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109th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                    109-362

======================================================================

 
                     DEFICIT REDUCTION ACT OF 2005

                                _______
                                

   December 19 (legislative day, December 18), 2005.--Ordered to be 
                                printed

                                _______
                                

 Mr. Nussle, from the committee of conference, submitted the following

                           CONFERENCE REPORT

                         [To accompany S. 1932]

    The committee of conference on the disagreeing votes of the 
two Houses on the amendment of the House to the bill (S. 1932), 
to provide for reconciliation pursuant to section 202(a) of the 
concurrent resolution on the budget for fiscal year 2006 (H. 
Con. Res. 95), having met, after full and free conference, have 
agreed to recommend and do recommend to their respective Houses 
as follows:
    That the Senate recede from its disagreement to the 
amendment of the House and agree to the same with an amendment 
as follows:
    In lieu of the matter proposed to be inserted by the House 
amendment, insert the following:

SECTION 1. SHORT TITLE.

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

SEC. 2. TABLE OF TITLES.

    The table of titles is as follows:

                     TITLE I--AGRICULTURE PROVISIONS

           TITLE II--HOUSING AND DEPOSIT INSURANCE PROVISIONS

       TITLE III--DIGITAL TELEVISION TRANSITION AND PUBLIC SAFETY

                   TITLE IV--TRANSPORTATION PROVISIONS

                            TITLE V--MEDICARE

                      TITLE VI--MEDICAID AND SCHIP

             TITLE VII--HUMAN RESOURCES AND OTHER PROVISIONS

          TITLE VIII--EDUCATION AND PENSION BENEFIT PROVISIONS

                       TITLE IX--LIHEAP PROVISIONS

                  TITLE X--JUDICIARY RELATED PROVISIONS

                    TITLE I--AGRICULTURE PROVISIONS

SECTION 1001. SHORT TITLE.

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

                     Subtitle A--Commodity Programs

SEC. 1101. NATIONAL DAIRY MARKET LOSS PAYMENTS.

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

SEC. 1102. ADVANCE DIRECT PAYMENTS.

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

SEC. 1103. COTTON COMPETITIVENESS PROVISIONS.

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

                        Subtitle B--Conservation

SEC. 1201. WATERSHED REHABILITATION PROGRAM.

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

SEC. 1202. CONSERVATION SECURITY PROGRAM.

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

SEC. 1203. ENVIRONMENTAL QUALITY INCENTIVES PROGRAM.

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

                           Subtitle C--Energy

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

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

                     Subtitle D--Rural Development

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

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

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

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

SEC. 1403. RURAL BUSINESS INVESTMENT PROGRAM.

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

SEC. 1404. RURAL BUSINESS STRATEGIC INVESTMENT GRANTS.

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

SEC. 1405. RURAL FIREFIGHTERS AND EMERGENCY PERSONNEL GRANTS.

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

                          Subtitle E--Research

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

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

           TITLE II--HOUSING AND DEPOSIT INSURANCE PROVISIONS

                   Subtitle A--FHA Asset Disposition

SEC. 2002. DEFINITIONS.

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

SEC. 2003. APPROPRIATED FUNDS REQUIREMENT FOR BELOW-MARKET SALES.

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

SEC. 2004. 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 USC 1701z-
11(f)(4)) is amended by adding at the end the following new 
sentence: ``This paragraph shall be effective during fiscal 
years 2006 through 2010 only to the extent that such budget 
authority is made available for use under this paragraph in 
advance in appropriation Acts.''.
    (c) Applicability.--The amendments made by this section 
shall not apply to any transaction that formally commences 
within one year prior to the enactment of this section.

                     Subtitle B--Deposit Insurance

SEC. 2101. SHORT TITLE.

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

SEC. 2102. MERGING THE BIF AND SAIF.

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

SEC. 2103. INCREASE IN DEPOSIT INSURANCE COVERAGE.

    (a) In General.--Section 11(a)(1) of the Federal Deposit 
Insurance Act (12 U.S.C. 1821(a)(1)) is amended--
            (1) by striking subparagraph (B) and inserting the 
        following new subparagraph:
                    ``(B) Net amount of insured deposit.--The 
                net amount due to any depositor at an insured 
                depository institution shall not exceed the 
                standard maximum deposit insurance amount as 
                determined in accordance with subparagraphs 
                (C), (D), (E) and (F) and paragraph (3).''; and
            (2) by adding at the end the following new 
        subparagraphs:
                    ``(E) Standard maximum deposit insurance 
                amount defined.--For purposes of this Act, the 
                term `standard maximum deposit insurance 
                amount' means $100,000, adjusted as provided 
                under subparagraph (F) after March 31, 2010.
                    ``(F) Inflation adjustment.--
                            ``(i) In general.--By April 1 of 
                        2010, and the 1st day of each 
                        subsequent 5-year period, the Board of 
                        Directors and the National Credit Union 
                        Administration Board shall jointly 
                        consider the factors set forth under 
                        clause (v), and, upon determining that 
                        an inflation adjustment is appropriate, 
                        shall jointly prescribe the amount by 
                        which the standard maximum deposit 
                        insurance amount and the standard 
                        maximum share insurance amount (as 
                        defined in section 207(k) of the 
                        Federal Credit Union Act) applicable to 
                        any depositor at an insured depository 
                        institution shall be increased by 
                        calculating the product of--
                                    ``(I) $100,000; and
                                    ``(II) the ratio of the 
                                published annual value of the 
                                Personal Consumption 
                                Expenditures Chain-Type Price 
                                Index (or any successor index 
                                thereto), published by the 
                                Department of Commerce, for the 
                                calendar year preceding the 
                                year in which the adjustment is 
                                calculated under this clause, 
                                to the published annual value 
                                of such index for the calendar 
                                year preceding the date this 
                                subparagraph takes effect under 
                                the Federal Deposit Insurance 
                                Reform Act of 2005.
                        The values used in the calculation 
                        under subclause (II) shall be, as of 
                        the date of the calculation, the values 
                        most recently published by the 
                        Department of Commerce.
                            ``(ii) Rounding.--If the amount 
                        determined under clause (ii) for any 
                        period is not a multiple of $10,000, 
                        the amount so determined shall be 
                        rounded down to the nearest $10,000.
                            ``(iii) Publication and report to 
                        the congress.--Not later than April 5 
                        of any calendar year in which an 
                        adjustment is required to be calculated 
                        under clause (i) to the standard 
                        maximum deposit insurance amount and 
                        the standard maximum share insurance 
                        amount under such clause, the Board of 
                        Directors and the National Credit Union 
                        Administration Board shall--
                                    ``(I) publish in the 
                                Federal Register the standard 
                                maximum deposit insurance 
                                amount, the standard maximum 
                                share insurance amount, and the 
                                amount of coverage under 
                                paragraph (3)(A) and section 
                                207(k)(3) of the Federal Credit 
                                Union Act, as so calculated; 
                                and
                                    ``(II) jointly submit a 
                                report to the Congress 
                                containing the amounts 
                                described in subclause (I).
                            ``(iv) 6-month implementation 
                        period.--Unless an Act of Congress 
                        enacted before July 1 of the calendar 
                        year in which an adjustment is required 
                        to be calculated under clause (i) 
                        provides otherwise, the increase in the 
                        standard maximum deposit insurance 
                        amount and the standard maximum share 
                        insurance amount shall take effect on 
                        January 1 of the year immediately 
                        succeeding such calendar year.
                            ``(v) Inflation adjustment 
                        consideration.--In making any 
                        determination under clause (i) to 
                        increase the standard maximum deposit 
                        insurance amount and the standard 
                        maximum share insurance amount, the 
                        Board of Directors and the National 
                        Credit Union Administration Board shall 
                        jointly consider--
                                    ``(I) the overall state of 
                                the Deposit Insurance Fund and 
                                the economic conditions 
                                affecting insured depository 
                                institutions;
                                    ``(II) potential problems 
                                affecting insured depository 
                                institutions; or
                                    ``(III) whether the 
                                increase will cause the reserve 
                                ratio of the fund to fall below 
                                1.15 percent of estimated 
                                insured deposits.''.
    (b) Coverage for Certain Employee Benefit Plan Deposits.--
Section 11(a)(1)(D) of the Federal Deposit Insurance Act (12 
U.S.C. 1821(a)(1)(D)) is amended to read as follows:
                    ``(D) Coverage for certain employee benefit 
                plan deposits.--
                            ``(i) Pass-through insurance.--The 
                        Corporation shall provide pass-through 
                        deposit insurance for the deposits of 
                        any employee benefit plan.
                            ``(ii) Prohibition on acceptance of 
                        benefit plan deposits.--An insured 
                        depository institution that is not well 
                        capitalized or adequately capitalized 
                        may not accept employee benefit plan 
                        deposits.
                            ``(iii) Definitions.--For purposes 
                        of this subparagraph, the following 
                        definitions shall apply:
                                    ``(I) Capital standards.--
                                The terms `well capitalized' 
                                and `adequately capitalized' 
                                have the same meanings as in 
                                section 38.
                                    ``(II) Employee benefit 
                                plan.--The term `employee 
                                benefit plan' has the same 
                                meaning as in paragraph 
                                (5)(B)(ii), and includes any 
                                eligible deferred compensation 
                                plan described in section 457 
                                of the Internal Revenue Code of 
                                1986.
                                    ``(III) Pass-through 
                                deposit insurance.--The term 
                                `pass-through deposit 
                                insurance' means, with respect 
                                to an employee benefit plan, 
                                deposit insurance coverage 
                                based on the interest of each 
                                participant, in accordance with 
                                regulations issued by the 
                                Corporation.''.
    (c) Increased Amount of Deposit Insurance for Certain 
Retirement Accounts.--Section 11(a)(3)(A) of the Federal 
Deposit Insurance Act (12 U.S.C. 1821(a)(3)(A)) is amended by 
striking ``$100,000'' and inserting ``$250,000 (which amount 
shall be subject to inflation adjustments as provided in 
paragraph (1)(F), except that $250,000 shall be substituted for 
$100,000 wherever such term appears in such paragraph)''.
    (h) Effective Date.--This section and the amendments made 
by this section shall take effect on the date the final 
regulations required under section 9(a)(2) take effect.

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

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

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

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

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

    Section 7(b)(1) of the Federal Deposit Insurance Act (12 
U.S.C. 1817(b)(1)) is amended by adding at the end the 
following new subparagraphs:
                    ``(E) Information concerning risk of loss 
                and economic conditions.--
                            ``(i) Sources of information.--For 
                        purposes of determining risk of losses 
                        at insured depository institutions and 
                        economic conditions generally affecting 
                        depository institutions, the 
                        Corporation shall collect information, 
                        as appropriate, from all sources the 
                        Board of Directors considers 
                        appropriate, such as reports of 
                        condition, inspection reports, and 
                        other information from all Federal 
                        banking agencies, any information 
                        available from State bank supervisors, 
                        State insurance and securities 
                        regulators, the Securities and Exchange 
                        Commission (including information 
                        described in section 35), the Secretary 
                        of the Treasury, the Commodity Futures 
                        Trading Commission, the Farm Credit 
                        Administration, the Federal Trade 
                        Commission, any Federal reserve bank or 
                        Federal home loan bank, and other 
                        regulators of financial institutions, 
                        and any information available from 
                        credit rating entities, and other 
                        private economic or business analysts.
                            ``(ii) Consultation with federal 
                        banking agencies.--
                                    ``(I) In general.--Except 
                                as provided in subclause (II), 
                                in assessing the risk of loss 
                                to the Deposit Insurance Fund 
                                with respect to any insured 
                                depository institution, the 
                                Corporation shall consult with 
                                the appropriate Federal banking 
                                agency of such institution.
                                    ``(II) Treatment on 
                                aggregate basis.--In the case 
                                of insured depository 
                                institutions that are well 
                                capitalized (as defined in 
                                section 38) and, in the most 
                                recent examination, were found 
                                to be well managed, the 
                                consultation under subclause 
                                (I) concerning the assessment 
                                of the risk of loss posed by 
                                such institutions may be made 
                                on an aggregate basis.
                            ``(iii) Rule of construction.--No 
                        provision of this paragraph shall be 
                        construed as providing any new 
                        authority for the Corporation to 
                        require submission of information by 
                        insured depository institutions to the 
                        Corporation.
                    ``(F) Modifications to the risk-based 
                assessment system allowed only after notice and 
                comment.--In revising or modifying the risk-
                based assessment system at any time after the 
                date of the enactment of the Federal Deposit 
                Insurance Reform Act of 2005, the Board of 
                Directors may implement such revisions or 
                modification in final form only after notice 
                and opportunity for comment.''.

