120 STAT. 30

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)  NOTE: Effective date.  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)  NOTE: Deadline.  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)''.

[[Page 31]]
120 STAT. 31

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

[[Page 32]]
120 STAT. 32

(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)  NOTE: Applicability.  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)  NOTE: Applicability.  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)''.

[[Page 33]]
120 STAT. 33

SEC. 5005.  NOTE: 42 USC 1395ww note.  EXTENDED PHASE-IN OF THE
INPATIENT REHABILITATION FACILITY CLASSIFICATION CRITERIA.

(a)  NOTE: Applicability.  In General.--Notwithstanding section
412.23(b)(2) of title 42, Code of Federal Regulations, the Secretary of
Health and Human Services shall apply the applicable percent specified
in subsection (b) in the classification criterion used under the IRF
regulation (as defined in subsection (c)) to determine whether a
hospital or unit of a hospital is an inpatient rehabilitation facility
under the Medicare program under title XVIII of the Social Security Act.

(b) Applicable Percent.--For purposes of subsection (a), the
applicable percent specified in this subsection for cost reporting
periods--
(1) beginning during the 12-month period beginning on July
1, 2006, is 60 percent;
(2) beginning during the 12-month period beginning on July
1, 2007, is 65 percent; and
(3) beginning on or after July 1, 2008, is 75 percent.

(c) IRF Regulation.--For purposes of subsection (a), the term ``IRF
regulation'' means the rule published in the Federal Register on May 7,
2004, entitled ``Medicare Program; Final Rule; Changes to the Criteria
for Being Classified as an Inpatient Rehabilitation Facility'' (69 Fed.
Reg. 25752).

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

(a) Development.--
(1) In general.--The Secretary of Health and Human Services
(in this section referred to as the ``Secretary'') shall develop
a strategic and implementing plan to address issues described in
paragraph (2) regarding physician investment in specialty
hospitals (as defined in section 1877(h)(7)(A) of the Social
Security Act (42 U.S.C. 1395nn(h)(7)(A)).
(2) Issues described.--The issues described in this
paragraph are the following:
(A) Proportionality of investment return.
(B) Bona fide investment.
(C) Annual disclosure of investment information.
(D) The provision by specialty hospitals of--
(i) care to patients who are eligible for
medical assistance under a State plan approved
under title XIX of the Social Security Act,
including patients not so eligible but who are
regarded as such because they receive benefits
under a demonstration project approved under title
XI of such Act; and
(ii) charity care.
(E) Appropriate enforcement.

(b) Reports.--
(1) Interim report.--Not later than 3 months after the date
of the enactment of this Act, the Secretary shall submit an
interim report to the appropriate committees of jurisdiction of
Congress on the status of the development of the plan under
subsection (a).
(2) Final report.--Not later than six months after the date
of the enactment of this Act, the Secretary shall submit a final
report to the appropriate committees of jurisdiction of Congress
on the plan developed under subsection (a) together

[[Page 34]]
120 STAT. 34

with recommendations for such legislation and administrative
actions as the Secretary considers appropriate.

(c) Continuation of Suspension on Enrollment.--
(1)  NOTE: Deadline.  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.  NOTE: 42 USC 1395ww note.  MEDICARE DEMONSTRATION PROJECTS
TO PERMIT GAINSHARING ARRANGEMENTS.

(a)  NOTE: Deadlines.  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

[[Page 35]]
120 STAT. 35

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)  NOTE: Deadline.  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.

[[Page 36]]
120 STAT. 36

(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.  NOTE: 42 USC 1395b-1 note.  POST-ACUTE CARE PAYMENT REFORM
DEMONSTRATION PROGRAM.

(a) Establishment.--
(1)  NOTE: Deadline.  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

[[Page 37]]
120 STAT. 37

characteristics of the diagnosis to determine the appropriate
placement of such patient in a post-acute care site. The
Secretary shall use a standardized patient assessment instrument
across all post-acute care sites to measure functional status
and other factors during the treatment and at discharge from
each provider. Participants in the program shall provide
information on the fixed and variable costs for each individual.
An additional comprehensive assessment shall be provided at the
end of the episode of care.
(2) Number of sites.--The Secretary shall conduct the
demonstration program under this section with sufficient numbers
to determine statistically reliable results.
(3) Duration.--The Secretary shall conduct the demonstration
program under this section for a 3-year period.

(b) Waiver Authority.--The Secretary may waive such requirements of
titles XI and XVIII of the Social Security Act (42 U.S.C. 1301 et seq.;
42 U.S.C. 1395 et seq.) as may be necessary for the purpose of carrying
out the demonstration program under this section.
(c) Report.--Not later than 6 months after the completion of the
demonstration program under this section, the Secretary shall submit to
Congress a report on such program, that includes the results of the
program and recommendations for such legislation and administrative
action as the Secretary determines to be appropriate.
(d) Funding.--The Secretary shall provide for the transfer from the
Federal Hospital Insurance Trust Fund established under section 1817 of
the Social Security Act (42 U.S.C. 1395i), $6,000,000 for the costs of
carrying out the demonstration program under this section.

Subtitle B--Provisions Relating to Part B

CHAPTER 1--PAYMENT PROVISIONS

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

(a) DME.--
(1) In general.--Section 1834(a)(7)(A) of the Social
Security Act (42 U.S.C. 1395m(a)(7)(A)) is amended to read as
follows:
``(A)  NOTE: Applicability.  Payment.--In the case
of an item of durable medical equipment not described in
paragraphs (2) through (6), the following rules shall
apply:
``(i) Rental.--
``(I) In general.--Except as
provided in clause (iii), payment for
the item shall be made on a monthly
basis for the rental of the item during
the period of medical need (but payments
under this clause may not extend over a
period of continuous use (as determined
by the Secretary) of longer than 13
months).
``(II) Payment amount.--Subject to
subparagraph (B), the amount recognized
for the item, for each of the first 3
months of such period, is 10 percent of
the purchase price recognized under

[[Page 38]]
120 STAT. 38

paragraph (8) with respect to the item,
and, for each of the remaining months of
such period, is 7.5 percent of such
purchase price.
``(ii) Ownership after rental.--On the first
day that begins after the 13th continuous month
during which payment is made for the rental of an
item under clause (i), the supplier of the item
shall transfer title to the item to the
individual.
``(iii) Purchase agreement option for power-
driven wheelchairs.--In the case of a power-driven
wheelchair, at the time the supplier furnishes the
item, the supplier shall offer the individual the
option to purchase the item, and payment for such
item shall be made on a lump-sum basis if the
individual exercises such option.
``(iv) Maintenance and servicing.--After the
supplier transfers title to the item under clause
(ii) or in the case of a power-driven wheelchair
for which a purchase agreement has been entered
into under clause (iii), maintenance and servicing
payments shall, if the Secretary determines such
payments are reasonable and necessary, be made
(for parts and labor not covered by the supplier's
or manufacturer's warranty, as determined by the
Secretary to be appropriate for the particular
type of durable medical equipment), and such
payments shall be in an amount determined to be
appropriate by the Secretary.''.
(2)  NOTE: 42 USC 1395m note.  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

[[Page 39]]
120 STAT. 39

``(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)  NOTE: 42 USC 1395m note.  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

[[Page 40]]
120 STAT. 40

adjustment factor described in paragraph (1)(C),
exceeds
``(ii) the Medicare OPD fee schedule amount
established under the prospective payment system
for hospital outpatient department services under
paragraph (3)(D) of section 1833(t) for such
service for such year, determined without regard
to geographic adjustment under paragraph (2)(D) of
such section,
the Secretary shall substitute the amount described in
clause (ii), adjusted by the geographic adjustment
factor described in paragraph (1)(C), for the fee
schedule amount for such technical component for such
year.
``(B) Imaging services described.--For purposes of
subparagraph (A), imaging services described in this
subparagraph are imaging and computer-assisted imaging
services, including X-ray, ultrasound (including
echocardiography), nuclear medicine (including positron
emission tomography), magnetic resonance imaging,
computed tomography, and fluoroscopy, but excluding
diagnostic and screening mammography.''; and
(2) in subsection (c)(2)(B)(v), as added by subsection
(a)(3), by adding at the end the following new subclause:
``(II) OPD payment cap for imaging
services.--Effective for fee schedules
established beginning with 2007, reduced
expenditures attributable to subsection
(b)(4).''.

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

Section 1833(i)(2) of the Social Security Act (42 U.S.C.
1395l(i)(2)) is amended--
(1) in subparagraph (A), by inserting ``subject to
subparagraph (E),'' after ``subparagraph (D),'';
(2) in subparagraph (D)(ii), by inserting before the period
at the end the following: ``and taking into account reduced
expenditures that would apply if subparagraph (E) were to
continue to apply, as estimated by the Secretary''; and
(3) by adding at the end the following new subparagraph:

``(E) With respect to surgical procedures furnished on or after
January 1, 2007, and before the effective date of the implementation of
a revised payment system under subparagraph (D), if--
``(i) the standard overhead amount under subparagraph (A)
for a facility service for such procedure, without the
application of any geographic adjustment, exceeds
``(ii) the Medicare OPD fee schedule amount established
under the prospective payment system for hospital outpatient
department services under paragraph (3)(D) of section 1833(t)
for such service for such year, determined without regard to
geographic adjustment under paragraph (2)(D) of such section,

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

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

(a) Update for 2006.--Section 1848(d) of the Social Security Act (42
U.S.C. 1395w-4(d)) is amended--

[[Page 41]]
120 STAT. 41

(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)  NOTE: 42 USC 1395w-4 note.  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

[[Page 42]]
120 STAT. 42

(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.  NOTE: Deadline.  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)  NOTE: 42 USC 1395l note.  Timely implementation.--The
Secretary of Health and Human Services shall waive such
provisions of law and regulation (including those described in
section 110(c) of Public Law 108-173) as are necessary to
implement the amendments made by paragraph (1) on a timely basis
and, notwithstanding any other provision of law, may implement
such amendments by

[[Page 43]]
120 STAT. 43

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)  NOTE: Deadline. 42 USC 1395l note.  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

[[Page 44]]
120 STAT. 44

(2) by adding at the end the following new subsection:

``Ultrasound Screening for Abdominal Aortic Aneurysm

``(bbb) The term `ultrasound screening for abdominal aortic
aneurysm' means--
``(1) a procedure using sound waves (or such other
procedures using alternative technologies, of commensurate
accuracy and cost, that the Secretary may specify) provided for
the early detection of abdominal aortic aneurysm; and
``(2) includes a physician's interpretation of the results
of the procedure.''.

(b) Inclusion of Ultrasound Screening for Abdominal Aortic Aneurysm
in Initial Preventive Physical Examination.--Section 1861(ww)(2) of such
Act (42 U.S.C. 1395x(ww)(2)) is amended by adding at the end the
following new subparagraph:
``(L) Ultrasound screening for abdominal aortic aneurysm as
defined in section 1861(bbb).''.