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

    (a) In General.--Subsection (e) of section 7 of the Federal 
Deposit Insurance Act (12 U.S.C. 1817(e)) is amended to read as 
follows:
    ``(e) Refunds, Dividends, and Credits.--
            ``(1) Refunds of overpayments.--In the case of any 
        payment of an assessment by an insured depository 
        institution in excess of the amount due to the 
        Corporation, the Corporation may--
                    ``(A) refund the amount of the excess 
                payment to the insured depository institution; 
                or
                    ``(B) credit such excess amount toward the 
                payment of subsequent assessments until such 
                credit is exhausted.
            ``(2) Dividends from excess amounts in deposit 
        insurance fund.--
                    ``(A) Reserve ratio in excess of 1.5 
                percent of estimated insured deposits.--If, at 
                the end of a calendar year, the reserve ratio 
                of the Deposit Insurance Fund exceeds 1.5 
                percent of estimated insured deposits, the 
                Corporation shall declare the amount in the 
                Fund in excess of the amount required to 
                maintain the reserve ratio at 1.5 percent of 
                estimated insured deposits, as dividends to be 
                paid to insured depository institutions.
                    ``(B) Reserve ratio equal to or in excess 
                of 1.35 percent of estimated insured deposits 
                and not more than 1.5 percent.--If, at the end 
                of a calendar year, the reserve ratio of the 
                Deposit Insurance Fund equals or exceeds 1.35 
                percent of estimated insured deposits and is 
                not more than 1.5 percent of such deposits, the 
                Corporation shall declare the amount in the 
                Fund that is equal to 50 percent of the amount 
                in excess of the amount required to maintain 
                the reserve ratio at 1.35 percent of the 
                estimated insured deposits as dividends to be 
                paid to insured depository institutions.
                    ``(C) Basis for distribution of 
                dividends.--
                            ``(i) In general.--Solely for the 
                        purposes of dividend distribution under 
                        this paragraph, the Corporation shall 
                        determine each insured depository 
                        institution's relative contribution to 
                        the Deposit Insurance Fund (or any 
                        predecessor deposit insurance fund) for 
                        calculating such institution's share of 
                        any dividend declared under this 
                        paragraph, taking into account the 
                        factors described in clause (ii).
                            ``(ii) Factors for distribution.--
                        In implementing this paragraph in 
                        accordance with regulations, the 
                        Corporation shall take into account the 
                        following factors:
                                    ``(I) The ratio of the 
                                assessment base of an insured 
                                depository institution 
                                (including any predecessor) on 
                                December 31, 1996, to the 
                                assessment base of all eligible 
                                insured depository institutions 
                                on that date.
                                    ``(II) The total amount of 
                                assessments paid on or after 
                                January 1, 1997, by an insured 
                                depository institution 
                                (including any predecessor) to 
                                the Deposit Insurance Fund (and 
                                any predecessor deposit 
                                insurance fund).
                                    ``(III) That portion of 
                                assessments paid by an insured 
                                depository institution 
                                (including any predecessor) 
                                that reflects higher levels of 
                                risk assumed by such 
                                institution.
                                    ``(IV) Such other factors 
                                as the Corporation may 
                                determine to be appropriate.
                    ``(D) Notice and opportunity for comment.--
                The Corporation shall prescribe by regulation, 
                after notice and opportunity for comment, the 
                method for the calculation, declaration, and 
                payment of dividends under this paragraph.
                    ``(E) Limitation.--The Board of Directors 
                may suspend or limit dividends paid under 
                subparagraph (B), if the Board determines in 
                writing that--
                            ``(i) a significant risk of losses 
                        to the Deposit Insurance Fund exists 
                        over the next 1-year period; and
                            ``(ii) it is likely that such 
                        losses will be sufficiently high as to 
                        justify a finding by the Board that the 
                        reserve ratio should temporarily be 
                        allowed--
                                    ``(I) to grow without 
                                requiring dividends under 
                                subparagraph (B); or
                                    ``(II) to exceed the 
                                maximum amount established 
                                under subsection (b)(3)(B)(i).
                    ``(F) Considerations.--In making a 
                determination under subparagraph (E), the Board 
                shall consider--
                            ``(i) national and regional 
                        conditions and their impact on insured 
                        depository institutions;
                            ``(ii) potential problems affecting 
                        insured depository institutions or a 
                        specific group or type of depository 
                        institution;
                            ``(iii) the degree to which the 
                        contingent liability of the Corporation 
                        for anticipated failures of insured 
                        institutions adequately addresses 
                        concerns over funding levels in the 
                        Deposit Insurance Fund; and
                            ``(iv) any other factors that the 
                        Board determines are appropriate.
                    ``(H) Review of determination.--
                            ``(i) Annual review.--A 
                        determination to suspend or limit 
                        dividends under subparagraph (E) shall 
                        be reviewed by the Board of Directors 
                        annually.
                            ``(ii) Action by board.--Based on 
                        each annual review under clause (i), 
                        the Board of Directors shall either 
                        renew or remove a determination to 
                        suspend or limit dividends under 
                        subparagraph (E), or shall make a new 
                        determination in accordance with this 
                        paragraph. Unless justified under the 
                        terms of the renewal or new 
                        determination, the Corporation shall be 
                        required to provide cash dividends 
                        under subparagraph (A) or (B), as 
                        appropriate.
            ``(3) One-time credit based on total assessment 
        base at year-end 1996.--
                    ``(A) In general.--Before the end of the 
                270-day period beginning on the date of the 
                enactment of the Federal Deposit Insurance 
                Reform Act of 2005, the Board of Directors 
                shall, by regulation after notice and 
                opportunity for comment, provide for a credit 
                to each eligible insured depository institution 
                (or a successor insured depository 
                institution), based on the assessment base of 
                the institution on December 31, 1996, as 
                compared to the combined aggregate assessment 
                base of all eligible insured depository 
                institutions, taking into account such factors 
                as the Board of Directors may determine to be 
                appropriate.
                    ``(B) Credit limit.--The aggregate amount 
                of credits available under subparagraph (A) to 
                all eligible insured depository institutions 
                shall equal the amount that the Corporation 
                could collect if the Corporation imposed an 
                assessment of 10.5 basis points on the combined 
                assessment base of the Bank Insurance Fund and 
                the Savings Association Insurance Fund as of 
                December 31, 2001.
                    ``(C) Eligible insured depository 
                institution defined.--For purposes of this 
                paragraph, the term `eligible insured 
                depository institution' means any insured 
                depository institution that--
                            ``(i) was in existence on December 
                        31, 1996, and paid a deposit insurance 
                        assessment prior to that date; or
                            ``(ii) is a successor to any 
                        insured depository institution 
                        described in clause (i).
                    ``(D) Application of credits.--
                            ``(i) In general.--Subject to 
                        clause (ii), the amount of a credit to 
                        any eligible insured depository 
                        institution under this paragraph shall 
                        be applied by the Corporation, subject 
                        to subsection (b)(3)(E), to the 
                        assessments imposed on such institution 
                        under subsection (b) that become due 
                        for assessment periods beginning after 
                        the effective date of regulations 
                        prescribed under subparagraph (A).
                            ``(ii) Temporary restriction on use 
                        of credits.--The amount of a credit to 
                        any eligible insured depository 
                        institution under this paragraph may 
                        not be applied to more than 90 percent 
                        of the assessments imposed on such 
                        institution under subsection (b) that 
                        become due for assessment periods 
                        beginning in fiscal years 2008, 2009, 
                        and 2010.
                            ``(iii) Regulations.--The 
                        regulations prescribed under 
                        subparagraph (A) shall establish the 
                        qualifications and procedures governing 
                        the application of assessment credits 
                        pursuant to clause (i).
                    ``(E) Limitation on amount of credit for 
                certain depository institutions.--In the case 
                of an insured depository institution that 
                exhibits financial, operational, or compliance 
                weaknesses ranging from moderately severe to 
                unsatisfactory, or is not adequately 
                capitalized (as defined in section 38) at the 
                beginning of an assessment period, the amount 
                of any credit allowed under this paragraph 
                against the assessment on that depository 
                institution for such period may not exceed the 
                amount calculated by applying to that 
                depository institution the average assessment 
                rate on all insured depository institutions for 
                such assessment period.
                    ``(F) Successor defined.--The Corporation 
                shall define the term `successor' for purposes 
                of this paragraph, by regulation, and may 
                consider any factors as the Board may deem 
                appropriate.
            ``(4) Administrative review.--
                    ``(A) In general.--The regulations 
                prescribed under paragraphs (2)(D) and (3) 
                shall include provisions allowing an insured 
                depository institution a reasonable opportunity 
                to challenge administratively the amount of the 
                credit or dividend determined under paragraph 
                (2) or (3) for such institution.
                    ``(B) Administrative review.--Any review 
                under subparagraph (A) of any determination of 
                the Corporation under paragraph (2) or (3) 
                shall be final and not subject to judicial 
                review.''.
    (b) Definition of Reserve Ratio.--Section 3(y) of the 
Federal Deposit Insurance Act (12 U.S.C. 1813(y)) (as amended 
by section 2105(b) of this subtitle) is amended by adding at 
the end the following new paragraph:
            ``(3) Reserve ratio.--The term `reserve ratio', 
        when used with regard to the Deposit Insurance Fund 
        other than in connection with a reference to the 
        designated reserve ratio, means the ratio of the net 
        worth of the Deposit Insurance Fund to the value of the 
        aggregate estimated insured deposits.''.

SEC. 2108. DEPOSIT INSURANCE FUND RESTORATION PLANS.

    Section 7(b)(3) of the Federal Deposit Insurance Act (12 
U.S.C. 1817(b)(3)) (as amended by section 2105(a) of this 
subtitle) is amended by adding at the end the following new 
subparagraph:
                    ``(E) Dif restoration plans.--
                            ``(i) In general.--Whenever--
                                    ``(I) the Corporation 
                                projects that the reserve ratio 
                                of the Deposit Insurance Fund 
                                will, within 6 months of such 
                                determination, fall below the 
                                minimum amount specified in 
                                subparagraph (B)(ii) for the 
                                designated reserve ratio; or
                                    ``(II) the reserve ratio of 
                                the Deposit Insurance Fund 
                                actually falls below the 
                                minimum amount specified in 
                                subparagraph (B)(ii) for the 
                                designated reserve ratio 
                                without any determination under 
                                subclause (I) having been made,
                        the Corporation shall establish and 
                        implement a Deposit Insurance Fund 
                        restoration plan within 90 days that 
                        meets the requirements of clause (ii) 
                        and such other conditions as the 
                        Corporation determines to be 
                        appropriate.
                            ``(ii) Requirements of restoration 
                        plan.--A Deposit Insurance Fund 
                        restoration plan meets the requirements 
                        of this clause if the plan provides 
                        that the reserve ratio of the Fund will 
                        meet or exceed the minimum amount 
                        specified in subparagraph (B)(ii) for 
                        the designated reserve ratio before the 
                        end of the 5-year period beginning upon 
                        the implementation of the plan (or such 
                        longer period as the Corporation may 
                        determine to be necessary due to 
                        extraordinary circumstances).
                            ``(iii) Restriction on assessment 
                        credits.--As part of any restoration 
                        plan under this subparagraph, the 
                        Corporation may elect to restrict the 
                        application of assessment credits 
                        provided under subsection (e)(3) for 
                        any period that the plan is in effect.
                            ``(iv) Limitation on restriction.--
                        Notwithstanding clause (iii), while any 
                        restoration plan under this 
                        subparagraph is in effect, the 
                        Corporation shall apply credits 
                        provided to an insured depository 
                        institution under subsection (e)(3) 
                        against any assessment imposed on the 
                        institution for any assessment period 
                        in an amount equal to the lesser of--
                                    ``(I) the amount of the 
                                assessment; or
                                    ``(II) the amount equal to 
                                3 basis points of the 
                                institution's assessment base.
                            ``(v) Transparency.--Not more than 
                        30 days after the Corporation 
                        establishes and implements a 
                        restoration plan under clause (i), the 
                        Corporation shall publish in the 
                        Federal Register a detailed analysis of 
                        the factors considered and the basis 
                        for the actions taken with regard to 
                        the plan.''.

SEC. 2109. REGULATIONS REQUIRED.

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

       TITLE III--DIGITAL TELEVISION TRANSITION AND PUBLIC SAFETY

SEC. 3001. SHORT TITLE; DEFINITION.

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

SEC. 3002. ANALOG SPECTRUM RECOVERY: FIRM DEADLINE.

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

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 (P.L. 108-494; 118 
        Stat. 3993)), as paragraph (16) of such section; and
            (2) in the first paragraph (15) of such section (as 
        added by section 3(a) of the Auction Reform Act of 2002 
        (P.L. 107-195; 116 Stat. 716)), by adding at the end of 
        subparagraph (C) the following new clauses:
                            ``(v) Additional deadlines for 
                        recovered analog spectrum.--
                        Notwithstanding subparagraph (B), the 
                        Commission shall conduct the auction of 
                        the licenses for recovered analog 
                        spectrum by commencing the bidding not 
                        later than January 28, 2008, and shall 
                        deposit the proceeds of such auction in 
                        accordance with paragraph (8)(E)(ii) 
                        not later than June 30, 2008.
                            ``(vi) Recovered analog spectrum.--
                        For purposes of clause (v), the term 
                        `recovered analog spectrum' means the 
                        spectrum between channels 52 and 69, 
                        inclusive (between frequencies 698 and 
                        806 megahertz, inclusive) reclaimed 
                        from analog television service 
                        broadcasting under paragraph (14), 
                        other than--
                                    ``(I) the spectrum required 
                                by section 337 to be made 
                                available for public safety 
                                services; and
                                    ``(II) the spectrum 
                                auctioned prior to the date of 
                                enactment of the Digital 
                                Television Transition and 
                                Public Safety Act of 2005.''.
    (b) Extension of Auction Authority.--Section 309(j)(11) of 
such Act (47 U.S.C. 309(j)(11)) is amended by striking ``2007'' 
and inserting ``2011''.

SEC. 3004. RESERVATION OF AUCTION PROCEEDS.

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

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

    (a) Creation of Program.--The Assistant Secretary shall--
            (1) implement and administer a program through 
        which households in the United States may obtain 
        coupons that can be applied toward the purchase of 
        digital-to-analog converter boxes; and
            (2) make payments of not to exceed $990,000,000, in 
        the aggregate, through fiscal year 2009 to carry out 
        that program from the Digital Television Transition and 
        Public Safety Fund established under section 
        309(j)(8)(E) of the Communications Act of 1934 (47 
        U.S.C. 309(j)(8)(E).
    (b) Credit.--The Assistant Secretary may borrow from the 
Treasury beginning on October 1, 2006 such sums as may be 
necessary, but not to exceed $1,500,000,000, to implement this 
section. The Assistant Secretary shall reimburse the Treasury, 
without interest, as funds are deposited into the Digital 
Television Transition and Public Safety Fund.
    (c) Program Specifications.--
            (1) Limitations.--
                    (A) Two-per-household maximum.--A household 
                may obtain coupons by making a request as 
                required by the regulations under this section 
                between January 1, 2008, and March 31, 2009, 
                inclusive. The Assistant Secretary shall ensure 
                that each requesting household receives, via 
                the United States Postal Service, no more than 
                two coupons.
                    (B) No combinations of coupons.--Two 
                coupons may not be used in combination toward 
                the purchase of a single digital-to-analog 
                converter box.
                    (C) Duration.--All coupons shall expire 3 
                months after issuance.
            (2) Distribution of coupons.--The Assistant 
        Secretary shall expend not more than $100,000,000 on 
        administrative expenses and shall ensure that the sum 
        of--
                    (A) all administrative expenses for the 
                program, including not more than $5,000,000 for 
                consumer education concerning the digital 
                television transition and the availability of 
                the digital-to-analog converter box program; 
                and
                    (B) the total maximum value of all the 
                coupons redeemed, and issued but not expired, 
                does not exceed $990,000,000.
            (3) Use of additional amount.--If the Assistant 
        Secretary transmits to the Committee on Energy and 
        Commerce of the House of Representatives and Committee 
        on Commerce, Science, and Transportation of the Senate 
        a statement certifying that the sum permitted to be 
        expended under paragraph (2) will be insufficient to 
        fulfill the requests for coupons from eligible 
        households--
                    (A) paragraph (2) shall be applied--
                            (i) by substituting 
                        ``$160,000,000'' for ``$100,000,000''; 
                        and
                            (ii) by substituting 
                        ``$1,500,000,000'' for 
                        ``$990,000,000'';
                    (B) subsection (a)(2) shall be applied by 
                substituting ``$1,500,000,000'' for 
                ``$990,000,000''; and
                    (C) the additional amount permitted to be 
                expended shall be available 60 days after the 
                Assistant Secretary sends such statement.
            (4) Coupon value.--The value of each coupon shall 
        be $40.
    (e) 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 Fundestablished 
under section 309(j)(8)(E) of the Communications Act of 1934 (47 U.S.C. 
309(j)(8)(E).
    (b) Credit.--The Assistant Secretary may borrow from the 
Treasury beginning on October 1, 2006 such sums as may be 
necessary, but not to exceed $1,000,000,000, to implement this 
section. The Assistant Secretary shall reimburse the Treasury, 
without interest, as funds are deposited into the Digital 
Television Transition and Public Safety Fund.
    (c) Condition of Grants.--In order to obtain a grant under 
the grant program, a public safety agency shall agree to 
provide, from non-Federal sources, not less than 20 percent of 
the costs of acquiring and deploying the interoperable 
communications systems funded under the grant program.
    (d) Definitions.--For purposes of this section:
            (1) Public safety agency.--The term ``public safety 
        agency'' means any State, local, or tribal government 
        entity, or nongovernmental organization authorized by 
        such entity, whose sole or principal purpose is to 
        protect the safety of life, health, or property.
            (2) Interoperable communications systems.--The term 
        ``interoperable communications systems'' means 
        communications systems which enable public safety 
        agencies to share information amongst local, State, 
        Federal, and tribal public safety agencies in the same 
        area via voice or data signals.
            (3) Reallocated public safety spectrum.--The term 
        ``reallocated public safety spectrum'' means the bands 
        of spectrum located at 764-776 megahertz and 794-806 
        megahertz, inclusive.

SEC. 3007. NYC 9/11 DIGITAL TRANSITION.

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

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

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

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

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

SEC. 3010. NATIONAL ALERT AND TSUNAMI WARNING PROGRAM.

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

SEC. 3011. ENHANCE 911.

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

SEC. 3012. ESSENTIAL AIR SERVICE PROGRAM.

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

SEC. 3014. SUPPLEMENTAL LICENSE FEES.

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

                  TITLE IV--TRANSPORTATION PROVISIONS

SEC. 4001. EXTENSION OF VESSEL TONNAGE DUTIES.

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

                           TITLE V--MEDICARE

               Subtitle A--Provisions Relating to Part A

SEC. 5001. HOSPITAL QUALITY IMPROVEMENT.

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

        In developing such a plan, the Secretary shall consult 
        with relevant affected parties and shall consider 
        experience with such demonstrations that are relevant 
        to the value based purchasing program under this 
        subsection.
            (3) Congressional report.--By not later than August 
        1, 2007, the Secretary of Health and Human Services 
        shall submit a report to Congress on the plan for the 
        value based purchasing program developed under this 
        subsection.
            (4) MedPAC report on hospital value based 
        purchasing program.--
                    (A) In general.--By not later than June 1, 
                2007, the Medicare Payment Advisory Commission 
                shall submit to Congress a report that includes 
                detailed recommendations on a structure of 
                value based payment adjustments for hospital 
                services under the Medicare program under title 
                XVIII of the Social Security Act.
                    (B) Contents.--Such report shall include 
                the following:
                            (i) Determinations of the 
                        thresholds, the size of payments, the 
                        sources of funds, and the relationship 
                        of payments to improvement and 
                        attainment of quality.
                            (ii) An analysis of hospital 
                        efficiency measures such as costs per 
                        discharge, related services within an 
                        episode of care including payments for 
                        physicians' services associated with 
                        the discharge or episode of care.
                            (iii) An identification of other 
                        changes that are needed within the 
                        payment structure under section 1886(d) 
                        of the Social Security Act (42 U.S.C. 
                        1395ww(d)) to assure consistency 
                        between such structure and the value 
                        based payment program.
    (c) Quality Adjustment in DRG Payments for Certain Hospital 
Acquired Infections.--
            (1) In general.--Section 1886(d)(4) of the Social 
        Security Act (42 U.S.C. 1395ww(d)(4)) is amended by 
        adding at the end the following new subparagraph:
    ``(D)(i) For discharges occurring on or after October 1, 
2008, the diagnosis-related group to be assigned under this 
paragraph for a discharge described in clause (ii) shall be a 
diagnosis-related group that does not result in higher payment 
based on the presence of a secondary diagnosis code described 
in clause (iv).
    ``(ii) A discharge described in this clause is a discharge 
which meets the following requirements:
            ``(I) The discharge includes a condition identified 
        by a diagnosis code selected under clause (iv) as a 
        secondary diagnosis.
            ``(II) But for clause (i), the discharge would have 
        been classified to a diagnosis-related group that 
        results in a higher payment based on the presence of a 
        secondary diagnosis code selected under clause (iv).
            ``(III) At the time of admission, no code selected 
        under clause (iv) was present.
    ``(iii) As part of the information required to be reported 
by a hospital with respect to a discharge of an individual in 
order for payment to be made under this subsection, for 
discharges occurring on or after October 1, 2007, the 
information shall include the secondary diagnosis of the 
individual at admission.
    ``(iv) By not later than October 1, 2007, the Secretary 
shall select diagnosis codes associated with at least two 
conditions, each of which codes meets all of the following 
requirements (as determined by the Secretary):
            ``(I) Cases described by such code have a high cost 
        or high volume, or both, under this title.
            ``(II) The code results in the assignment of a case 
        to a diagnosis-related group that has a higher payment 
        when the code is present as a secondary diagnosis.
            ``(III) The code describes such conditions that 
        could reasonably have been prevented through the 
        application of evidence-based guidelines.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