(c) Payment for Ultrasound Screening for Abdominal Aortic
Aneurysm.--Section 1848(j)(3) of such Act (42 U.S.C. 1395w-4(j)(3)) is
amended by inserting ``(2)(AA),'' after ``(2)(W),''.
(d) Frequency.--Section 1862(a)(1) of such Act (42 U.S.C.
1395y(a)(1)) is amended--
(1) by striking ``and'' at the end of subparagraph (L);
(2) by striking the semicolon at the end of subparagraph (M)
and inserting ``, and''; and
(3) by adding at the end the following new subparagraph:
``(N) in the case of ultrasound screening for abdominal
aortic aneurysm which is performed more frequently than is
provided for under section 1861(s)(2)(AA);''.

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

(f)  NOTE: 42 USC 1395l note.  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)  NOTE: 42 USC 1395l note.  Effective Date.--The amendments
made by this section shall apply to services furnished on or after
January 1, 2007.

[[Page 45]]
120 STAT. 45

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)  NOTE: 42 USC 1395u note.  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).

[[Page 46]]
120 STAT. 46

``(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)  NOTE: 42 USC 1395p note.  Effective Date.--The amendment made
by subsection (a)(1) shall apply to months beginning with January 2007
and the amendments made by subsection (a)(2) shall take effect on
January 1, 2007.

Subtitle C--Provisions Relating to Parts A and B

SEC. 5201. HOME HEALTH PAYMENTS.

(a) 2006 Update.--Section 1895(b)(3)(B)(ii) of the Social Security
Act (42 U.S.C. 1395fff(b)(3)(B)(ii)) is amended--
(1) in subclause (III), by striking ``each of 2005 and
2006'' and inserting ``all of 2005'';
(2) by striking ``or'' at the end of subclause (III);
(3) in subclause (IV), by striking ``2007 and'' and by
redesignating such subclause as subclause (V); and
(4) by inserting after subclause (III) the following new
subclause:
``(IV) 2006, 0 percent; and''.

(b) Applying Rural Add-On Policy for 2006.--Section 421(a) of
Medicare Prescription Drug, Improvement, and Modernization Act of 2003
(Public Law 108-173; 117 Stat. 2283)  NOTE: 42 USC 1395fff note.  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

[[Page 47]]
120 STAT. 47

market basket percentage increase
applicable under such clause for such
year shall be reduced by 2 percentage
points.  NOTE: Applicability.  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)  NOTE: Procedures.  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)  NOTE: 42 USC 1395h note.  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.

[[Page 48]]
120 STAT. 48

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

SEC. 5204. MEDICARE INTEGRITY PROGRAM FUNDING.

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

Subtitle D--Provisions Relating to Part C

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

(a) In General.--Section 1853 of the Social Security Act (42 U.S.C.
1395w-23) is amended--
(1) in subsection (j)(1)--
(A) in subparagraph (A)--
(i) by inserting ``(or, beginning with 2007,
\1/12\ of the applicable amount determined under
subsection (k)(1))'' after ``1853(c)(1)''; and
(ii) by inserting ``(for years before 2007)''
after ``adjusted as appropriate'';
(B) in subparagraph (B), by inserting ``(for years
before 2007)'' after ``adjusted as appropriate''; and
(2) by adding at the end the following new subsection:

``(k) Determination of Applicable Amount for Purposes of Calculating
the Benchmark Amounts.--
``(1) Applicable amount defined.--For purposes of subsection
(j), subject to paragraph (2), the term `applicable amount'
means for an area--
``(A) for 2007--
``(i) if such year is not specified under
subsection (c)(1)(D)(ii), an amount equal to the
amount specified in subsection (c)(1)(C) for the
area for 2006--
``(I) first adjusted by the
rescaling factor for 2006 for the area
(as made available by the Secretary in
the announcement of the rates on April
4, 2005, under subsection (b)(1), but
excluding any national adjustment
factors for coding intensity and risk
adjustment budget neutrality that were
included in such factor); and

[[Page 49]]
120 STAT. 49

``(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

[[Page 50]]
120 STAT. 50

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.--

[[Page 51]]
120 STAT. 51

``(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.  NOTE: 42 USC 1395eee note.  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.

[[Page 52]]
120 STAT. 52

(6) Secretary.--The term ``Secretary'' means the Secretary
of Health and Human Services.

(b) Site Development Grants and Technical Assistance Program.--
(1) Site development grants.--
(A) In general.--The Secretary shall establish a
process and criteria to award site development grants to
qualified PACE providers that have been approved to
serve a rural area.
(B) Amount per award.--A site development grant
awarded under subparagraph (A) to any individual rural
PACE pilot site shall not exceed $750,000.
(C) Number of awards.--Not more than 15 rural PACE
pilot sites shall be awarded a site development grant
under subparagraph (A).
(D) Use of funds.--Funds made available under a site
development grant awarded under subparagraph (A) may be
used for the following expenses only to the extent such
expenses are incurred in relation to establishing or
delivering PACE program services in a rural area:
(i) Feasibility analysis and planning.
(ii) Interdisciplinary team development.
(iii) Development of a provider network,
including contract development.
(iv) Development or adaptation of claims
processing systems.
(v) Preparation of special education and
outreach efforts required for the PACE program.
(vi) Development of expense reporting required
for calculation of outlier payments or
reconciliation processes.
(vii) Development of any special quality of
care or patient satisfaction data collection
efforts.
(viii) Establishment of a working capital fund
to sustain fixed administrative, facility, or
other fixed costs until the provider reaches
sufficient enrollment size.
(ix) Startup and development costs incurred
prior to the approval of the rural PACE pilot
site's PACE provider application by CMS.
(x) Any other efforts determined by the rural
PACE pilot site to be critical to its successful
startup, as approved by the Secretary.
(E) Appropriation.--
(i) In general.--Out of funds in the Treasury
not otherwise appropriated, there are appropriated
to the Secretary to carry out this subsection for
fiscal year 2006, $7,500,000.
(ii) Availability.--Funds appropriated under
clause (i) shall remain available for expenditure
through fiscal year 2008.
(2) Technical assistance program.--The Secretary shall
establish a technical assistance program to provide--
(A) outreach and education to State agencies and
provider organizations interested in establishing PACE
programs in rural areas; and

[[Page 53]]
120 STAT. 53

(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

[[Page 54]]
120 STAT. 54

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)  NOTE: Certification.  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)  NOTE: Deadline. Reports.  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'';

[[Page 55]]
120 STAT. 55

(2) by adding at the end of subsection (e) the following new
paragraph:
``(5)  NOTE: Effective date.  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  NOTE: 42 USC 1396r-8.  is amended--
(1) in subparagraph (A)--
(A) in clause (i), by inserting ``month of a'' after
``last day of each''; and
(B)  NOTE: Effective date.  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)  NOTE: 42 USC 1396r-8 note.  Requirement to promulgate
regulation.--

[[Page 56]]
120 STAT. 56

(A)  NOTE: Deadline.  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)  NOTE: Regulations.  Deadline for
promulgation.--Not later than July 1, 2007, the
Secretary of Health and Human Services shall promulgate
a regulation that clarifies the requirements for, and
manner in which, average manufacturer prices are
determined under section 1927 of the Social Security
Act, taking into consideration the recommendations
submitted to the Secretary in accordance with
subparagraph (A)(ii).

(d) Exclusion of Sales at a Nominal Price From Determination of Best
Price.--
(1) Manufacturer reporting of sales.--Subsection
(b)(3)(A)(iii) of such section  NOTE: 42 USC 1396r-8.  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.

[[Page 57]]
120 STAT. 57

``(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)  NOTE: Deadline.  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)  NOTE: Contracts.  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:

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120 STAT. 58

``(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  NOTE: 42 USC 1396r-8,
1395x.  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)  NOTE: 42 USC 1396r-8 note.  Effective date.--The
amendments made by this subsection shall take effect on the date
of the enactment of this Act.

(g)  NOTE: 42 USC 1396r-8 note.  Effective Date.--Except as
otherwise provided, the amendments made by this section shall take
effect on January 1, 2007,

[[Page 59]]
120 STAT. 59

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)  NOTE: Deadline. Publication.  Identificati
on 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)  NOTE: Deadline.  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);

[[Page 60]]
120 STAT. 60

(2) by striking ``or'' at the end of subparagraph (B) and
inserting ``and''; and
(3) by adding at the end the following new subparagraph:
``(C) with respect to covered outpatient drugs
described in section 1927(a)(7), unless information
respecting utilization data and coding on such drugs
that is required to be submitted under such section is
submitted in accordance with such section; or''.

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

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

[[Page 61]]
120 STAT. 61

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)  NOTE: 42 USC 1396r-8 note.  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)  NOTE: 42 USC 1396r-8 note.  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

[[Page 62]]
120 STAT. 62

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)  NOTE: 42 USC 1396p note.  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)  NOTE: 42 USC 1396p note.  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

[[Page 63]]
120 STAT. 63

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)  NOTE: Notification.  In the case of disclosure
concerning an annuity under subsection (c)(1)(F), the State shall notify
the issuer of the annuity of the right of the State under such
subsection as a preferred remainder beneficiary in the annuity for
medical assistance furnished to the individual. Nothing in this
paragraph shall be construed as preventing such an issuer from notifying
persons with any other remainder interest of the State's remainder
interest under such subsection.

``(B) In the case of such an issuer receiving notice under
subparagraph (A), the State may require the issuer to notify the State
when there is a change in the amount of income or principal being
withdrawn from the amount that was being withdrawn at the time of the
most recent disclosure described in paragraph (1). A State shall take
such information into account in determining the amount of the State's
obligations for medical assistance or in the individual's eligibility
for such assistance.
``(3) The Secretary may provide guidance to States on categories of
transactions that may be treated as a transfer of asset for less than
fair market value.
``(4) Nothing in this subsection shall be construed as preventing a
State from denying eligibility for medical assistance for an individual
based on the income or resources derived from an annuity described in
paragraph (1).''.
(b) Requirement for State To Be Named as a Remainder Beneficiary.--
Section 1917(c)(1) of such Act (42 U.S.C. 1396p(c)(1)), is amended by
adding at the end the following:
``(F) For purposes of this paragraph, the purchase of an annuity
shall be treated as the disposal of an asset for less than fair market
value unless--
``(i) the State is named as the remainder beneficiary in the
first position for at least the total amount of medical
assistance paid on behalf of the annuitant under this title; or
``(ii) the State is named as such a beneficiary in the
second position after the community spouse or minor or disabled
child and is named in the first position if such spouse or a
representative of such child disposes of any such remainder for
less than fair market value.''.