               Subtitle B--Provisions Relating to Part B

                     CHAPTER 1--PAYMENT PROVISIONS

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

    (a) DME.--
            (1) In general.--Section 1834(a)(7)(A) of the 
        Social Security Act (42 U.S.C. 1395m(a)(7)(A)) is 
        amended to read as follows:
                    ``(A) Payment.--In the case of an item of 
                durable medical equipment not described in 
                paragraphs (2) through (6), the following rules 
                shall apply:
                            ``(i) Rental.--
                                    ``(I) In general.--Except 
                                as provided in clause (iii), 
                                payment for the item shall be 
                                made on a monthly basis for the 
                                rental of the item during the 
                                period of medical need (but 
                                payments under this clause may 
                                not extend over a period of 
                                continuous use (as determined 
                                by the Secretary) of longer 
                                than 13 months).
                                    ``(II) Payment amount.--
                                Subject to subparagraph (B), 
                                the amount recognized for the 
                                item, for each of the first 3 
                                months of such period, is 10 
                                percent of the purchase price 
                                recognized under paragraph (8) 
                                with respect to the item, and, 
                                for each of the remaining 
                                months of such period, is 7.5 
                                percent of such purchase price.
                            ``(ii) Ownership after rental.--On 
                        the first day that begins after the 
                        13th continuous month during which 
                        payment is made for the rental of an 
                        item under clause (i), the supplier of 
                        the item shall transfer title to the 
                        item to the individual.
                            ``(iii) Purchase agreement option 
                        for power-driven wheelchairs.--In the 
                        case of a power-driven wheelchair, at 
                        the time the supplier furnishes the 
                        item, the supplier shall offer the 
                        individual the option to purchase the 
                        item, and payment for such item shall 
                        be made on a lump-sum basis if the 
                        individual exercises such option.
                            ``(iv) Maintenance and servicing.--
                        After the supplier transfers title to 
                        the item under clause (ii) or in the 
                        case of a power-driven wheelchair for 
                        which a purchase agreement has been 
                        entered into under clause (iii), 
                        maintenance and servicing payments 
                        shall, if the Secretary determines such 
                        payments are reasonable and necessary, 
                        be made (for parts and labor not 
                        covered by the supplier's or 
                        manufacturer's warranty, as determined 
                        by the Secretary to be appropriate for 
                        the particular type of durable medical 
                        equipment), and such payments shall be 
                        in an amount determined to be 
                        appropriate by the Secretary.''.
            (2) Effective date.--The amendment made by 
        paragraph (1) shall apply to items furnished for which 
        the first rental month occurs on or after January 1, 
        2006.
    (b) Oxygen Equipment.--
            (1) In general.--Section 1834(a)(5) of such Act (42 
        U.S.C. 1395m(a)(5)) is amended--
                    (A) in subparagraph (A), by striking ``and 
                (E)'' and inserting ``(E), and (F)''; and
                    (B) by adding at the end the following new 
                subparagraph:
                    ``(F) Ownership of equipment.--
                            ``(i) In general.--Payment for 
                        oxygen equipment (including portable 
                        oxygen equipment) under this paragraph 
                        may not extend over a period of 
                        continuous use (as determined by the 
                        Secretary) of longer than 36 months.
                            ``(ii) Ownership.--
                                    ``(I) Transfer of title.--
                                On the first day that begins 
                                after the 36th continuous month 
                                during which payment is made 
                                for the equipment under this 
                                paragraph, the supplier of the 
                                equipment shall transfer title 
                                to the equipment to the 
                                individual.
                                    ``(II) Payments for oxygen 
                                and maintenance and 
                                servicing.--After the supplier 
                                transfers title to the 
                                equipment under subclause (I)--
                                            ``(aa) payments for 
                                        oxygen shall continue 
                                        to be made in the 
                                        amount recognized for 
                                        oxygen under paragraph 
                                        (9) for the period of 
                                        medical need; and
                                            ``(bb) maintenance 
                                        and servicing payments 
                                        shall, if the Secretary 
                                        determines such 
                                        payments are reasonable 
                                        and necessary, be made 
                                        (for parts and labor 
                                        not covered by the 
                                        supplier's or 
                                        manufacturer's 
                                        warranty, as determined 
                                        by the Secretary to be 
                                        appropriate for the 
                                        equipment), and such 
                                        payments shall be in an 
                                        amount determined to be 
                                        appropriate by the 
                                        Secretary.''.
            (2) Effective date.--
                    (A) In general.--The amendments made by 
                paragraph (1) shall take effect on January 1, 
                2006.
                    (B) Application to certain individuals.--In 
                the case of an individual receiving oxygen 
                equipment on December 31, 2005, for which 
                payment is made under section 1834(a) of the 
                Social Security Act (42 U.S.C. 1395m(a)), the 
                36-month period described in paragraph 
                (5)(F)(i) of such section, as added by 
                paragraph (1), shall begin on January 1, 2006.

SEC. 5102. ADJUSTMENTS IN PAYMENT FOR IMAGING SERVICES.

    (a) Multiple Procedure Payment Reduction for Imaging 
Exempted From Budget Neutrality.--Section 1848(c)(2)(B) of the 
Social Security Act (42 U.S.C. 1395w-4(c)(2)(B)) is amended--
            (1) in clause (ii)(II), by striking ``clause (iv)'' 
        and inserting ``clauses (iv) and (v)'';
            (2) in clause (iv) in the heading, by inserting 
        ``of certain additional expenditures'' after 
        ``Exemption''; and
            (3) by adding at the end the following new clause:
                            ``(v) Exemption of certain reduced 
                        expenditures from budget-neutrality 
                        calculation.--The following reduced 
                        expenditures, as estimated by the 
                        Secretary, shall not be taken into 
                        account in applying clause (ii)(II):
                                    ``(I) Reduced payment for 
                                multiple imaging procedures.--
                                Effective for fee schedules 
                                established beginning with 
                                2007, reduced expenditures 
                                attributable to the multiple 
                                procedure payment reduction for 
                                imaging under the final rule 
                                published by the Secretary in 
                                the Federal Register on 
                                November 21, 2005 (42 CFR 405, 
                                et al.) insofar as it relates 
                                to the physician fee schedules 
                                for 2006 and 2007.''.
    (b) Reduction in Physician Fee Schedule to OPD Payment 
Amount for Imaging Services.--Section 1848 of such Act (42 
U.S.C. 1395w-4) is amended--
            (1) in subsection (b), by adding at the end the 
        following new paragraph:
            ``(4) Special rule for imaging services.--
                    ``(A) In general.--In the case of imaging 
                services described in subparagraph (B) 
                furnished on or after January 1, 2007, if--
                            ``(i) the technical component 
                        (including the technical component 
                        portion of a global fee) of the service 
                        established for a year under the fee 
                        schedule described in paragraph (1) 
                        without application of the geographic 
                        adjustment factor described in 
                        paragraph (1)(C), exceeds
                            ``(ii) the medicare OPD fee 
                        schedule amount established under the 
                        prospective payment system for hospital 
                        outpatient department services under 
                        paragraph (3)(D) of section 1833(t) for 
                        such service for such year, determined 
                        without regard to geographic adjustment 
                        under paragraph (2)(D) of such section,
                the Secretary shall substitute the amount 
                described in clause (ii), adjusted by the 
                geographic adjustment factor described in 
                paragraph (1)(C), for the fee schedule amount 
                for such technical component for such year.
                    ``(B) Imaging services described.--For 
                purposes of subparagraph (A), imaging services 
                described in this subparagraph are imaging and 
                computer-assisted imaging services, including 
                X-ray, ultrasound (including echocardiography), 
                nuclear medicine (including positron emission 
                tomography), magnetic resonance imaging, 
                computed tomography, and fluoroscopy, but 
                excluding diagnostic and screening 
                mammography.''; and
            (2) in subsection (c)(2)(B)(v), as added by 
        subsection (a)(3), by adding at the end the following 
        new subclause:
                                    ``(II) OPD payment cap for 
                                imaging services.--Effective 
                                for fee schedules established 
                                beginning with 2007, reduced 
                                expenditures attributable to 
                                subsection (b)(4).''.

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

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

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

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

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

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

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

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

SEC. 5107. REVISIONS TO PAYMENTS FOR THERAPY SERVICES.

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

                        CHAPTER 2--MISCELLANEOUS

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

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

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

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

          ``Ultrasound Screening for Abdominal Aortic Aneurysm

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

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

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

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

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

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

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

            Subtitle C--Provisions Relating to Parts A and B

SEC. 5201. HOME HEALTH PAYMENTS.

    (a) 2006 Update.--Section 1895(b)(3)(B)(ii) of the Social 
Security Act (42 U.S.C. 1395fff(b)(3)(B)(ii)) is amended--
            (1) in subclause (III), by striking ``each of 2005 
        and 2006'' and inserting ``all of 2005'';
            (2) by striking ``or'' at the end of subclause 
        (III);
            (3) in subclause (IV), by striking ``2007 and'' and 
        by redesignating such subclause as subclause (V); and
            (4) by inserting after subclause (III) the 
        following new subclause:
                                    ``(IV) 2006, 0 percent; 
                                and''.
    (b) Applying Rural Add-On Policy for 2006.--Section 421(a) 
of Medicare Prescription Drug, Improvement, and Modernization 
Act of 2003 (Public Law 108-173; 117 Stat. 2283) is amended by 
inserting ``and episodes and visits beginning on or after 
January 1, 2006, and before January 1, 2007,'' after ``April 1, 
2005,''.
    (c) Home Health Care Quality Improvement.--Section 
1895(b)(3)(B) of the Social Security Act (42 U.S.C. 
1395fff(b)(3)(B)) is amended--
            (1) in clause (ii)(V), as redesignated by 
        subsection (a)(3), by inserting ``subject to clause 
        (v),'' after ``subsequent year,''; and
            (2) by adding at the end the following new clause:
                            ``(v) Adjustment if quality data 
                        not submitted.--
                                    ``(I) Adjustment.--For 
                                purposes of clause (ii)(V), for 
                                2007 and each subsequent year, 
                                in the case of a home health 
                                agency that does not submit 
                                data to the Secretary in 
                                accordance with subclause (II) 
                                with respect to such a year, 
                                the home health market basket 
                                percentage increase applicable 
                                under such clause for such year 
                                shall be reduced by 2 
                                percentage points. Such 
                                reduction shall apply only with 
                                respect to the year involved, 
                                and the Secretary shall not 
                                take into account such 
                                reduction in computing the 
                                prospective payment amount 
                                under this section for a 
                                subsequent year, and the 
                                Medicare Payment Advisory 
                                Commission shall carry out the 
                                requirements under section 
                                5201(d) of the Deficit 
                                Reduction Act of 2005.
                                    ``(II) Submission of 
                                quality data.--For 2007 and 
                                each subsequent year, each home 
                                health agency shall submit to 
                                the Secretary such data that 
                                the Secretary determines are 
                                appropriate for the measurement 
                                of health care quality. Such 
                                data shall be submitted in a 
                                form and manner, and at a time, 
                                specified by the Secretary for 
                                purposes of this clause.
                                    ``(III) Public availability 
                                of data submitted.--The 
                                Secretary shall establish 
                                procedures for making data 
                                submitted under subclause (II) 
                                available to the public. Such 
                                procedures shall ensure that a 
                                home health agency has the 
                                opportunity to review the data 
                                that is to be made public with 
                                respect to the agency prior to 
                                such data being made public.''.
    (d) MedPAC Report on Value Based Purchasing.--
            (1) In general.--Not later than June 1, 2007, the 
        Medicare Payment Advisory Commission shall submit to 
        Congress a report that includes recommendations on a 
        detailed structure of value based payment adjustments 
        for home health services under the Medicare program 
        under title XVIII of the Social Security Act. Such 
        report shall include recommendations concerning the 
        determination of thresholds, the size of such payments, 
        sources of funds, and the relationship of payments for 
        improvement and attainment of quality.
            (2) Funding.--Out of any funds in the Treasury not 
        otherwise appropriated, there are appropriated to the 
        Medicare Payment Advisory Commission $550,000, to carry 
        out this subsection.

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

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

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

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

SEC. 5204. MEDICARE INTEGRITY PROGRAM FUNDING.

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

               Subtitle D--Provisions Relating to Part C

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

    (a) In General.--Section 1853 of the Social Security Act 
(42 U.S.C. 1395w-23) is amended--
            (1) in subsection (j)(1)--
                    (A) in subparagraph (A)--
                            (i) by inserting ``(or, beginning 
                        with 2007, \1/12\ of the applicable 
                        amount determined under subsection 
                        (k)(1))'' after ``1853(c)(1)''; and
                            (ii) by inserting ``(for years 
                        before 2007)'' after ``adjusted as 
                        appropriate'';
                    (B) in subparagraph (B), by inserting 
                ``(for years before 2007)'' after ``adjusted as 
                appropriate''; and
            (2) by adding at the end the following new 
        subsection:
    ``(k) Determination of Applicable Amount for Purposes of 
Calculating the Benchmark Amounts.--
            ``(1) Applicable amount defined.--For purposes of 
        subsection (j), subject to paragraph (2), the term 
        `applicable amount' means for an area--
                    ``(A) for 2007--
                            ``(i) if such year is not specified 
                        under subsection (c)(1)(D)(ii), an 
                        amount equal to the amount specified in 
                        subsection (c)(1)(C) for the area for 
                        2006--
                                    ``(I) first adjusted by the 
                                rescaling factor for 2006 for 
                                the area (as made available by 
                                the Secretary in the 
                                announcement of the rates on 
                                April 4, 2005, under subsection 
                                (b)(1), but excluding any 
                                national adjustment factors for 
                                coding intensity and risk 
                                adjustment budget neutrality 
                                that were included in such 
                                factor); and
                                    ``(II) then increased by 
                                the national per capita MA 
                                growth percentage, described in 
                                subsection (c)(6) for 2007, but 
                                not taking into account any 
                                adjustment under subparagraph 
                                (C) of such subsection for a 
                                year before 2004;
                            ``(ii) if such year is specified 
                        under subsection (c)(1)(D)(ii), an 
                        amount equal to the greater of--
                                    ``(I) the amount determined 
                                under clause (i) for the area 
                                for the year; or
                                    ``(II) the amount specified 
                                in subsection (c)(1)(D) for the 
                                area for the year; and
                    ``(B) for a subsequent year--
                            ``(i) if such year is not specified 
                        under subsection (c)(1)(D)(ii), an 
                        amount equal to the amount determined 
                        under this paragraph for the area for 
                        the previous year (determined without 
                        regard to paragraph (2)), increased by 
                        the national per capita MA growth 
                        percentage, described in subsection 
                        (c)(6) for that succeeding year, but 
                        not taking into account any adjustment 
                        under subparagraph (C) of such 
                        subsection for a year before 2004; and
                            ``(ii) if such year is specified 
                        under subsection (c)(1)(D)(ii), an 
                        amount equal to the greater of--
                                    ``(I) the amount determined 
                                under clause (i) for the area 
                                for the year; or
                                    ``(II) the amount specified 
                                in subsection (c)(1)(D) for the 
                                area for the year.
            ``(2) Phase-out of budget neutrality factor.--
                    ``(A) In general.--Except as provided in 
                subparagraph (D), in the case of 2007 through 
                2010, the applicable amount determined under 
                paragraph (1) shall be multiplied by a factor 
                equal to 1 plus the product of--
                            ``(i) the percent determined under 
                        subparagraph (B) for the year; and
                            ``(ii) the applicable phase-out 
                        factor for the year under subparagraph 
                        (C).
                    ``(B) Percent determined.--
                            ``(i) In general.--For purposes of 
                        subparagraph (A)(i), subject to clause 
                        (iv), the percent determined under this 
                        subparagraph for a year is a percent 
                        equal to a fraction the numerator of 
                        which is described in clause (ii) and 
                        the denominator of which is described 
                        in clause (iii).
                            ``(ii) Numerator based on 
                        difference between demographic rate and 
                        risk rate.--
                                    ``(I) In general.--The 
                                numerator described in this 
                                clause is an amount equal to 
                                the amount by which the 
                                demographic rate described in 
                                subclause (II) exceeds the risk 
                                rate described in subclause 
                                (III).
                                    ``(II) Demographic rate.--
                                The demographic rate described 
                                in this subclause is the 
                                Secretary's estimate of the 
                                total payments that would have 
                                been made under this part in 
                                the year if all the monthly 
                                payment amounts for all MA 
                                plans were equal to \1/12\ of 
                                the annual MA capitation rate 
                                under subsection (c)(1) for the 
                                area and year, adjusted 
                                pursuant to subsection 
                                (a)(1)(C).
                                    ``(III) Risk rate.--The 
                                risk rate described in this 
                                subclause is the Secretary's 
                                estimate of the total payments 
                                that would have been made under 
                                this part in the year if all 
                                the monthly payment amounts for 
                                all MA plans were equal to the 
                                amount described in subsection 
                                (j)(1)(A) (determined as if 
                                this paragraph had not applied) 
                                under subsection (j) for the 
                                area and year, adjusted 
                                pursuant to subsection 
                                (a)(1)(C).
                            ``(iii) Denominator based on risk 
                        rate.--The denominator described in 
                        this clause is equal to the total 
                        amount estimated for the year under 
                        clause (ii)(III).
                            ``(iv) Requirements.--In estimating 
                        the amounts under the previous clauses, 
                        the Secretary shall--
                                    ``(I) use a complete set of 
                                the most recent and 
                                representative Medicare 
                                Advantage risk scores under 
                                subsection (a)(3) that are 
                                available from the risk 
                                adjustment model announced for 
                                the year;
                                    ``(II) adjust the risk 
                                scores to reflect changes in 
                                treatment and coding practices 
                                in the fee-for-service sector;
                                    ``(III) adjust the risk 
                                scores for differences in 
                                coding patterns between 
                                Medicare Advantage plans and 
                                providers under the original 
                                medicare fee-for-service 
                                program under parts A and B to 
                                the extent that the Secretary 
                                has identified such 
                                differences, as required in 
                                subsection (a)(1)(C);
                                    ``(IV) as necessary, adjust 
                                the risk scores for late data 
                                submitted by Medicare Advantage 
                                organizations;
                                    ``(V) as necessary, adjust 
                                the risk scores for lagged 
                                cohorts; and
                                    ``(VI) as necessary, adjust 
                                the risk scores for changes in 
                                enrollment in Medicare 
                                Advantage plans during the 
                                year.
                            ``(v) Authority.--In computing such 
                        amounts the Secretary may take into 
                        account the estimated health risk of 
                        enrollees in preferred provider 
                        organization plans (including MA 
                        regional plans) for the year.
                    ``(C) Applicable phase-out factor.--For 
                purposes of subparagraph (A)(ii), the term 
                `applicable phase-out factor' means--
                            ``(i) for 2007, 0.55;
                            ``(ii) for 2008, 0.40;
                            ``(iii) for 2009, 0.25; and
                            ``(iv) for 2010, 0.05.
                    ``(D) Termination of application.--
                Subparagraph (A) shall not apply in a year if 
                the amount estimated under subparagraph 
                (B)(ii)(III) for the year is equal to or 
                greater than the amount estimated under 
                subparagraph (B)(ii)(II) for the year.
            ``(3) No revision in percent.--
                    ``(A) In general.--The Secretary may not 
                make any adjustment to the percent determined 
                under paragraph (2)(B) for any year.
                    ``(B) Rule of construction.--Nothing in 
                this subsection shall be construed to limit the 
                authority of the Secretary to make adjustments 
                to the applicable amounts determined under 
                paragraph (1) as appropriate for purposes of 
                updating data or for purposes of adopting an 
                improved risk adjustment methodology.''.
    (b) Refinements to Health Status Adjustment.--Section 
1853(a)(1)(C) of such Act (42 U.S.C. 1395w-23) is amended--
            (1) by designating the matter after the heading as 
        a clause (i) with the following heading: ``In 
        general.--'' and indenting appropriately; and
            (2) by adding at the end the following:
                            ``(ii) Application during phase-out 
                        of budget neutrality factor.--For 2006 
                        through 2010:
                                    ``(I) In applying the 
                                adjustment under clause (i) for 
                                health status to payment 
                                amounts, the Secretary shall 
                                ensure that such adjustment 
                                reflects changes in treatment 
                                and coding practices in the 
                                fee-for-service sector and 
                                reflects differences in coding 
                                patterns between Medicare 
                                Advantage plans and providers 
                                under part A and B to the 
                                extent that the Secretary has 
                                identified such differences.
                                    ``(II) In order to ensure 
                                payment accuracy, the Secretary 
                                shall conduct an analysis of 
                                the differences described in 
                                subclause (I). The Secretary 
                                shall complete such analysis by 
                                a date necessary to ensure that 
                                the results of such analysis 
                                are incorporated into the risk 
                                scores only for 2008, 2009, and 
                                2010. In conducting such 
                                analysis, the Secretary shall 
                                use data submitted with respect 
                                to 2004 and subsequent years, 
                                as available.''.

SEC. 5302. RURAL PACE PROVIDER GRANT PROGRAM.