(c) Inclusion of Transfers To Purchase Balloon Annuities.--Section
1917(c)(1) of such Act (42 U.S.C. 1396p(c)(1)), as amended by subsection
(b), is amended by adding at the end the following:
``(G) For purposes of this paragraph with respect to a transfer of
assets, the term `assets' includes an annuity purchased by or on behalf
of an annuitant who has applied for medical assistance

[[Page 64]]
120 STAT. 64

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)  NOTE: 42 USC 1396p note.  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)  NOTE: 42 USC 1396r-5 note.  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

[[Page 65]]
120 STAT. 65

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)  NOTE: Procedures.  The Secretary shall establish a process
whereby paragraph (1) is waived in the case of a demonstrated
hardship.''.

(b)  NOTE: 42 USC 1396p note.  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),

[[Page 66]]
120 STAT. 66

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)  NOTE: Applicability.  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:

[[Page 67]]
120 STAT. 67

``(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)  NOTE: 42 USC 1396p note.  Effective Dates.--
(1) In general.--Except as provided in paragraphs (2) and
(3), the amendments made by this section shall apply to payments
under title XIX of the Social Security Act (42 U.S.C. 1396 et
seq.) for calendar quarters beginning on or after the date of
enactment of this Act, without regard to whether or not final
regulations to carry out such amendments have been promulgated
by such date.
(2) Exceptions.--The amendments made by this section shall
not apply--
(A) to medical assistance provided for services
furnished before the date of enactment;
(B) with respect to assets disposed of on or before
the date of enactment of this Act; or
(C) with respect to trusts established on or before
the date of enactment of this Act.
(3) Extension of effective date for state law amendment.--In
the case of a State plan under title XIX of the Social Security
Act (42 U.S.C. 1396 et seq.) which the Secretary of Health and
Human Services determines requires State legislation in order
for the plan to meet the additional requirements imposed by the
amendments made by a provision of this section, the State plan
shall not be regarded as failing to comply with the requirements
of such title solely on the basis of its failure to meet these
additional requirements before the first day of the first
calendar quarter beginning after the close of the first regular
session of the State legislature that begins after the date of
the enactment of this Act. For purposes of the previous
sentence, in the case of a State that has a 2-year legislative
session, each year of the session is considered to be a separate
regular session of the State legislature.

[[Page 68]]
120 STAT. 68

Subchapter  NOTE: 42 USC 1396p note.  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)  NOTE: Reports. Notification.  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.

[[Page 69]]
120 STAT. 69

``(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  NOTE: Applicability.  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.  NOTE: Records.  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).

[[Page 70]]
120 STAT. 70

``(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

[[Page 71]]
120 STAT. 71

the State insurance commissioner for the State certifies (in a
manner satisfactory to the Secretary) that the policy meets such
requirements.

``(C)  NOTE: Deadline.  Not later than 12 months after the
National Association of Insurance Commissioners issues a revision,
update, or other modification of a model regulation or model Act
provision specified in subparagraph (A), or of any provision of such
regulation or Act that is substantively related to a provision specified
in such subparagraph, the Secretary shall review the changes made to the
provision, determine whether incorporating such changes into the
corresponding provision specified in such subparagraph would improve
qualified State long-term care insurance partnerships, and if so, shall
incorporate the changes into such provision.''.
(2) State reporting requirements.--Nothing in clauses
(iii)(VI) and (v) of section 1917(b)(1)(C) of the Social
Security Act (as added by paragraph (1)) shall be construed as
prohibiting a State from requiring an issuer of a long-term care
insurance policy sold in the State (regardless of whether the
policy is issued under a qualified State long-term care
insurance partnership under section 1917(b)(1)(C)(iii) of such
Act) to require the issuer to report information or data to the
State that is in addition to the information or data required
under such clauses.
(3) Effective date.--A State plan amendment that provides
for a qualified State long-term care insurance partnership under
the amendments made by paragraph (1) may provide that such
amendment is effective for long-term care insurance policies
issued on or after a date, specified in the amendment, that is
not earlier than the first day of the first calendar quarter in
which the plan amendment was submitted to the Secretary of
Health and Human Services.

(b) Standards for Reciprocal Recognition Among Partnership States.--
In  NOTE: Deadline.  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

[[Page 72]]
120 STAT. 72

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)  NOTE: 42 USC 1396h.  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:

[[Page 73]]
120 STAT. 73

``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)  NOTE: 42 USC 1396h note.  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)  NOTE: Procedures.  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

[[Page 74]]
120 STAT. 74

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)  NOTE: 42 USC 1396a note.  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)  NOTE: 42 USC 1396b note.  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  NOTE: 42 USC 1396v.  as
section 1937; and
(2) by inserting after section 1935 the following:


``MEDICAID INTEGRITY PROGRAM


``Sec. 1936.  NOTE: Contracts. 42 USC 1396u-6.  (a) In General.--
There is hereby established the Medicaid Integrity Program (in this
section referred to as the `Program') under which the Secretary shall
promote the integrity of the program under this title by entering into
contracts in accordance with this section with eligible entities to
carry out the activities described in subsection (b).

``(b) Activities Described.--Activities described in this subsection
are as follows:
``(1) Review of the actions of individuals or entities
furnishing items or services (whether on a fee-for-service,
risk, or other basis) for which payment may be made under a
State

[[Page 75]]
120 STAT. 75

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)  NOTE: Regulations.  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

[[Page 76]]
120 STAT. 76

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)  NOTE: Regulations.  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

[[Page 77]]
120 STAT. 77

(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)  NOTE: Contracts.  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

[[Page 78]]
120 STAT. 78

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)).  NOTE: Deadline.  Such information shall be
disseminated no less frequently than quarterly.
``(2) Limited waiver authority.--The Secretary shall waive
only such requirements of this section and of titles XI and XIX
as are necessary to carry out paragraph (1).''.
(2) Funding.--Section 1817(k)(4) of such Act (42 U.S.C.
1395i(k)(4)), as amended by section 5204 of this Act, is
amended--
(A) in subparagraph (A), by striking ``subparagraph
(B)'' and inserting ``subparagraphs (B), (C), and (D)'';
and
(B) by adding at the end the following:
``(D) Expansion of the medicare-medicaid data match
program.--The amount appropriated under subparagraph (A)
for a fiscal year is further increased as follows for
purposes of carrying out section 1893(b)(6) for the
respective fiscal year:
``(i) $12,000,000 for fiscal year 2006.
``(ii) $24,000,000 for fiscal year 2007.
``(iii) $36,000,000 for fiscal year 2008.
``(iv) $48,000,000 for fiscal year 2009.
``(v) $60,000,000 for fiscal year 2010 and
each fiscal year thereafter.''.

(e)  NOTE: 42 USC 1396a note.  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--

[[Page 79]]
120 STAT. 79

(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,

[[Page 80]]
120 STAT. 80

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)  NOTE: 42 USC 1396a note.  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

[[Page 81]]
120 STAT. 81

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)  NOTE: 42 USC 1396b note.  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)  NOTE: 42 USC 1396b note.  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.  NOTE: 42 USC 1396o-1.  (a) State Flexibility.--
``(1) In general.--Notwithstanding sections 1916 and
1902(a)(10)(B), a State, at its option and through a State plan

[[Page 82]]
120 STAT. 82

amendment, may impose premiums and cost sharing for any group of
individuals (as specified by the State) and for any type of
services (other than drugs for which cost sharing may be imposed
under subsection (c)), and may vary such premiums and cost
sharing among such groups or types, consistent with the
limitations established under this section. Nothing in this
section shall be construed as superseding (or preventing the
application of) section 1916(g).
``(2) Definitions.--In this section:
``(A) Premium.--The term `premium' includes any
enrollment fee or similar charge.
``(B) Cost sharing.--The term `cost sharing'
includes any deduction, copayment, or similar charge.

``(b) Limitations on Exercise of Authority.--
``(1) Individuals with family income between 100 and 150
percent of the poverty line.--In the case of an individual whose
family income exceeds 100 percent, but does not exceed 150
percent, of the poverty line applicable to a family of the size
involved, subject to subsections (c)(2) and (e)(2)(A)--
``(A) no premium may be imposed under the plan; and
``(B) with respect to cost sharing--
``(i) the cost sharing imposed under
subsection (a) with respect to any item or service
may not exceed 10 percent of the cost of such item
or service; and
``(ii) the total aggregate amount of cost
sharing imposed under this section (including any
cost sharing imposed under subsection (c) or (e))
for all individuals in the family may not exceed 5
percent of the family income of the family
involved, as applied on a quarterly or monthly
basis (as specified by the State).
``(2) Individuals with family income above 150 percent of
the poverty line.--In the case of an individual whose family
income exceeds 150 percent of the poverty line applicable to a
family of the size involved, subject to subsections (c)(2) and
(e)(2)(A)--
``(A) the total aggregate amount of premiums and
cost sharing imposed under this section (including any
cost sharing imposed under subsection (c) or (e)) for
all individuals in the family may not exceed 5 percent
of the family income of the family involved, as applied
on a quarterly or monthly basis (as specified by the
State); and
``(B) with respect to cost sharing, the cost sharing
imposed with respect to any item or service under
subsection (a) may not exceed 20 percent of the cost of
such item or service.
``(3) Additional limitations.--
``(A) Premiums.--No premiums shall be imposed under
this section with respect to the following:
``(i) Individuals under 18 years of age that
are required to be provided medical assistance
under section 1902(a)(10)(A)(i), and including
individuals with respect to whom aid or assistance
is made available under part B of title IV to
children in foster care and individuals with
respect to whom adoption or foster care assistance
is made available under part E of such title,
without regard to age.

[[Page 83]]
120 STAT. 83

``(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

[[Page 84]]
120 STAT. 84

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

[[Page 85]]
120 STAT. 85

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)  NOTE: 42 USC 1396o note.  Effective Date.--The amendments
made by this section shall apply to cost sharing imposed for items and
services furnished on or after March 31, 2006.

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

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

[[Page 86]]
120 STAT. 86

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)  NOTE: 42 USC 1396o-1 note.  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.--

[[Page 87]]
120 STAT. 87

``(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.''.

[[Page 88]]
120 STAT. 88

(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)  NOTE: 42 USC 1396b note.  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  NOTE: 42 USC 1396v.  and by inserting after section 1936 the
following new section:


``State flexibility in benefit packages


``Sec. 1937.  NOTE: 42 USC 1396u-7.  (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

[[Page 89]]
120 STAT. 89

1902(a)(10)(A), wrap-around benefits to the
benchmark coverage or benchmark equivalent
coverage consisting of early and periodic
screening, diagnostic, and treatment services
defined in section 1905(r).
``(B) Limitation.--The State may only exercise the
option under subparagraph (A) for an individual eligible
under an eligibility category that had been established
under the State plan on or before the date of the
enactment of this section.
``(C) Option of wrap-around benefits.--In the case
of coverage described in subparagraph (A), a State, at
its option, may provide such wrap-around or additional
benefits as the State may specify.
``(D) Treatment as medical assistance.--Payment of
premiums for such coverage under this subsection shall
be treated as payment of other insurance premiums
described in the third sentence of section 1905(a).
``(2) Application.--
``(A) In general.--Except as provided in
subparagraph (B), a State may require that a full-
benefit eligible individual (as defined in subparagraph
(C)) within a group obtain benefits under this title
through enrollment in coverage described in paragraph
(1)(A). A State may apply the previous sentence to
individuals within 1 or more groups of such individuals.
``(B) Limitation on application.--A State may not
require under subparagraph (A) an individual to obtain
benefits through enrollment described in paragraph
(1)(A) if the individual is within one of the following
categories of individuals:
``(i) Mandatory pregnant women.--The
individual is a pregnant woman who is required to
be covered under the State plan under section
1902(a)(10)(A)(i).
``(ii) Blind or disabled individuals.--The
individual qualifies for medical assistance under
the State plan on the basis of being blind or
disabled (or being treated as being blind or
disabled) without regard to whether the individual
is eligible for supplemental security income
benefits under title XVI on the basis of being
blind or disabled and including an individual who
is eligible for medical assistance on the basis of
section 1902(e)(3).
``(iii) Dual eligibles.--The individual is
entitled to benefits under any part of title
XVIII.
``(iv) Terminally ill hospice patients.--The
individual is terminally ill and is receiving
benefits for hospice care under this title.
``(v) Eligible on basis of
institutionalization.--The individual is an
inpatient in a hospital, nursing facility,
intermediate care facility for the mentally
retarded, or other medical institution, and is
required, as a condition of receiving services in
such institution under the State plan, to spend
for costs of medical care all but a minimal amount
of the individual's income required for personal
needs.

[[Page 90]]
120 STAT. 90

``(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.--

[[Page 91]]
120 STAT. 91

``(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--

[[Page 92]]
120 STAT. 92

``(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)  NOTE: 42 USC 1396u-7 note.  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)  NOTE: 42 USC 1396b note.  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

[[Page 93]]
120 STAT. 93

of a Medicaid managed care organization with a contract
under section 1903(m) of the Social Security Act as of
December 8, 2005.

(c) Clarification Regarding Non-Regulation of Transfers.--
(1) In general.--Nothing in section 1903(w) of the Social
Security Act (42 U.S.C. 1396b(w)) shall be construed by the
Secretary of Health and Human Services as prohibiting a State's
use of funds as the non-Federal share of expenditures under
title XIX of such Act where such funds are transferred from or
certified by a publicly-owned regional medical center located in
another State and described in paragraph (2), so long as the
Secretary determines that such use of funds is proper and in the
interest of the program under title XIX.
(2) Center described.--A center described in this paragraph
is a publicly-owned regional medical center that--
(A) provides level 1 trauma and burn care services;
(B) provides level 3 neonatal care services;
(C) is obligated to serve all patients, regardless
of State of origin;
(D) is located within a Standard Metropolitan
Statistical Area (SMSA) that includes at least 3 States,
including the States described in paragraph (1);
(E) serves as a tertiary care provider for patients
residing within a 125-mile radius; and
(F) meets the criteria for a disproportionate share
hospital under section 1923 of such Act in at least one
State other than the one in which the center is located.
(3) Effective period.--This subsection shall apply through
December 31, 2006.

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

(a) In General.--Section 1915(g) of the Social Security Act (42
U.S.C. 1396n(g)(2)) is amended by striking paragraph (2) and inserting
the following:
``(2) For purposes of this subsection:
``(A)(i) The term `case management services' means services
which will assist individuals eligible under the plan in gaining
access to needed medical, social, educational, and other
services.
``(ii) Such term includes the following:
``(I) Assessment of an eligible individual to
determine service needs, including activities that focus
on needs identification, to determine the need for any
medical, educational, social, or other services. Such
assessment activities include the following:
``(aa) Taking client history.
``(bb) Identifying the needs of the
individual, and completing related documentation.
``(cc) Gathering information from other
sources such as family members, medical providers,
social workers, and educators, if necessary, to
form a complete assessment of the eligible
individual.
``(II) Development of a specific care plan based on
the information collected through an assessment, that
specifies

[[Page 94]]
120 STAT. 94

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--

[[Page 95]]
120 STAT. 95

``(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)  NOTE: 42 USC 1396n note.  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.  NOTE: Public
comment.  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)  NOTE: 42 USC 1396n note.  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.

[[Page 96]]
120 STAT. 96

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)  NOTE: 42 USC 1396r-4 note.  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  NOTE: Family Opportunity Act of
2005. 42 USC 1305 note.  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);

[[Page 97]]
120 STAT. 97

(ii) by adding ``or'' at the end of subclause
(XVIII); and
(iii) by adding at the end the following new
subclause:
``(XIX) who are disabled children
described in subsection (cc)(1);''; and
(B) by adding at the end the following new
subsection:

``(cc)(1) Individuals described in this paragraph are individuals--
``(A) who are children who have not attained 19 years of age
and are born--
``(i) on or after January 1, 2001 (or, at the option
of a State, on or after an earlier date), in the case of
the second, third, and fourth quarters of fiscal year
2007;
``(ii) on or after October 1, 1995 (or, at the
option of a State, on or after an earlier date), in the
case of each quarter of fiscal year 2008; and
``(iii) after October 1, 1989, in the case of each
quarter of fiscal year 2009 and each quarter of any
fiscal year thereafter;
``(B) who would be considered disabled under section
1614(a)(3)(C) (as determined under title XVI for children but
without regard to any income or asset eligibility requirements
that apply under such title with respect to children); and
``(C) whose family income does not exceed such income level
as the State establishes and does not exceed--
``(i) 300 percent of the poverty line (as defined in
section 2110(c)(5)) applicable to a family of the size
involved; or
``(ii) such higher percent of such poverty line as a
State may establish, except that--
``(I) any medical assistance provided to an
individual whose family income exceeds 300 percent
of such poverty line may only be provided with
State funds; and
``(II) no Federal financial participation
shall be provided under section 1903(a) for any
medical assistance provided to such an
individual.''.
(2) Interaction with employer-sponsored family coverage.--
Section 1902(cc) of such Act (42 U.S.C. 1396a(cc)), as added by
paragraph (1)(B), is amended by adding at the end the following
new paragraph:

``(2)(A) If an employer of a parent of an individual described in
paragraph (1) offers family coverage under a group health plan (as
defined in section 2791(a) of the Public Health Service Act), the State
shall--
``(i) notwithstanding section 1906, require such parent to
apply for, enroll in, and pay premiums for such coverage as a
condition of such parent's child being or remaining eligible for
medical assistance under subsection (a)(10)(A)(ii)(XIX) if the
parent is determined eligible for such coverage and the employer
contributes at least 50 percent of the total cost of annual
premiums for such coverage; and
``(ii) if such coverage is obtained--
``(I) subject to paragraph (2) of section 1916(h),
reduce the premium imposed by the State under that
section in

[[Page 98]]
120 STAT. 98

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

[[Page 99]]
120 STAT. 99

term excludes any child eligible for medical assistance only by reason
of section 1902(a)(10)(A)(ii)(XIX).''.
(d)  NOTE: 42 USC 1396a note.  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.  NOTE: 42 USC 1396a note.  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

[[Page 100]]
120 STAT. 100

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)  NOTE: Grants. Contracts.  For the purpose of enabling
the Secretary (through grants, contracts, or otherwise) to provide for
special projects of regional and national significance for the
development and support

[[Page 101]]
120 STAT. 101

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)  NOTE: Applicability.  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'';

[[Page 102]]
120 STAT. 102

(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)  NOTE: 42 USC 1396a note.  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.  NOTE: Grants. 42 USC 1396a note.  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--

[[Page 103]]
120 STAT. 103

(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

[[Page 104]]
120 STAT. 104

care services for an eligible individual, such services for the
individual which are planned and purchased under the direction
and control of such individual or the individual's authorized
representative (as defined by the Secretary), including the
amount, duration, scope, provider, and location of such
services, under the State Medicaid program consistent with the
following requirements:
(A) Assessment.--There is an assessment of the
needs, capabilities, and preferences of the individual
with respect to such services.
(B) Service plan.--Based on such assessment, there
is developed jointly with such individual or the
individual's authorized representative a plan for such
services for such individual that is approved by the
State and that--
(i) specifies those services, if any, which
the individual or the individual's authorized
representative would be responsible for directing;
(ii) identifies the methods by which the
individual or the individual's authorized
representative or an agency designated by an
individual or representative will select, manage,
and dismiss providers of such services;
(iii) specifies the role of family members and
others whose participation is sought by the
individual or the individual's authorized
representative with respect to such services;
(iv) is developed through a person-centered
process that--
(I) is directed by the individual or
the individual's authorized
representative;
(II) builds upon the individual's
capacity to engage in activities that
promote community life and that respects
the individual's preferences, choices,
and abilities; and
(III) involves families, friends,
and professionals as desired or required
by the individual or the individual's
authorized representative;
(v) includes appropriate risk management
techniques that recognize the roles and sharing of
responsibilities in obtaining services in a self-
directed manner and assure the appropriateness of
such plan based upon the resources and
capabilities of the individual or the individual's
authorized representative; and
(vi) may include an individualized budget
which identifies the dollar value of the services
and supports under the control and direction of
the individual or the individual's authorized
representative.
(C) Budget process.--With respect to individualized
budgets described in subparagraph (B)(vi), the State
application under subsection (c)--
(i) describes the method for calculating the
dollar values in such budgets based on reliable
costs and service utilization;
(ii) defines a process for making adjustments
in such dollar values to reflect changes in
individual assessments and service plans; and

[[Page 105]]
120 STAT. 105

(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

[[Page 106]]
120 STAT. 106

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

[[Page 107]]
120 STAT. 107

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

[[Page 108]]
120 STAT. 108

(B) the State will participate in and cooperate with
the evaluation of the MFP demonstration project.

(d) Secretary's Award of Competitive Grants.--
(1) In general.--The Secretary shall award grants under this
section on a competitive basis to States selected from among
those with applications meeting the requirements of subsection
(c), in accordance with the provisions of this subsection.
(2) Selection and modification of state applications.--In
selecting State applications for the awarding of such a grant,
the Secretary--
(A) shall take into consideration the manner in
which, and extent to which, the State proposes to
achieve the objectives specified in subsection (a);
(B) shall seek to achieve an appropriate national
balance in the numbers of eligible individuals, within
different target groups of eligible individuals, who are
assisted to transition to qualified residences under MFP
demonstration projects, and in the geographic
distribution of States operating MFP demonstration
projects;
(C) shall give preference to State applications
proposing--
(i) to provide transition assistance to
eligible individuals within multiple target
groups; and
(ii) to provide eligible individuals with the
opportunity to receive home and community-based
long-term care services as self-directed services,
as defined in subsection (b)(8); and
(D) shall take such objectives into consideration in
setting the annual amounts of State grant awards under
this section.
(3) Waiver authority.--The Secretary is authorized to waive
the following provisions of title XIX of the Social Security
Act, to the extent necessary to enable a State initiative to
meet the requirements and accomplish the purposes of this
section:
(A) Statewideness.--Section 1902(a)(1), in order to
permit implementation of a State initiative in a
selected area or areas of the State.
(B) Comparability.--Section 1902(a)(10)(B), in order
to permit a State initiative to assist a selected
category or categories of individuals described in
subsection (b)(2)(A).
(C) Income and resources eligibility.--Section
1902(a)(10)(C)(i)(III), in order to permit a State to
apply institutional eligibility rules to individuals
transitioning to community-based care.
(D) Provider agreements.--Section 1902(a)(27), in
order to permit a State to implement self-directed
services in a cost-effective manner.
(4) Conditional approval of outyear grant.--In awarding
grants under this section, the Secretary shall condition the
grant for the second and any subsequent fiscal years of the
grant period on the following:
(A) Numerical benchmarks.--The State must
demonstrate to the satisfaction of the Secretary that it
is meeting numerical benchmarks specified in the grant
agreement for--

[[Page 109]]
120 STAT. 109

(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.--

[[Page 110]]
120 STAT. 110

(1)  NOTE: Contracts.  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)  NOTE: Contracts.  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.