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

                      TITLE VI--MEDICAID AND SCHIP

                          Subtitle A--Medicaid

               CHAPTER 1--PAYMENT FOR PRESCRIPTION DRUGS

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

    (a) Modification of Federal Upper Payment Limit for 
Multiple Source Drugs; Definition of Multiple Source Drugs.--
Section 1927 of the Social Security Act (42 U.S.C. 1396r-8) is 
amended--
            (1) in subsection (e)(4)--
                    (A) by striking ``The Secretary'' and 
                inserting ``Subject to paragraph (5), the 
                Secretary''; and
                    (B) by inserting ``(or, effective January 
                1, 2007, two or more)'' after ``three or 
                more'';
            (2) by adding at the end of subsection (e) the 
        following new paragraph:
            ``(5) Use of amp in upper payment limits.--
        Effective January 1, 2007, in applying the Federal 
        upper reimbursement limit under paragraph (4) and 
        section 447.332(b) of title 42 of the Code of Federal 
        Regulations, the Secretary shall substitute 250 percent 
        of the average manufacturer price (as computed without 
        regard to customary prompt pay discounts extended to 
        wholesalers) for 150 percent of the published price.'';
            (3) in subsection (k)(7)(A)(i), in the matter 
        preceding subclause (I), by striking ``are 2 or more 
        drug products'' and inserting ``at least 1 other drug 
        product''; and
            (4) in subclauses (I), (II), and (III) of 
        subsection (k)(7)(A)(i), by striking ``are'' and 
        inserting ``is'' each place it appears.
    (b) Disclosure of Price Information to States and the 
Public.--Subsection (b)(3) of such section is amended--
            (1) in subparagraph (A)--
                    (A) in clause (i), by inserting ``month of 
                a'' after ``last day of each''; and
                    (B) by adding at the end the following: 
                ``Beginning July 1, 2006, the Secretary shall 
                provide on a monthly basis to States under 
                subparagraph (D)(iv) the most recently reported 
                average manufacturer prices for single source 
                drugs and for multiple source drugs and shall, 
                on at least a quarterly basis, update the 
                information posted on the website under 
                subparagraph (D)(v).''; and
            (2) in subparagraph (D)--
                    (A) by striking ``and'' at the end of 
                clause (ii);
                    (B) by striking the period at the end of 
                clause (iii) and inserting a comma; and
                    (C) by inserting after clause (iii) the 
                following new clauses:
                            ``(iv) to States to carry out this 
                        title, and
                            ``(v) to the Secretary to disclose 
                        (through a website accessible to the 
                        public) average manufacturer prices.''.
    (c) Definition of Average Manufacturer Price.--
            (1) Exclusion of customary prompt pay discounts 
        extended to wholesalers.--Subsection (k)(1) of such 
        section is amended--
                    (A) by striking ``The term'' and inserting 
                the following:
                    ``(A) In general.--Subject to subparagraph 
                (B), the term'';
                    (B) by striking ``, after deducting 
                customary prompt pay discounts''; and
                    (C) by adding at the end the following:
                    ``(B) Exclusion of customary prompt pay 
                discounts extended to wholesalers.--The average 
                manufacturer price for a covered outpatient 
                drug shall be determined without regard to 
                customary prompt pay discounts extended to 
                wholesalers.''.
            (2) Manufacturer reporting of prompt pay 
        discounts.--Subsection (b)(3)(A)(i) of such section is 
        amended by inserting ``, customary prompt pay discounts 
        extended to wholesalers,'' after ``(k)(1))''.
            (3) Requirement to promulgate regulation.--
                    (A) Inspector general recommendations.--Not 
                later than June 1, 2006, the Inspector General 
                of the Department of Health and Human Services 
                shall--
                            (i) review the requirements for, 
                        and manner in which, average 
                        manufacturer prices are determined 
                        under section 1927 of the Social 
                        Security Act, as amended by this 
                        section; and
                            (ii) shall submit to the Secretary 
                        of Health and Human Services and 
                        Congress such recommendations for 
                        changes in such requirements or manner 
                        as the Inspector General determines to 
                        be appropriate.
                    (B) Deadline for promulgation.--Not later 
                than July 1, 2007, the Secretary of Health and 
                Human Services shall promulgate a regulation 
                that clarifies the requirements for, and manner 
                in which, average manufacturer prices are 
                determined under section 1927 of the Social 
                Security Act, taking into consideration the 
                recommendations submitted to the Secretary in 
                accordance with subparagraph (A)(ii).
    (d) Exclusion of Sales at a Nominal Price From 
Determination of Best Price.--
            (1) Manufacturer reporting of sales.--Subsection 
        (b)(3)(A)(iii) of such section is amended by inserting 
        before the period at the end the following: ``, and, 
        for calendar quarters beginning on or after January 1, 
        2007 and only with respect to the information described 
        in subclause (III), for covered outpatient drugs''.
            (2) Limitation on sales at a nominal price.--
        Subsection (c)(1) of such section is amended by adding 
        at the end the following new subparagraph:
                    ``(D) Limitation on sales at a nominal 
                price.--
                            ``(i) In general.--For purposes of 
                        subparagraph (C)(ii)(III) and 
                        subsection (b)(3)(A)(iii)(III), only 
                        sales by a manufacturer of covered 
                        outpatient drugs at nominal prices to 
                        the following shall be considered to be 
                        sales at a nominal price or merely 
                        nominal in amount:
                                    ``(I) A covered entity 
                                described in section 340B(a)(4) 
                                of the Public Health Service 
                                Act.
                                    ``(II) An intermediate care 
                                facility for the mentally 
                                retarded.
                                    ``(III) A State-owned or 
                                operated nursing facility.
                                    ``(IV) Any other facility 
                                or entity that the Secretary 
                                determines is a safety net 
                                provider to which sales of such 
                                drugs at a nominal price would 
                                be appropriate based on the 
                                factors described in clause 
                                (ii).
                            ``(ii) Factors.--The factors 
                        described in this clause with respect 
                        to a facility or entity are the 
                        following:
                                    ``(I) The type of facility 
                                or entity.
                                    ``(II) The services 
                                provided by the facility or 
                                entity.
                                    ``(III) The patient 
                                population served by the 
                                facility or entity.
                                    ``(IV) The number of other 
                                facilities or entities eligible 
                                to purchase at nominal prices 
                                in the same service area.
                            ``(iii) Nonapplication.--Clause (i) 
                        shall not apply with respect to sales 
                        by a manufacturer at a nominal price of 
                        covered outpatient drugs pursuant to a 
                        master agreement under section 8126 of 
                        title 38, United States Code.''.
    (e) Retail Survey Prices; State Payment and Utilization 
Rates; and Performance Rankings.--Such section is further 
amended by inserting after subsection (e) the following new 
subsection:
    ``(f) Survey of Retail Prices; State Payment and 
Utilization Rates; and Performance Rankings.--
            ``(1) Survey of retail prices.--
                    ``(A) Use of vendor.--The Secretary may 
                contract services for--
                            ``(i) the determination on a 
                        monthly basis of retail survey prices 
                        for covered outpatient drugs that 
                        represent a nationwide average of 
                        consumer purchase prices for such 
                        drugs, net of all discounts and rebates 
                        (to the extent any information with 
                        respect to such discounts and rebates 
                        is available); and
                            ``(ii) the notification of the 
                        Secretary when a drug product that is 
                        therapeutically and pharmaceutically 
                        equivalent and bioequivalent becomes 
                        generally available.
                    ``(B) Secretary response to notification of 
                availability of multiple source products.--If 
                contractor notifies the Secretary under 
                subparagraph (A)(ii) that a drug product 
                described in such subparagraph has become 
                generally available, the Secretary shall make a 
                determination, within 7 days after receiving 
                such notification, as to whether the product is 
                now described in subsection (e)(4).
                    ``(C) Use of competitive bidding.--In 
                contracting for such services, the Secretary 
                shall competitively bid for an outside vendor 
                that has a demonstrated history in--
                            ``(i) surveying and determining, on 
                        a representative nationwide basis, 
                        retail prices for ingredient costs of 
                        prescription drugs;
                            ``(ii) working with retail 
                        pharmacies, commercial payers, and 
                        States in obtaining and disseminating 
                        such price information; and
                            ``(iii) collecting and reporting 
                        such price information on at least a 
                        monthly basis.
                In contracting for such services, the Secretary 
                may waive such provisions of the Federal 
                Acquisition Regulation as are necessary for the 
                efficient implementation of this subsection, 
                other than provisions relating to 
                confidentiality of information and such other 
                provisions as the Secretary determines 
                appropriate.
                    ``(D) Additional provisions.--A contract 
                with a vendor under this paragraph shall 
                include such terms and conditions as the 
                Secretary shall specify, including the 
                following:
                            ``(i) The vendor must monitor the 
                        marketplace and report to the Secretary 
                        each time there is a new covered 
                        outpatient drug generally available.
                            ``(ii) The vendor must update the 
                        Secretary no less often than monthly on 
                        the retail survey prices for covered 
                        outpatient drugs.
                            ``(iii) The contract shall be 
                        effective for a term of 2 years.
                    ``(E) Availability of information to 
                states.--Information on retail survey prices 
                obtained under this paragraph, including 
                applicable information on single source drugs, 
                shall be provided to States on at least a 
                monthly basis. The Secretary shall devise and 
                implement a means for providing access to each 
                State agency designated under section 
                1902(a)(5) with responsibility for the 
                administration or supervision of the 
                administration of the State plan under this 
                title of the retail survey price determined 
                under this paragraph.
            ``(2) Annual state report.--Each State shall 
        annually report to the Secretary information on--
                    ``(A) the payment rates under the State 
                plan under this title for covered outpatient 
                drugs;
                    ``(B) the dispensing fees paid under such 
                plan for such drugs; and
                    ``(C) utilization rates for noninnovator 
                multiple source drugs under such plan.
            ``(3) Annual state performance rankings.--
                    ``(A) Comparative analysis.--The Secretary 
                annually shall compare, for the 50 most widely 
                prescribed drugs identified by the Secretary, 
                the national retail sales price data (collected 
                under paragraph (1)) for such drugs with data 
                on prices under this title for each such drug 
                for each State.
                    ``(B) Availability of information.--The 
                Secretary shall submit to Congress and the 
                States full information regarding the annual 
                rankings made under subparagraph (A).
            ``(4) Appropriation.--Out of any funds in the 
        Treasury not otherwise appropriated, there is 
        appropriated to the Secretary of Health and Human 
        Services $5,000,000 for each of fiscal years 2006 
        through 2010 to carry out this subsection.''.
    (f) Miscellaneous Amendments.--
            (1) In general.--Sections 1927(g)(1)(B)(i)(II) and 
        1861(t)(2)(B)(ii)(I) of such Act are each amended by 
        inserting ``(or its successor publications)'' after 
        ``United States Pharmacopoeia-Drug Information''.
            (2) Paperwork reduction.--The last sentence of 
        section 1927(g)(2)(A)(ii) of such Act (42 U.S.C. 1396r-
        8(g)(2)(A)(ii)) is amended by inserting before the 
        period at the end the following: ``, or to require 
        verification of the offer to provide consultation or a 
        refusal of such offer''.
            (3) Effective date.--The amendments made by this 
        subsection shall take effect on the date of the 
        enactment of this Act.
    (g) Effective Date.--Except as otherwise provided, the 
amendments made by this section shall take effect on January 1, 
2007, without regard to whether or not final regulations to 
carry out such amendments have been promulgated by such date.

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

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

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

    (a) Inclusion With Other Reported Average Manufacturer and 
Best Prices.--Section 1927(b)(3)(A) of the Social Security Act 
(42 U.S.C. 1396r-8(b)(3)(A)) is amended--
            (1) by striking clause (i) and inserting the 
        following:
                            ``(i) not later than 30 days after 
                        the last day of each rebate period 
                        under the agreement--
                                    ``(I) on the average 
                                manufacturer price (as defined 
                                in subsection (k)(1)) for 
                                covered outpatient drugs for 
                                the rebate period under the 
                                agreement (including for all 
                                such drugs that are sold under 
                                a new drug application approved 
                                under section 505(c) of the 
                                Federal Food, Drug, and 
                                Cosmetic Act); and
                                    ``(II) for single source 
                                drugs and innovator multiple 
                                source drugs (including all 
                                such drugs that are sold under 
                                a new drug application approved 
                                under section 505(c) of the 
                                Federal Food, Drug, and 
                                Cosmetic Act), on the 
                                manufacturer's best price (as 
                                defined in subsection 
                                (c)(1)(C)) for such drugs for 
                                the rebate period under the 
                                agreement;''; and
            (2) in clause (ii), by inserting ``(including for 
        such drugs that are sold under a new drug application 
        approved under section 505(c) of the Federal Food, 
        Drug, and Cosmetic Act)'' after ``drugs''.
    (b) Conforming Amendments.--Section 1927 of such Act (42 
U.S.C. 1396r-8) is amended--
            (1) in subsection (c)(1)(C)--
                    (A) in clause (i), in the matter preceding 
                subclause (I), by inserting after ``or 
                innovator multiple source drug of a 
                manufacturer'' the following: ``(including the 
                lowest price available to any entity for any 
                such drug of a manufacturer that is sold under 
                a new drug application approved under section 
                505(c) of the Federal Food, Drug, and Cosmetic 
                Act)''; and
                    (B) in clause (ii)--
                            (i) in subclause (II), by striking 
                        ``and'' at the end;
                            (ii) in subclause (III), by 
                        striking the period at the end and 
                        inserting ``; and''; and
                            (iii) by adding at the end the 
                        following:
                                    ``(IV) in the case of a 
                                manufacturer that approves, 
                                allows, or otherwise permits 
                                any other drug of the 
                                manufacturer to be sold under a 
                                new drug application approved 
                                under section 505(c) of the 
                                Federal Food, Drug, and 
                                Cosmetic Act, shall be 
                                inclusive of the lowest price 
                                for such authorized drug 
                                available from the manufacturer 
                                during the rebate period to any 
                                manufacturer, wholesaler, 
                                retailer, provider, health 
                                maintenance organization, 
                                nonprofit entity, or 
                                governmental entity within the 
                                United States, excluding those 
                                prices described in subclauses 
                                (I) through (IV) of clause 
                                (i).''; and
            (2) in subsection (k), as amended by section 
        6001(c)(1), by adding at the end the following:
                    ``(C) Inclusion of section 505(c) drugs.--
                In the case of a manufacturer that approves, 
                allows, or otherwise permits any drug of the 
                manufacturer to be sold under a new drug 
                application approved under section 505(c) of 
                the Federal Food, Drug, and Cosmetic Act, such 
                term shall be inclusive of the average price 
                paid for such drug by wholesalers for drugs 
                distributed to the retail pharmacy class of 
                trade.''.
    (c) Effective Date.--The amendments made by this section 
take effect on January 1, 2007.

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

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

                CHAPTER 2--LONG-TERM CARE UNDER MEDICAID

              Subchapter A--Reform of Asset Transfer Rules

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

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

SEC. 6012. DISCLOSURE AND TREATMENT OF ANNUITIES.

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

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

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

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

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

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

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

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

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

           Subchapter B--Expanded Access to Certain Benefits

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

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

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

SEC. 6032. ENCOURAGING THE ENACTMENT OF STATE FALSE CLAIMS ACTS.

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

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

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

SEC. 6033. EMPLOYEE EDUCATION ABOUT FALSE CLAIMS RECOVERY.

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

SEC. 6034. PROHIBITION ON RESTOCKING AND DOUBLE BILLING OF PRESCRIPTION 
                    DRUGS.

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

SEC. 6035. MEDICAID INTEGRITY PROGRAM.

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

                      ``MEDICAID INTEGRITY PROGRAM

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

SEC. 6036. ENHANCING THIRD PARTY IDENTIFICATION AND PAYMENT.