[[Page 111]]
120 STAT. 111

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.--

[[Page 112]]
120 STAT. 112

``(A) Limitation on funds.--The total amount of
payments under this subsection shall be equal to, and
shall not exceed--
``(i) $75,000,000 for fiscal year 2007; and
``(ii) $75,000,000 for fiscal year 2008.
This subsection constitutes budget authority in advance
of appropriations Acts and represents the obligation of
the Secretary to provide for the payment of amounts
provided under this subsection.
``(B) Allocation of funds.--The Secretary shall
specify a method for allocating the funds made available
under this subsection among States. Such method shall
provide preference for States that design programs that
target health providers that treat significant numbers
of Medicaid beneficiaries. Such method shall provide
that not less than 25 percent of such funds shall be
allocated among States the population of which (as
determined according to data collected by the United
States Census Bureau) as of July 1, 2004, was more than
105 percent of the population of the respective State
(as so determined) as of April 1, 2000.
``(C) Form and manner of payment.--Payment to a
State under this subsection shall be made in the same
manner as other payments under section 1903(a). There is
no requirement for State matching funds to receive
payments under this subsection.
``(5) Medication risk management program.--
``(A) In general.--For purposes of this subsection,
the term `medication risk management program' means a
program for targeted beneficiaries that ensures that
covered outpatient drugs are appropriately used to
optimize therapeutic outcomes through improved
medication use and to reduce the risk of adverse events.
``(B) Elements.--Such program may include the
following elements:
``(i) The use of established principles and
standards for drug utilization review and best
practices to analyze prescription drug claims of
targeted beneficiaries and identify outlier
physicians.
``(ii) On an ongoing basis provide outlier
physicians--
``(I) a comprehensive pharmacy
claims history for each targeted
beneficiary under their care;
``(II) information regarding the
frequency and cost of relapses and
hospitalizations of targeted
beneficiaries under the physician's
care; and
``(III) applicable best practice
guidelines and empirical references.
``(iii) Monitor outlier physician's
prescribing, such as failure to refill, dosage
strengths, and provide incentives and information
to encourage the adoption of best clinical
practices.
``(C) Targeted beneficiaries.--For purposes of this
paragraph, the term `targeted beneficiaries' means
Medicaid eligible beneficiaries who are identified as
having high prescription drug costs and medical costs,
such as

[[Page 113]]
120 STAT. 113

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  NOTE: 42 USC 1396v.  as
section 1939; and
(2) by inserting after section 1937 the following new
section:


``health opportunity accounts


``Sec. 1938.  NOTE: 42 USC 1396u-8.  (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)  NOTE: Effective date.  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:

[[Page 114]]
120 STAT. 114

``(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

[[Page 115]]
120 STAT. 115

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

[[Page 116]]
120 STAT. 116

be applicable to such services furnished by a
participating provider under this title if the
deductible described in paragraph (1)(A) was not
applicable.
``(B) Treatment under medicaid managed care plans.--
In the case of an individual who is participating in a
State demonstration program and is enrolled with a
Medicaid managed care organization, the State shall
enter into an arrangement with the organization under
which the individual may obtain demonstration program
Medicaid services from any provider described in clause
(ii) of subparagraph (A) at payment rates that do not
exceed the payment rates that may be imposed under that
clause.
``(C) Computation.--The payment rates described in
subparagraphs (A) and (B) shall be computed without
regard to any cost sharing that would be otherwise
applicable under sections 1916 and 1916A.
``(D) Definitions.--For purposes of this paragraph:
``(i) The term `demonstration program Medicaid
services' means, with respect to an individual
participating in a State demonstration program,
services for which the individual would be
provided medical assistance under this title but
for the application of the deductible described in
paragraph (1)(A).
``(ii) The term `participating provider'
means--
``(I) with respect to an individual
described in subparagraph (A), a health
care provider that has entered into a
participation agreement with the State
for the provision of services to
individuals entitled to benefits under
the State plan; or
``(II) with respect to an individual
described in subparagraph (B) who is
enrolled in a Medicaid managed care
organization, a health care provider
that has entered into an arrangement for
the provision of services to enrollees
of the organization under this title.
``(4) No effect on subsequent benefits.--Except as provided
under paragraphs (1) and (2), alternative benefits for an
eligible individual shall consist of the benefits otherwise
provided to the individual, including cost sharing relating to
such benefits.
``(5) Overriding cost sharing and comparability requirements
for alternative benefits.--The provisions of this title relating
to cost sharing for benefits (including sections 1916 and 1916A)
shall not apply with respect to benefits to which the annual
deductible under paragraph (1)(A) applies. The provisions of
section 1902(a)(10)(B) (relating to comparability) shall not
apply with respect to the provision of alternative benefits (as
described in this subsection).
``(6) Treatment as medical assistance.--Subject to
subparagraphs (D) and (E) of subsection (d)(2), payments for
alternative benefits under this section (including contributions
into a health opportunity account) shall be treated as medical
assistance for purposes of section 1903(a).
``(7) Use of tiered deductible and cost sharing.--
``(A) In general.--A State--

[[Page 117]]
120 STAT. 117

``(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

[[Page 118]]
120 STAT. 118

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

[[Page 119]]
120 STAT. 119

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-

[[Page 120]]
120 STAT. 120

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

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

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

[[Page 121]]
120 STAT. 121

on physician referrals under section 1877 and such
other prohibitions and requirements as the
Secretary determines to be appropriate).''.

(b)  NOTE: 42 USC 1396a note.  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  NOTE: Effective date.  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)  NOTE: 42 USC 1396u-2 note.  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

[[Page 122]]
120 STAT. 122

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

[[Page 123]]
120 STAT. 123

exceeds the projected enrollment submitted for
purposes of subparagraph (C), but only if--
``(I)  NOTE: Notice.  the State
provides at least 60 days notice to the
Secretary and the public of the proposed
modification;
``(II) the State deems an individual
receiving home and community-based
services on the basis of the most recent
version of the criteria in effect prior
to the effective date of the
modification to be eligible for such
services for a period of at least 12
months beginning on the date the
individual first received medical
assistance for such services; and
``(III) after the effective date of
such modification, the State, at a
minimum, applies the criteria for
determining whether an individual
requires the level of care provided in a
hospital, a nursing facility, or an
intermediate care facility for the
mentally retarded under the State plan
or under any waiver of such plan which
applied prior to the application of the
more stringent criteria developed under
subparagraph (B).
``(E) Independent evaluation and assessment.--
``(i) Eligibility determination.--The State
uses an independent evaluation for making the
determinations described in subparagraphs (A) and
(B).
``(ii) Assessment.--In the case of an
individual who is determined to be eligible for
home and community-based services, the State uses
an independent assessment, based on the needs of
the individual to--
``(I) determine a necessary level of
services and supports to be provided,
consistent with an individual's physical
and mental capacity;
``(II) prevent the provision of
unnecessary or inappropriate care; and
``(III) establish an individualized
care plan for the individual in
accordance with subparagraph (G).
``(F) Assessment.--The independent assessment
required under subparagraph (E)(ii) shall include the
following:
``(i) An objective evaluation of an
individual's inability to perform 2 or more
activities of daily living (as defined in section
7702B(c)(2)(B) of the Internal Revenue Code of
1986) or the need for significant assistance to
perform such activities.
``(ii) A face-to-face evaluation of the
individual by an individual trained in the
assessment and evaluation of individuals whose
physical or mental conditions trigger a potential
need for home and community-based services.
``(iii) Where appropriate, consultation with
the individual's family, spouse, guardian, or
other responsible individual.
``(iv) Consultation with appropriate treating
and consulting health and support professionals
caring for the individual.

[[Page 124]]
120 STAT. 124

``(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:

[[Page 125]]
120 STAT. 125

``(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

[[Page 126]]
120 STAT. 126


``(cc)  NOTE: Procedure.  provi
des 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-

[[Page 127]]
120 STAT. 127

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)  NOTE: 42 USC 1396n note.  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)  NOTE: Public information.  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)  NOTE: 42 USC 1396n note.  Effective Date.--The amendments
made by subsections (a) and (b) take effect on January 1, 2007, and
apply to expenditures for medical assistance for home and community-
based services provided in accordance with section 1915(i) of the Social
Security Act (as added by subsections (a) and (b)) on or after that
date.

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

(a) Exemption From Certain Requirements.--Section 1915 of the Social
Security Act (42 U.S.C. 1396n), as amended by section 6086(a), is
amended by adding at the end the following new subsection:
``(j)(1) A State may provide, as `medical assistance', payment for
part or all of the cost of self-directed personal assistance services
(other than room and board) under the plan which are provided pursuant
to a written plan of care to individuals with respect to whom there has
been a determination that, but for the provision of such services, the
individuals would require and receive personal care services under the
plan, or home and community-based services provided pursuant to a waiver
under subsection (c). Self-directed personal assistance services may not
be provided under this subsection to individuals who reside in a home or
property that is

[[Page 128]]
120 STAT. 128

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)  NOTE: Reports.  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.  NOTE: Deadline.  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

[[Page 129]]
120 STAT. 129

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

[[Page 130]]
120 STAT. 130

entity shall be at the administrative rate established in section
1903(a).''.
(b)  NOTE: 42 USC 1396n note.  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

[[Page 131]]
120 STAT. 131

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)  NOTE: 42 USC 1397dd note.  Effective Date.--The amendments
made by this section apply to items and services furnished on or after
October 1, 2005, without regard to whether or not regulations
implementing such amendments have been issued.

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

(a) Prohibition on Use of SCHIP Funds.--Section 2107 of the Social
Security Act (42 U.S.C. 1397gg) is amended by adding at the end the
following:
``(f) Limitation of Waiver Authority.--Notwithstanding subsection
(e)(2)(A) and section 1115(a), the Secretary may not approve a waiver,
experimental, pilot, or demonstration project that would allow funds
made available under this title to be used to provide child health
assistance or other health benefits coverage to a nonpregnant childless
adult. For purposes of the preceding sentence, a caretaker relative (as
such term is defined for purposes of carrying out section 1931) shall
not be considered a childless adult.''.
(b) Conforming Amendments.--Section 2105(c)(1) of such Act (42
U.S.C. 1397ee(c)(1)) is amended--
(1) by inserting ``and may not include coverage of a
nonpregnant childless adult'' after ``section 2101)''; and
(2) by adding at the end the following: ``For purposes of
the preceding sentence, a caretaker relative (as such term is
defined for purposes of carrying out section 1931) shall not be
considered a childless adult.''.

(c)  NOTE: 42 USC 1397gg note.  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

[[Page 132]]
120 STAT. 132

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)  NOTE: 42 USC 1397gg note.  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)  NOTE: 42 USC 1397ee note.  Effective Date.--The amendment
made by subsection (a) shall apply to expenditures made under title XIX
of the Social Security Act (42 U.S.C. 1396 et seq.) on or after October
1, 2005.

Subtitle C--Katrina Relief

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

(a) In General.--The Secretary of Health and Human Services shall
pay to each eligible State, from amounts appropriated pursuant to
subsection (e), amounts for the following purposes:
(1) Under the authority of an approved Multi-State Section
1115 Demonstration Project (in this section referred to as a
``section 1115 project'')--
(A) with respect to evacuees receiving health care
under such project, for the non-Federal share of
expenditures:
(i) for medical assistance furnished under
title XIX of the Social Security Act, and
(ii) for child health assistance furnished
under title XXI of such Act;
(B) with respect to evacuees who do not have other
coverage for such assistance through insurance,
including (but not limited to) private insurance, under
title XIX or title XXI of the Social Security Act, or
under State-funded health insurance programs, for the
total uncompensated care costs incurred for medically
necessary services and supplies or premium assistance
for such persons, and for those evacuees receiving
medical assistance under the project for the total
uncompensated care costs incurred for medically
necessary services and supplies beyond those included as
medical assistance or child health assistance under the
State's approved plan under title XIX or title XXI of
the Social Security Act;
(C) with respect to affected individuals receiving
health care under such project for the non-Federal share
of the following expenditures:
(i) for medical assistance furnished under
title XIX of the Social Security Act, and
(ii) for child health assistance furnished
under title XXI of such Act; and

[[Page 133]]
120 STAT. 133

(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.

[[Page 134]]
120 STAT. 134

(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)  NOTE: Appropriation authorization.  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)  NOTE: Effective date. Applicability.  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.

[[Page 135]]
120 STAT. 135

TITLE VII--HUMAN RESOURCES AND OTHER PROVISIONS

SEC. 7001. REFERENCES.

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

Subtitle A--TANF

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

(a) In General.--Activities authorized by part A of title IV and
section 1108(b) of the Social Security Act (adjusted, as applicable, by
or under this subtitle, the amendments made by this subtitle, and the
TANF Emergency Response and Recovery Act of 2005) shall continue through
September 30, 2010, in the manner authorized for fiscal year 2004, and
out of any money in the Treasury of the United States not otherwise
appropriated, there are hereby appropriated such sums as may be
necessary for such purpose. Grants and payments may be made pursuant to
this authority on a quarterly basis through fiscal year 2010 at the
level provided for such activities for the corresponding quarter of
fiscal year 2004 (or, as applicable, at such greater level as may result
from the application of this subtitle, the amendments made by this
subtitle, and the TANF Emergency Response and Recovery Act of 2005),
except that in the case of section 403(a)(3) of the Social Security Act,
grants and payments may be made pursuant to this authority only through
fiscal year 2008 and in the case of section 403(a)(4) of the Social
Security Act, no grants shall be made for any fiscal year occurring
after fiscal year 2005.
(b) Conforming Amendments.--Part A of title IV (42 U.S.C. 601 et
seq.) is amended--
(1) in section 403(a)(3)(H)(ii),  NOTE: 42 USC 603.  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  NOTE: 42 USC 609.  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.

[[Page 136]]
120 STAT. 136

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)  NOTE: Deadline.  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;

[[Page 137]]
120 STAT. 137

``(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  NOTE: Public
comment.  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  NOTE: Deadline.  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)  NOTE: 42 USC 607 note.  Effective Date.--The amendments made
by subsections (a) and (b) shall take effect on October 1, 2006.

[[Page 138]]
120 STAT. 138

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

(a) Healthy Marriage and Family Funds.--Section 403(a)(2) (42 U.S.C.
603(a)(2)) is amended to read as follows:
``(2) Healthy marriage promotion and responsible fatherhood
grants.--
``(A) In general.--
``(i) Use of funds.--Subject to subparagraphs
(B) and (C), the Secretary may use the funds made
available under subparagraph (D) for the purpose
of conducting and supporting research and
demonstration projects by public or private
entities, and providing technical assistance to
States, Indian tribes and tribal organizations,
and such other entities as the Secretary may
specify that are receiving a grant under another
provision of this part.
``(ii) Limitations.--The Secretary may not
award funds made available under this paragraph on
a noncompetitive basis, and may not provide any
such funds to an entity for the purpose of
carrying out healthy marriage promotion activities
or for the purpose of carrying out activities
promoting responsible fatherhood unless the entity
has submitted to the Secretary an application
which--
``(I) describes--
``(aa) how the programs or
activities proposed in the
application will address, as
appropriate, issues of domestic
violence; and
``(bb) what the applicant
will do, to the extent relevant,
to ensure that participation in
the programs or activities is
voluntary, and to inform
potential participants that
their participation is
voluntary; and
``(II) contains a commitment by the
entity--
``(aa) to not use the funds
for any other purpose; and
``(bb) to consult with
experts in domestic violence or
relevant community domestic
violence coalitions in
developing the programs and
activities.
``(iii) Healthy marriage promotion
activities.--In clause (ii), the term `healthy
marriage promotion activities' means the
following:
``(I) Public advertising campaigns
on the value of marriage and the skills
needed to increase marital stability and
health.
``(II) Education in high schools on
the value of marriage, relationship
skills, and budgeting.
``(III) Marriage education, marriage
skills, and relationship skills
programs, that may include parenting
skills, financial management, conflict
resolution, and job and career
advancement, for non-married pregnant
women and non-married expectant fathers.
``(IV) Pre-marital education and
marriage skills training for engaged
couples and for couples or individuals
interested in marriage.

[[Page 139]]
120 STAT. 139

``(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

[[Page 140]]
120 STAT. 140

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).''.

[[Page 141]]
120 STAT. 141

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--

[[Page 142]]
120 STAT. 142

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

[[Page 143]]
120 STAT. 143

``(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)  NOTE: 42 USC 657 note.  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.

[[Page 144]]
120 STAT. 144

``(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 assign- ments.--
``(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  NOTE: 26 USC 6402.  (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)  NOTE: 42 USC 608 note.  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)--

[[Page 145]]
120 STAT. 145

(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)  NOTE: 42 USC 664 note.  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)  NOTE: 42 USC 666 note.  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)  NOTE: 42 USC 652 note.  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

[[Page 146]]
120 STAT. 146

``(B) furnish information resulting from the data
matches to the State agencies responsible for collecting
child support from the individuals.
``(2) Liability.--An insurer (including any agent of an
insurer) shall not be liable under any Federal or State law to
any person for any disclosure provided for under this
subsection, or for any other action taken in good faith in
accordance with this subsection.''.

(b) State Reimbursement of Federal Costs.--Section 453(k)(3) (42
U.S.C. 653(k)(3)) is amended by inserting ``or section 452(l)'' after
``pursuant to this section''.

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

(a) State Agencies Required To Seek Medical Support From Either
Parent.--
(1) In general.--Section 466(a)(19)(A) (42 U.S.C.
666(a)(19)(A)) is amended by striking ``which include a
provision for the health care coverage of the child are
enforced'' and inserting ``shall include a provision for medical
support for the child to be provided by either or both parents,
and shall be enforced''.
(2) Conforming amendments.--
(A) Title iv-d.--
(i) Section 452(f) (42 U.S.C. 652(f)) is
amended by striking ``include medical support as
part of any child support order and enforce
medical support'' and inserting ``enforce medical
support included as part of a child support
order''.
(ii) Section 466(a)(19) (42 U.S.C.
666(a)(19)), as amended by paragraph (1) of this
subsection, is amended--
(I) in subparagraph (A)--
(aa) by striking ``section
401(e)(3)(C)'' and inserting
``section 401(e)''; and
(bb) by striking ``section
401(f)(5)(C)'' and inserting
``section 401(f)'';
(II) in subparagraph (B)--
(aa) by striking
``noncustodial'' each place it
appears; and
(bb) in clause (iii), by
striking ``section 466(b)'' and
inserting ``subsection (b)'';
and
(III) in subparagraph (C), by
striking ``noncustodial'' each place it
appears and inserting ``obligated''.
(B) State or local governmental group health
plans.--Section 401(e)(2) of the Child Support
Performance and Incentive Act of 1998 (29 U.S.C. 1169
note) is amended, in the matter preceding subparagraph
(A), by striking ``who is a noncustodial parent of the
child''.
(C) Church plans.--Section 401(f)(5)(C) of the Child
Support Performance and Incentive Act of 1998 (29 U.S.C.
1169 note) is amended by striking ``noncustodial'' each
place it appears.

(b) Enforcement of Medical Support Requirements.--Section 452(f) (42
U.S.C. 652(f)), as amended by subsection (a)(2)(A)(i),

[[Page 147]]
120 STAT. 147

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)  NOTE: 42 USC 655 note.  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)  NOTE: 42 USC 655 note.  Effective Date.--The amendment made
by subsection (a) shall take effect on October 1, 2007.

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

(a) In General.--Section 454(6)(B) (42 U.S.C. 654(6)(B)) is
amended--
(1) by inserting ``(i)'' after ``(B)'';
(2) by redesignating clauses (i) and (ii) as subclauses (I)
and (II), respectively;
(3) by adding ``and'' after the semicolon; and
(4) by adding after and below the end the following new
clause:
``(ii) in the case of an individual who has never
received assistance under a State program funded under
part A and for whom the State has collected at least
$500 of support, the State shall impose an annual fee of
$25 for each case in which services are furnished, which
shall be retained by the State from support collected on
behalf of the individual (but not from the first $500 so
collected), paid by the individual applying for the
services, recovered from the absent parent, or paid by
the State out of its own funds (the payment of which
from State funds shall not be considered as an
administrative cost of the State for the operation of
the plan, and the fees shall be considered income to the
program);''.

(b) Conforming Amendments.--Section 457(a)(3) (42 U.S.C. 657(a)(3))
is amended to read as follows:
``(3) Families that never received assistance.--In the case
of any other family, the State shall distribute to the

[[Page 148]]
120 STAT. 148

family the portion of the amount so collected that remains after
withholding any fee pursuant to section 454(6)(B)(ii).''.