    (a) Clarification of Third Parties Legally Responsible for 
Payment of a Claim for a Health Care Item or Service.--Section 
1902(a)(25) of the Social Security Act (42 U.S.C. 1396a(a)(25)) 
is amended--
            (1) in subparagraph (A), in the matter preceding 
        clause (i)--
                    (A) by inserting ``, self-insured plans'' 
                after ``health insurers''; and
                    (B) by striking ``and health maintenance 
                organizations'' and inserting ``managed care 
                organizations, pharmacy benefit managers, or 
                other parties that are, by statute, contract, 
                or agreement, legally responsible for payment 
                of a claim for a health care item or service''; 
                and
            (2) in subparagraph (G)--
                    (A) by inserting ``a self-insured plan,'' 
                after ``1974,''; and
                    (B) by striking ``and a health maintenance 
                organization'' and inserting ``a managed care 
                organization, a pharmacy benefit manager, or 
                other party that is, by statute, contract, or 
                agreement, legally responsible for payment of a 
                claim for a health care item or service''.
     (b) Requirement for Third Parties To Provide the State 
With Coverage Eligibility and Claims Data.--Section 1902(a)(25) 
of such Act (42 U.S.C. 1396a(a)(25)) is amended--
            (1) in subparagraph (G), by striking ``and'' at the 
        end;
            (2) in subparagraph (H), by adding ``and'' after 
        the semicolon at the end; and
            (3) by inserting after subparagraph (H), the 
        following:
                    ``(I) that the State shall provide 
                assurances satisfactory to the Secretary that 
                the State has in effect laws requiring health 
                insurers, including self-insured plans, group 
                health plans (as defined in section 607(1) of 
                the Employee Retirement Income Security Act of 
                1974), service benefit plans, managed care 
                organizations, pharmacy benefit managers, or 
                other parties that are, by statute, contract, 
                or agreement, legally responsible for payment 
                of a claim for a health care item or service, 
                as a condition of doing business in the State, 
                to--
                            ``(i) provide, with respect to 
                        individuals who are eligible for, or 
                        are provided, medical assistance under 
                        the State plan, upon the request of the 
                        State, information to determine during 
                        what period the individual or their 
                        spouses or their dependents may be (or 
                        may have been) covered by a health 
                        insurer and the nature of the coverage 
                        that is or was provided by the health 
                        insurer (including the name, address, 
                        and identifying number of the plan) in 
                        a manner prescribed by the Secretary;
                            ``(ii) accept the State's right of 
                        recovery and the assignment to the 
                        State of any right of an individual or 
                        other entity to payment from the party 
                        for an item or service for which 
                        payment has been made under the State 
                        plan;
                            ``(iii) respond to any inquiry by 
                        the State regarding a claim for payment 
                        for any health care item or service 
                        that is submitted not later than 3 
                        years after the date of the provision 
                        of such health care item or service; 
                        and
                            ``(iv) agree not to deny a claim 
                        submitted by the State solely on the 
                        basis of the date of submission of the 
                        claim, the type or format of the claim 
                        form, or a failure to present proper 
                        documentation at the point-of-sale that 
                        is the basis of the claim, if--
                                    ``(I) the claim is 
                                submitted by the State within 
                                the 3-year period beginning on 
                                the date on which the item or 
                                service was furnished; and
                                    ``(II) any action by the 
                                State to enforce its rights 
                                with respect to such claim is 
                                commenced within 6 years of the 
                                State's submission of such 
                                claim;''.
    (c) Effective Date.--Except as provided in section 6035(e), 
the amendments made by this section take effect on January 1, 
2006.

SEC. 6037. IMPROVED ENFORCEMENT OF DOCUMENTATION REQUIREMENTS.

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

          CHAPTER 4--FLEXIBILITY IN COST SHARING AND BENEFITS

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

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

        ``STATE OPTION FOR ALTERNATIVE PREMIUMS AND COST SHARING

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

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

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

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

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

SEC. 6044. USE OF BENCHMARK BENEFIT PACKAGES.

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

                ``STATE FLEXIBILITY IN BENEFIT PACKAGES

    ``Sec. 1937. (a) State Option of Providing Benchmark 
Benefits.--
            ``(1) Authority.--
                    ``(A) In general.--Notwithstanding any 
                other provision of this title, a State, at its 
                option as a State plan amendment, may provide 
                for medical assistance under this title to 
                individuals within one or more groups of 
                individuals specified by the State through 
                enrollment in coverage that provides--
                            ``(i) benchmark coverage described 
                        in subsection (b)(1) or benchmark 
                        equivalent coverage described in 
                        subsection (b)(2); and
                            ``(ii) for any child under 19 years 
                        of age who is covered under the State 
                        plan under section 1902(a)(10)(A), 
                        wrap-around benefits to the benchmark 
                        coverage or benchmark equivalent 
                        coverage consisting of early and 
                        periodic screening, diagnostic, and 
                        treatment services defined in section 
                        1905(r).
                    ``(B) Limitation.--The State may only 
                exercise the option under subparagraph (A) for 
                an individual eligible under an eligibility 
                category that had been established under the 
                State plan on or before the date of the 
                enactment of this section.
                    ``(C) Option of wrap-around benefits.--In 
                the case of coverage described in subparagraph 
                (A), a State, at its option, may provide such 
                wrap-around or additional benefits as the State 
                may specify.
                    ``(D) Treatment as medical assistance.--
                Payment of premiums for such coverage under 
                this subsection shall be treated as payment of 
                other insurance premiums described in the third 
                sentence of section 1905(a).
            ``(2) Application.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), a State may require that a 
                full-benefit eligible individual (as defined in 
                subparagraph (C)) within a group obtain 
                benefits under this title through enrollment in 
                coverage described in paragraph (1)(A). A State 
                may apply the previous sentence to individuals 
                within 1 or more groups of such individuals.
                    ``(B) Limitation on application.--A State 
                may not require under subparagraph (A) an 
                individual to obtain benefits through 
                enrollment described in paragraph (1)(A) if the 
                individual is within one of the following 
                categories of individuals:
                            ``(i) Mandatory pregnant women.--
                        The individual is a pregnant woman who 
                        is required to be covered under the 
                        State plan under section 
                        1902(a)(10)(A)(i).
                            ``(ii) Blind or disabled 
                        individuals.--The individual qualifies 
                        for medical assistance under the State 
                        plan on the basis of being blind or 
                        disabled (or being treated as being 
                        blind or disabled) without regard to 
                        whether the individual is eligible for 
                        supplemental security income benefits 
                        under title XVI on the basis of being 
                        blind or disabled and including an 
                        individual who is eligible for medical 
                        assistance on the basis of section 
                        1902(e)(3).
                            ``(iii) Dual eligibles.--The 
                        individual is entitled to benefits 
                        under any part of title XVIII.
                            ``(iv) Terminally ill hospice 
                        patients.--The individual is terminally 
                        ill and is receiving benefits for 
                        hospice care under this title.
                            ``(v) Eligible on basis of 
                        institutionalization.--The individual 
                        is an inpatient in a hospital, nursing 
                        facility, intermediate care facility 
                        for the mentally retarded, or other 
                        medical institution, and is required, 
                        as a condition of receiving services in 
                        such institution under the State plan, 
                        to spend for costs of medical care all 
                        but a minimal amount of the 
                        individual's income required for 
                        personal needs.
                            ``(vi) Medically frail and special 
                        medical needs individuals.--The 
                        individual is medically frail or 
                        otherwise an individual with special 
                        medical needs (as identified in 
                        accordance with regulations of the 
                        Secretary).
                            ``(vii) Beneficiaries qualifying 
                        for long-term care services.--The 
                        individual qualifies based on medical 
                        condition for medical assistance for 
                        long-term care services described in 
                        section 1917(c)(1)(C).
                            ``(viii) Children in foster care 
                        receiving child welfare services and 
                        children receiving foster care or 
                        adoption assistance.--The individual is 
                        an individual with respect to whom aid 
                        or assistance is made available under 
                        part B of title IV to children in 
                        foster care and individuals with 
                        respect to whom adoption or foster care 
                        assistance is made available under part 
                        E of such title, without regard to age.
                            ``(ix) TANF and section 1931 
                        parents.--The individual qualifies for 
                        medical assistance on the basis of 
                        eligibility to receive assistance under 
                        a State plan funded under part A of 
                        title IV (as in effect on or after the 
                        welfare reform effective date defined 
                        in section 1931(i)).
                            ``(x) Women in the breast or 
                        cervical cancer program.--The 
                        individual is a woman who is receiving 
                        medical assistance by virtue of the 
                        application of sections 
                        1902(a)(10)(A)(ii)(XVIII) and 1902(aa).
                            ``(xii) Limited services 
                        beneficiaries.--The individual--
                                    ``(I) qualifies for medical 
                                assistance on the basis of 
                                section 
                                1902(a)(10)(A)(ii)(XII); or
                                    ``(II) is not a qualified 
                                alien (as defined in section 
                                431 of the Personal 
                                Responsibility and Work 
                                Opportunity Reconciliation Act 
                                of 1996) and receives care and 
                                services necessary for the 
                                treatment of an emergency 
                                medical condition in accordance 
                                with section 1903(v).
                    ``(C) Full-benefit eligible individuals.--
                            ``(i) In general.--For purposes of 
                        this paragraph, subject to clause (ii), 
                        the term `full-benefit eligible 
                        individual' means for a State for a 
                        month an individual who is determined 
                        eligible by the State for medical 
                        assistance for all services defined in 
                        section 1905(a) which are covered under 
                        the State plan under this title for 
                        such month under section 1902(a)(10)(A) 
                        or under any other category of 
                        eligibility for medical assistance for 
                        all such services under this title, as 
                        determined by the Secretary.
                            ``(ii) Exclusion of medically needy 
                        and spend-down populations.--Such term 
                        shall not include an individual 
                        determined to be eligible by the State 
                        for medical assistance under section 
                        1902(a)(10)(C) or by reason of section 
                        1902(f) or otherwise eligible based on 
                        a reduction of income based on costs 
                        incurred for medical or other remedial 
                        care.
    ``(b) Benchmark Benefit Packages.--
            ``(1) In general.--For purposes of subsection 
        (a)(1), each of the following coverage shall be 
        considered to be benchmark coverage:
                    ``(A) FEHBP-equivalent health insurance 
                coverage.--The standard Blue Cross/Blue Shield 
                preferred provider option service benefit plan, 
                described in and offered under section 8903(1) 
                of title 5, United States Code.
                    ``(B) State employee coverage.--A health 
                benefits coverage plan that is offered and 
                generally available to State employees in the 
                State involved.
                    ``(C) Coverage offered through hmo.--The 
                health insurance coverage plan that--
                            ``(i) is offered by a health 
                        maintenance organization (as defined in 
                        section 2791(b)(3) of the Public Health 
                        Service Act), and
                            ``(ii) has the largest insured 
                        commercial, non-medicaid enrollment of 
                        covered lives of such coverage plans 
                        offered by such a health maintenance 
                        organization in the State involved.
                    ``(D) Secretary-approved coverage.--Any 
                other health benefits coverage that the 
                Secretary determines, upon application by a 
                State, provides appropriate coverage for the 
                population proposed to be provided such 
                coverage.
            ``(2) Benchmark-equivalent coverage.--For purposes 
        of subsection (a)(1), coverage that meets the following 
        requirement shall be considered to be benchmark-
        equivalent coverage:
                    ``(A) Inclusion of basic services.--The 
                coverage includes benefits for items and 
                services within each of the following 
                categories of basic services:
                            ``(i) Inpatient and outpatient 
                        hospital services.
                            ``(ii) Physicians' surgical and 
                        medical services.
                            ``(iii) Laboratory and x-ray 
                        services.
                            ``(iv) Well-baby and well-child 
                        care, including age-appropriate 
                        immunizations.
                            ``(v) Other appropriate preventive 
                        services, as designated by the 
                        Secretary.
                    ``(B) Aggregate actuarial value equivalent 
                to benchmark package.--The coverage has an 
                aggregate actuarial value that is at least 
                actuarially equivalent to one of the benchmark 
                benefit packages described in paragraph (1).
                    ``(C) Substantial actuarial value for 
                additional services included in benchmark 
                package.--With respect to each of the following 
                categories of additional services for which 
                coverage is provided under the benchmark 
                benefit package used under subparagraph (B), 
                the coverage has an actuarial value that is 
                equal to at least 75 percent of the actuarial 
                value of the coverage of that category of 
                services in such package:
                            ``(i) Coverage of prescription 
                        drugs.
                            ``(ii) Mental health services.
                            ``(iii) Vision services.
                            ``(iv) Hearing services.
            ``(3) Determination of actuarial value.--The 
        actuarial value of coverage of benchmark benefit 
        packages shall be set forth in an actuarial opinion in 
        an actuarial report that has been prepared--
                    ``(A) by an individual who is a member of 
                the American Academy of Actuaries;
                    ``(B) using generally accepted actuarial 
                principles and methodologies;
                    ``(C) using a standardized set of 
                utilization and price factors;
                    ``(D) using a standardized population that 
                is representative of the population involved;
                    ``(E) applying the same principles and 
                factors in comparing the value of different 
                coverage (or categories of services);
                    ``(F) without taking into account any 
                differences in coverage based on the method of 
                delivery or means of cost control or 
                utilization used; and
                    ``(G) taking into account the ability of a 
                State to reduce benefits by taking into account 
                the increase in actuarial value of benefits 
                coverage offered under this title that results 
                from the limitations on cost sharing under such 
                coverage.
        The actuary preparing the opinion shall select and 
        specify in the memorandum the standardized set and 
        population to be used under subparagraphs (C) and (D).
            ``(4) Coverage of rural health clinic and fqhc 
        services.--Notwithstanding the previous provisions of 
        this section, a State may not provide for medical 
        assistance through enrollment of an individual with 
        benchmark coverage or benchmark equivalent coverage 
        under this section unless--
                    ``(A) the individual has access, through 
                such coverage or otherwise, to services 
                described in subparagraphs (B) and (C) of 
                section 1905(a)(2); and
                    ``(B) payment for such services is made in 
                accordance with the requirements of section 
                1902(bb).''.
    (b) Effective Date.--The amendment made by subsection (a) 
takes effect on March 31, 2006.