(c)  NOTE: 42 USC 654 note.  Effective Date.--The amendments made
by this section shall take effect on October 1, 2006.

SEC. 7311.  NOTE: 42 USC 654 note.  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

[[Page 149]]
120 STAT. 149

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)  NOTE: Grants.  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)  NOTE: 42 USC 629h.  (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

[[Page 150]]
120 STAT. 150

to in subparagraph (B) or (C) of subsection (b)(2) is
the amount that bears the same ratio to the amount made
available under subsection (e) for such a grant (reduced
by the dollar amount specified in subparagraph (A) of
this paragraph) as the number of individuals in the
State who have not attained 21 years of age bears to the
total number of such individuals in all States the
highest State courts of which have approved applications
under subsection (b) for such a grant.''.
(4) Funding.--Section 438 (42 U.S.C. 629h) is amended by
adding at the end the following:

``(e) Funding for Grants for Improved Data Collection and
Training.--Out of any money in the Treasury of the United States not
otherwise appropriated, there are appropriated to the Secretary, for
each of fiscal years 2006 through 2010--
``(1) $10,000,000 for grants referred to in subsection
(b)(2)(B); and
``(2) $10,000,000 for grants referred to in subsection
(b)(2)(C).''.

(b) Requirement To Demonstrate Meaningful Collaboration Between
Courts and Agencies in Child Welfare Services Programs.--Section 422(b)
(42 U.S.C. 622(b)) is amended--
(1) by striking ``and'' at the end of paragraph (13);
(2) by striking the period at the end of paragraph (14) and
inserting ``; and''; and
(3) by adding at the end the following:
``(15) demonstrate substantial, ongoing, and meaningful
collaboration with State courts in the development and
implementation of the State plan under subpart 1, the State plan
approved under subpart 2, and the State plan approved under part
E, and in the development and implementation of any program
improvement plan required under section 1123A.''.

(c) Use of Child Welfare Records in State Court Proceedings.--
Section 471 (42 U.S.C. 671) is amended--
(1) in subsection (a)(8), by inserting ``subject to
subsection (c),'' after ``(8)''; and
(2) by adding at the end the following:

``(c) Use of Child Welfare Records in State Court Proceedings.--
Subsection (a)(8) shall not be construed to limit the flexibility of a
State in determining State policies relating to public access to court
proceedings to determine child abuse and neglect or other court hearings
held pursuant to part B or this part, except that such policies shall,
at a minimum, ensure the safety and well-being of the child, parents,
and family.''.

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

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

[[Page 151]]
120 STAT. 151

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

[[Page 152]]
120 STAT. 152

``(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

[[Page 153]]
120 STAT. 153

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)  NOTE: Applicability.  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.''.

[[Page 154]]
120 STAT. 154

Subtitle E--Supplemental Security Income

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

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

``(B) In carrying out subparagraph (A), the Commissioner of Social
Security shall, to the extent feasible, select for review the
determinations which the Commissioner of Social Security identifies as
being the most likely to be incorrect.''.

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

(a) In General.--Section 1631(a)(10)(A)(i) (42 U.S.C.
1383(a)(10)(A)(i)) is amended by striking ``12'' and inserting ``3''.
(b)  NOTE: 42 USC 1383 note.  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)  NOTE: Effective date.  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)  NOTE: 19 USC 1675c note.  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).

[[Page 155]]
120 STAT. 155

Subtitle G--Effective Date

SEC. 7701.  NOTE: 42 USC 603 note.  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  NOTE: Higher Education Reconciliation Act of 2005.  A--
Higher Education Provisions

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

(a)  NOTE: 20 USC 1001 note.  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)  NOTE: 20 USC 1002 note.  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.  NOTE: 20 USC 1070a-1.  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

[[Page 156]]
120 STAT. 156

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)  NOTE: Regulations.  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

[[Page 157]]
120 STAT. 157

``(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)  NOTE: Regulations.  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,

[[Page 158]]
120 STAT. 158

out of any money in the Treasury not otherwise appropriated, for
the Department of Education to carry out this section--
``(A) $790,000,000 for fiscal year 2006;
``(B) $850,000,000 for fiscal year 2007;
``(C) $920,000,000 for fiscal year 2008;
``(D) $960,000,000 for fiscal year 2009; and
``(E) $1,010,000,000 for fiscal year 2010.
``(2) Use of excess funds.--If, at the end of a fiscal year,
the funds available for awarding grants under this section
exceed the amount necessary to make such grants in the amounts
authorized by subsection (d), then all of the excess funds shall
remain available for awarding grants under this section during
the subsequent fiscal year.

``(f) Recognition of Programs of Study.--The Secretary shall
recognize at least one rigorous secondary school program of study in
each State under subsection (c)(3)(A) and (B) for the purpose of
determining student eligibility under such subsection.
``(g) Sunset Provision.--The authority to make grants under this
section shall expire at the end of academic year 2010-2011.''.

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

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

SEC. 8005. LOAN LIMITS.

(a) Federal Insurance Limits.--Section 425(a)(1)(A) (20 U.S.C.
1075(a)(1)(A)) is amended--
(1) in clause (i)(I), by striking ``$2,625'' and inserting
``$3,500''; and
(2) in clause (ii)(I), by striking ``$3,500'' and inserting
``$4,500''.

(b) Guarantee Limits.--Section 428(b)(1)(A) (20 U.S.C.
1078(b)(1)(A)) is amended--
(1) in clause (i)(I), by striking ``$2,625'' and inserting
``$3,500''; and
(2) in clause (ii)(I), by striking ``$3,500'' and inserting
``$4,500''.

(c) Federal PLUS Loans.--Section 428B (20 U.S.C. 1078-2) is
amended--
(1) in subsection (a)(1)--
(A) in the matter preceding subparagraph (A), by
striking ``Parents'' and inserting ``A graduate or
professional student or the parents'';

[[Page 159]]
120 STAT. 159

(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)  NOTE: 20 USC 1075 note.  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--

[[Page 160]]
120 STAT. 160

``(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)  NOTE: 20 USC 1087-1 note.  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--

[[Page 161]]
120 STAT. 161

``(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)  NOTE: 20 USC 1078 note.  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)  NOTE: 20 USC 1078 note.  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.

[[Page 162]]
120 STAT. 162

SEC. 8008. ADDITIONAL LOAN TERMS AND CONDITIONS.

(a) Disbursement.--Section 428(b)(1)(N) (20 U.S.C. 1078(b)(1)(N)) is
amended--
(1) by striking ``or'' at the end of clause (i); and
(2) by striking clause (ii) and inserting the following:
``(ii) in the case of a student who is
studying outside the United States in a program of
study abroad that is approved for credit by the
home institution at which such student is
enrolled, and only after verification of the
student's enrollment by the lender or guaranty
agency, are, at the request of the student,
disbursed directly to the student by the means
described in clause (i), unless such student
requests that the check be endorsed, or the funds
transfer be authorized, pursuant to an authorized
power-of-attorney; or
``(iii) in the case of a student who is
studying outside the United States in a program of
study at an eligible foreign institution, are, at
the request of the foreign institution, disbursed
directly to the student, only after verification
of the student's enrollment by the lender or
guaranty agency by the means described in clause
(i).''.

(b) Repayment Plans: Direct Loans.--Section 455(d)(1) (20 U.S.C.
1087e(d)(1)) is amended by striking subparagraphs (A), (B), and (C) and
inserting the following:
``(A) a standard repayment plan, consistent with
subsection (a)(1) of this section and with section
428(b)(9)(A)(i);
``(B) a graduated repayment plan, consistent with
section 428(b)(9)(A)(ii);
``(C) an extended repayment plan, consistent with
section 428(b)(9)(A)(v), except that the borrower shall
annually repay a minimum amount determined by the
Secretary in accordance with section 428(b)(1)(L);
and''.

(c) Origination Fees.--
(1) FFEL program.--Paragraph (2) of section 438(c) (20
U.S.C. 1087-1(c)) is amended--
(A) by striking the designation and heading of such
paragraph and inserting the following:
``(2) Amount of origination fees.--
``(A) In general.--''; and
(B) by adding at the end the following new
subparagraph:
``(B)  NOTE: Applicability.  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

[[Page 163]]
120 STAT. 163

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)  NOTE: Applicability.  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

[[Page 164]]
120 STAT. 164

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

[[Page 165]]
120 STAT. 165

shall be effective beginning on the date of enactment of the
Higher Education Reconciliation Act of 2005.''; and
(3) in subsection (e), by striking ``, made to a student to
cover the cost of attendance at an eligible institution outside
the United States''.

SEC. 8011. SCHOOL AS LENDER.

Paragraph (2) of section 435(d) (20 U.S.C. 1085(d)(2)) is amended to
read as follows:
``(2) Requirements for eligible institutions.--
``(A) In general.--To be an eligible lender under
this part, an eligible institution--
``(i) shall employ at least one person whose
full-time responsibilities are limited to the
administration of programs of financial aid for
students attending such institution;
``(ii) shall not be a home study school;
``(iii) shall not--
``(I) make a loan to any
undergraduate student;
``(II) make a loan other than a loan
under section 428 or 428H to a graduate
or professional student; or
``(III) make a loan to a borrower
who is not enrolled at that institution;
``(iv) shall award any contract for financing,
servicing, or administration of loans under this
title on a competitive basis;
``(v) shall offer loans that carry an
origination fee or an interest rate, or both, that
are less than such fee or rate authorized under
the provisions of this title;
``(vi) shall not have a cohort default rate
(as defined in section 435(m)) greater than 10
percent;
``(vii) shall, for any year for which the
institution engages in activities as an eligible
lender, provide for a compliance audit conducted
in accordance with section 428(b)(1)(U)(iii)(I),
and the regulations thereunder, and submit the
results of such audit to the Secretary;
``(viii) shall use any proceeds from special
allowance payments and interest payments from
borrowers, interest subsidies received from the
Department of Education, and any proceeds from the
sale or other disposition of loans, for need-based
grant programs; and
``(ix) shall have met the requirements of
subparagraphs (A) through (F) of this paragraph as
in effect on the day before the date of enactment
of the Higher Education Reconciliation Act of
2005, and made loans under this part, on or before
April 1, 2006.
``(B) Administrative expenses.--An eligible lender
under subparagraph (A) shall be permitted to use a
portion of the proceeds described in subparagraph
(A)(viii) for reasonable and direct administrative
expenses.
``(C) Supplement, not supplant.--An eligible lender
under subparagraph (A) shall ensure that the proceeds
described in subparagraph (A)(viii) are used to
supplement,

[[Page 166]]
120 STAT. 166

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)  NOTE: Applicability.  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

[[Page 167]]
120 STAT. 167

``(III) held, directly or through any subsidiary,
affiliate, or trustee, a total unpaid balance of
principal equal to or less than $100,000,000 on loans
for which special allowances were paid under this
subparagraph in the most recent quarterly payment prior
to September 30, 2005.''.

(c) Elimination of Effective Date Limitation on Higher Teacher Loan
Forgiveness Benefits.--
(1) Technical clarification.--The matter preceding paragraph
(1) of section 2 of the Taxpayer-Teacher Protection Act of 2004
(Public Law 108-409; 118 Stat. 2299)  NOTE: 20 USC 1087-1.  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)  NOTE: 20 USC 1087-1 note.  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  NOTE: 20 USC 1087-1, 1078 note.  is
amended by striking subsections (b) and (c).
(2)  NOTE: Effective date. 20 USC 1087-1 note.  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--

[[Page 168]]
120 STAT. 168

(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)  NOTE: 20 USC 1078 note.  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,

[[Page 169]]
120 STAT. 169

and the deposit into the Federal Student Loan
Reserve Fund under section 422A of a Federal
default fee of an amount equal to 1.0 percent of
the principal amount of the loan, which fee shall
be collected either by deduction from the proceeds
of the loan or by payment from other non-Federal
sources, and ensures that the proceeds of the
Federal default fee will not be used for incentive
payments to lenders;''.
(2) Unsubsidized loans.--Section 428H(h) (20 U.S.C. 1078-
8(h)) is amended by adding at the end the following new
sentences: ``Effective for loans for which the date of guarantee
of principal is on or after July 1, 2006, in lieu of the
insurance premium authorized under the preceding sentence, each
State or nonprofit private institution or organization having an
agreement with the Secretary under section 428(b)(1) shall
collect and deposit into the Federal Student Loan Reserve Fund
under section 422A, a Federal default fee of an amount equal to
1.0 percent of the principal amount of the loan, which fee shall
be collected either by deduction from the proceeds of the loan
or by payment from other non-Federal sources. The Federal
default fee shall not be used for incentive payments to
lenders.''.
(3) Voluntary flexible agreements.--Section 428A(a)(1) (20
U.S.C. 1078-1(a)(1)) is amended--
(A) by striking ``or'' at the end of subparagraph
(A);
(B) by striking the period at the end of
subparagraph (B) and inserting ``; or''; and
(C) by adding at the end the following new
subparagraph:
``(C) the Federal default fee required by section
428(b)(1)(H) and the second sentence of section
428H(h).''.

(c) Treatment of Exempt Claims.--
(1) Amendment.--Section 428(c)(1) (20 U.S.C. 1078(c)(1)) is
amended--
(A) by redesignating subparagraph (G) as
subparagraph (H), and moving such subparagraph 2 em
spaces to the left; and
(B) by inserting after subparagraph (F) the
following new subparagraph:
``(G)(i) Notwithstanding any other provisions of this
section, in the case of exempt claims, the Secretary shall apply
the provisions of--
``(I) the fourth sentence of subparagraph (A) by
substituting `100 percent' for `95 percent';
``(II) subparagraph (B)(i) by substituting `100
percent' for `85 percent'; and
``(III) subparagraph (B)(ii) by substituting `100
percent' for `75 percent'.
``(ii) For purposes of clause (i) of this subparagraph, the
term `exempt claims' means claims with respect to loans for
which it is determined that the borrower (or the student on
whose behalf a parent has borrowed), without the lender's or the
institution's knowledge at the time the loan was made, provided
false or erroneous information or took actions that caused the
borrower or the student to be ineligible for all or a portion of
the loan or for interest benefits thereon.''.

[[Page 170]]
120 STAT. 170

(2)  NOTE: 20 USC 1078 note.  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--

[[Page 171]]
120 STAT. 171

(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''.

[[Page 172]]
120 STAT. 172

SEC. 8015. FUNDS FOR ADMINISTRATIVE EXPENSES.

Section 458  NOTE: 20 USC 1087h.  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

[[Page 173]]
120 STAT. 173

``(C) room and board costs (determined in accordance
with paragraph (3)), except that a student may receive
an allowance for such costs under this subparagraph for
not more than 3 semesters or the equivalent, of which
not more than 2 semesters or the equivalent may be
consecutive;'';
(2) in paragraph (11), by striking ``and'' after the
semicolon;
(3) in paragraph (12), by striking the period and inserting
``; and''; and
(4) by adding at the end the following:
``(13) at the option of the institution, for a student in a
program requiring professional licensure or certification, the
one-time cost of obtaining the first professional credentials
(as determined by the institution).''.

SEC. 8017. FAMILY CONTRIBUTION.

(a) Family Contribution for Dependent Students.--
(1) Amendments.--Section 475 (20 U.S.C. 1087oo) is amended--
(A) in subsection (g)(2)(D), by striking ``$2,200''
and inserting ``$3,000''; and
(B) in subsection (h), by striking ``35'' and
inserting ``20''.
(2)  NOTE: 20 USC 1087oo note.  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)  NOTE: 20 USC 1087pp note.  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)  NOTE: 20 USC 1087gg note.  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

[[Page 174]]
120 STAT. 174

(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--

[[Page 175]]
120 STAT. 175

``(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)  NOTE: 20 USC 1087ss note.  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)

[[Page 176]]
120 STAT. 176

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'';

[[Page 177]]
120 STAT. 177

(2) by striking paragraph (2);
(3) by redesignating paragraph (3) as paragraph (2); and
(4) by adding at the end the following new paragraph:

``(3) Notwithstanding paragraph (1) and section 472, assistance not
received under this title may be excluded from both estimated financial
assistance and cost of attendance, if that assistance is provided by a
State and is designated by such State to offset a specific component of
the cost of attendance. If that assistance is excluded from either
estimated financial assistance or cost of attendance, it shall be
excluded from both.''.

SEC. 8020. GENERAL PROVISIONS.

(a) Academic Year.--Paragraph (2) of section 481(a) (20 U.S.C.
1088(a)) is amended to read as follows:
``(2)(A) For the purpose of any program under this title, the term
`academic year' shall--
``(i) require a minimum of 30 weeks of instructional time
for a course of study that measures its program length in credit
hours; or
``(ii) require a minimum of 26 weeks of instructional time
for a course of study that measures its program length in clock
hours; and
``(iii) require an undergraduate course of study to contain
an amount of instructional time whereby a full-time student is
expected to complete at least--
``(I) 24 semester or trimester hours or 36 quarter
credit hours in a course of study that measures its
program length in credit hours; or
``(II) 900 clock hours in a course of study that
measures its program length in clock hours.

``(B) The Secretary may reduce such minimum of 30 weeks to not less
than 26 weeks for good cause, as determined by the Secretary on a case-
by-case basis, in the case of an institution of higher education that
provides a 2-year or 4-year program of instruction for which the
institution awards an associate or baccalaureate degree.''.
(b) Distance Education: Eligible Program.--Section 481(b) (20 U.S.C.
1088(b)) is amended by adding at the end the following new paragraphs:
``(3) An otherwise eligible program that is offered in whole or in
part through telecommunications is eligible for the purposes of this
title if the program is offered by an institution, other than a foreign
institution, that has been evaluated and determined (before or after the
date of enactment of the Higher Education Reconciliation Act of 2005) to
have the capability to effectively deliver distance education programs
by an accrediting agency or association that--
``(A) is recognized by the Secretary under subpart 2 of part
H; and
``(B) has evaluation of distance education programs within
the scope of its recognition, as described in section 496(n)(3).

``(4) For purposes of this title, the term `eligible program'
includes an instructional program that, in lieu of credit hours or clock
hours as the measure of student learning, utilizes direct assessment of
student learning, or recognizes the direct assessment of student
learning by others, if such assessment is consistent with the
accreditation of the institution or program utilizing the

[[Page 178]]
120 STAT. 178

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'';

[[Page 179]]
120 STAT. 179

(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.  NOTE: 20 USC 1092e.  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)  NOTE: Public information.  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

[[Page 180]]
120 STAT. 180

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)  NOTE: Deadline.  Publicity.--Not later than 270
days after the date of enactment of the Higher Education
Reconciliation Act of 2005, the Secretary and guaranty agencies
shall publicize the availability of the information required by
this section, with special emphasis on ensuring that populations
that are traditionally underrepresented in postsecondary
education are made aware of the availability of such
information.''.

SEC. 8024. WAGE GARNISHMENT REQUIREMENT.

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

Subtitle B--Pensions

SEC. 8101. INCREASES IN PBGC PREMIUMS.

(a) Flat-Rate Premiums.--
(1) Single-employer plans.--
(A) In general.--Clause (i) of section 4006(a)(3)(A)
of the Employee Retirement Income Security Act of 1974
(29 U.S.C. 1306(a)(3)(A)) is amended by striking ``$19''
and inserting ``$30''.
(B) Adjustment for inflation.--Section 4006(a)(3) of
such Act (29 U.S.C. 1306(a)(3)) is amended by adding at
the end the following new subparagraph:

``(F) For each plan year beginning in a calendar year after 2006,
there shall be substituted for the premium rate specified

[[Page 181]]
120 STAT. 181

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.--

[[Page 182]]
120 STAT. 182

``(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)  NOTE: Deadline.  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)  NOTE: 29 USC 1306 note.  Effective Dates.--

[[Page 183]]
120 STAT. 183

(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)  NOTE: 28 USC 1913 note.  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)  NOTE: 28 USC 1913 note.  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

[[Page 184]]
120 STAT. 184

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)  NOTE: 28 USC 1914 note.  Effective Date.--This section and
the amendment made by this section shall take effect 60 days after the
date of the enactment of this Act.

Subtitle B--Bankruptcy Fees

SEC. 10101. BANKRUPTCY FEES.

(a) Bankruptcy Filing Fees.--Section 1930(a) of title 28, United
States Code, is amended--
(1) in paragraph (1)--
(A) in subparagraph (A) by striking ``$220'' and
inserting ``$245''; and
(B) in subparagraph (B) by striking ``$150'' and
inserting ``$235''; and
(2) in paragraph (2) by striking ``$1,000'' and inserting
``$2,750''.

(b)  NOTE: 28 USC 1931 note.  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)  NOTE: 28 USC 1930 note.  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.

Approved February 8, 2006.

LEGISLATIVE HISTORY--S. 1932 (H.R. 4241):
---------------------------------------------------------------------------

HOUSE REPORTS: Nos. 109-276 accompanying H.R. 4241 (Comm. on the Budget)
and 109-362 (Comm. of Conference).
CONGRESSIONAL RECORD:
Vol. 151 (2005):
Oct. 31, Nov. 1-3, considered and
passed Senate.
Nov. 17, considered and passed
House, amended, in lieu of H.R.
4241.
Dec. 18, House agreed to conference
report.
Dec. 19-21, Senate considered and
disagreed to conference report.
Senate concurred in House
amendment with an amendment.
Vol. 152 (2006):
Feb. 1, House concurred in Senate
amendment pursuant to H. Res.
653.
WEEKLY COMPILATION OF PRESIDENTIAL DOCUMENTS, Vol. 42 (2006):
Feb. 8, Presidential statement and remarks.