               CHAPTER 5--STATE FINANCING UNDER MEDICAID

SEC. 6051. MANAGED CARE ORGANIZATION PROVIDER TAX REFORM.

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

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

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

SEC. 6053. ADDITIONAL FMAP ADJUSTMENTS.

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

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

    (a) In General.--For purposes of determining the DSH 
allotment for the District of Columbia under section 1923 of 
the Social Security Act (42 U.S.C. 1396r-4) for fiscal year 
2006 and each subsequent fiscal year, the table in subsection 
(f)(2) of such section is amended under each of the columns for 
FY 00, FY 01, and FY 02, in the entry for the District of 
Columbia by striking ``32'' and inserting ``49''.
    (b) Effective Date.--The amendments made by subsection (a) 
shall take effect as if enacted on October 1, 2005, and shall 
only apply to disproportionate share hospital adjustment 
expenditures applicable to fiscal year 2006 and subsequent 
fiscal years made on or after that date.

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

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

                      CHAPTER 6--OTHER PROVISIONS

                  Subchapter A--Family Opportunity Act

SEC. 6061. SHORT TITLE OF SUBCHAPTER.

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

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

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

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

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

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

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

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

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

    Subchapter B--Money Follows the Person Rebalancing Demonstration

SEC. 6071. MONEY FOLLOWS THE PERSON REBALANCING DEMONSTRATION.

    (a) Program Purpose and Authority.--The Secretary is 
authorized to award, on a competitive basis, grants to States 
in accordance with this section for demonstration projects 
(each in this section referred to as an ``MFP demonstration 
project'') designed to achieve the following objectives with 
respect to institutional and home and community-based long-term 
care services under State Medicaid programs:
            (1) Rebalancing.--Increase the use of home and 
        community-based, rather than institutional, long-term 
        care services.
            (2) Money follows the person.--Eliminate barriers 
        or mechanisms, whether in the State law, the State 
        Medicaid plan, the State budget, or otherwise, that 
        prevent or restrict the flexible use of Medicaid funds 
        to enable Medicaid-eligible individuals to receive 
        support for appropriate and necessary long-term 
        services in the settings of their choice.
            (3) Continuity of service.--Increase the ability of 
        the State Medicaid program to assure continued 
        provision of home and community-based long-term care 
        services to eligible individuals who choose to 
        transition from an institutional to a community 
        setting.
            (4) Quality assurance and quality improvement.--
        Ensure that procedures are in place (at least 
        comparable to those required under the qualified HCB 
        program) to provide quality assurance for eligible 
        individuals receiving Medicaid home and community-based 
        long-term care services and to provide for continuous 
        quality improvement in such services.
    (b) Definitions.--For purposes of this section:
            (1) Home and community-based long-term care 
        services.--The term ``home and community-based long-
        term care services'' means, with respect to a State 
        Medicaid program, home and community-based services 
        (including home health and personal care services) that 
        are provided under the State's qualified HCB program or 
        that could be provided under such a program but are 
        otherwise provided under the Medicaid program.
            (2) Eligible individual.--The term ``eligible 
        individual'' means, with respect to an MFP 
        demonstration project of a State, an individual in the 
        State--
                    (A) who, immediately before beginning 
                participation in the MFP demonstration 
                project--
                            (i) resides (and has resided, for a 
                        period of not less than 6 months or for 
                        such longer minimum period, not to 
                        exceed 2 years, as may be specified by 
                        the State) in an inpatient facility;
                            (ii) is receiving Medicaid benefits 
                        for inpatient services furnished by 
                        such inpatient facility; and
                            (iii) with respect to whom a 
                        determination has been made that, but 
                        for the provision of home and 
                        community-based long-term care 
                        services, the individual would continue 
                        to require the level of care provided 
                        in an inpatient facility and, in any 
                        case in which the State applies a more 
                        stringent level of care standard as a 
                        result of implementing the State plan 
                        option permitted under section 1915(i) 
                        of the Social Security Act, the 
                        individual must continue to require at 
                        least the level of care which had 
                        resulted in admission to the 
                        institution; and
                    (B) who resides in a qualified residence 
                beginning on the initial date of participation 
                in the demonstration project.
            (3) Inpatient facility.--The term ``inpatient 
        facility'' means a hospital, nursing facility, or 
        intermediate care facility for the mentally retarded. 
        Such term includes an institution for mental diseases, 
        but only, with respect to a State, to the extent 
        medical assistance is available under the State 
        Medicaid plan for services provided by such 
        institution.
            (4) Medicaid.--The term ``Medicaid'' means, with 
        respect to a State, the State program under title XIX 
        of the Social Security Act (including any waiver or 
        demonstration under such title or under section 1115 of 
        such Act relating to such title).
            (5) Qualified hcb program.--The term ``qualified 
        HCB program'' means a program providing home and 
        community-based long-term care services operating under 
        Medicaid, whether or not operating under waiver 
        authority.
            (6) Qualified residence.--The term ``qualified 
        residence'' means, with respect to an eligible 
        individual--
                    (A) a home owned or leased by the 
                individual or the individual's family member;
                    (B) an apartment with an individual lease, 
                with lockable access and egress, and which 
                includes living, sleeping, bathing, and cooking 
                areas over which the individual or the 
                individual's family has domain and control; and
                    (C) a residence, in a community-based 
                residential setting, in which no more than 4 
                unrelated individuals reside.
            (7) Qualified expenditures.--The term ``qualified 
        expenditures'' means expenditures by the State under 
        its MFP demonstration project for home and community-
        based long-term care services for an eligible 
        individual participating in the MFP demonstration 
        project, but only with respect to services furnished 
        during the 12-month period beginning on the date the 
        individual is discharged from an inpatient facility 
        referred to in paragraph (2)(A)(i).
            (8) Self-directed services.--The term ``self-
        directed'' means, with respect to home and community-
        based long-term care services for an eligible 
        individual, such services for the individual which are 
        planned and purchased under the direction and control 
        of such individual or the individual's authorized 
        representative (as defined by the Secretary), including 
        the amount, duration, scope, provider, and location of 
        such services, under the State Medicaid program 
        consistent with the following requirements:
                    (A) Assessment.--There is an assessment of 
                the needs, capabilities, and preferences of the 
                individual with respect to such services.
                    (B) Service plan.--Based on such 
                assessment, there is developed jointly with 
                such individual or the individual's authorized 
                representative a plan for such services for 
                such individual that is approved by the State 
                and that--
                            (i) specifies those services, if 
                        any, which the individual or the 
                        individual's authorized representative 
                        would be responsible for directing;
                            (ii) identifies the methods by 
                        which the individual or the 
                        individual's authorized representative 
                        or an agency designated by an 
                        individual or representative will 
                        select, manage, and dismiss providers 
                        of such services;
                            (iii) specifies the role of family 
                        members and others whose participation 
                        is sought by the individual or the 
                        individual's authorized representative 
                        with respect to such services;
                            (iv) is developed through a person-
                        centered process that--
                                    (I) is directed by the 
                                individual or the individual's 
                                authorized representative;
                                    (II) builds upon the 
                                individual's capacity to engage 
                                in activities that promote 
                                community life and that 
                                respects the individual's 
                                preferences, choices, and 
                                abilities; and
                                    (III) involves families, 
                                friends, and professionals as 
                                desired or required by the 
                                individual or the individual's 
                                authorized representative;
                            (v) includes appropriate risk 
                        management techniques that recognize 
                        the roles and sharing of 
                        responsibilities in obtaining services 
                        in a self-directed manner and assure 
                        the appropriateness of such plan based 
                        upon the resources and capabilities of 
                        the individual or the individual's 
                        authorized representative; and
                            (vi) may include an individualized 
                        budget which identifies the dollar 
                        value of the services and supports 
                        under the control and direction of the 
                        individual or the individual's 
                        authorized representative.
                    (C) Budget Process.--With respect to 
                individualized budgets described in 
                subparagraph (B)(vi), the State application 
                under subsection (c)--
                            (i) describes the method for 
                        calculating the dollar values in such 
                        budgets based on reliable costs and 
                        service utilization;
                            (ii) defines a process for making 
                        adjustments in such dollar values to 
                        reflect changes in individual 
                        assessments and service plans; and
                            (iii) provides a procedure to 
                        evaluate expenditures under such 
                        budgets.
            (9) State.--The term ``State'' has the meaning 
        given such term for purposes of title XIX of the Social 
        Security Act.
    (c) State Application.--A State seeking approval of an MFP 
demonstration project shall submit to the Secretary, at such 
time and in such format as the Secretary requires, an 
application meeting the following requirements and containing 
such additional information, provisions, and assurances, as the 
Secretary may require:
            (1) Assurance of a public development process.--The 
        application contains an assurance that the State has 
        engaged, and will continue to engage, in a public 
        process for the design, development, and evaluation of 
        the MFP demonstration project that allows for input 
        from eligible individuals, the families of such 
        individuals, authorizedrepresentatives of such 
individuals, providers, and other interested parties.
            (2) Operation in connection with qualified hcb 
        program to assure continuity of services.--The State 
        will conduct the MFP demonstration project for eligible 
        individuals in conjunction with the operation of a 
        qualified HCB program that is in operation (or 
        approved) in the State for such individuals in a manner 
        that assures continuity of Medicaid coverage for such 
        individuals so long as such individuals continue to be 
        eligible for medical assistance.
            (3) Demonstration project period.--The application 
        shall specify the period of the MFP demonstration 
        project, which shall include at least 2 consecutive 
        fiscal years in the 5-fiscal-year period beginning with 
        fiscal year 2007.
            (4) Service area.--The application shall specify 
        the service area or areas of the MFP demonstration 
        project, which may be a statewide area or 1 or more 
        geographic areas of the State.
            (5) Targeted groups and numbers of individuals 
        served.--The application shall specify--
                    (A) the target groups of eligible 
                individuals to be assisted to transition from 
                an inpatient facility to a qualified residence 
                during each fiscal year of the MFP 
                demonstration project;
                    (B) the projected numbers of eligible 
                individuals in each targeted group of eligible 
                individuals to be so assisted during each such 
                year; and
                    (C) the estimated total annual qualified 
                expenditures for each fiscal year of the MFP 
                demonstration project.
            (6) Individual choice, continuity of care.--The 
        application shall contain assurances that--
                    (A) each eligible individual or the 
                individual's authorized representative will be 
                provided the opportunity to make an informed 
                choice regarding whether to participate in the 
                MFP demonstration project;
                    (B) each eligible individual or the 
                individual's authorized representative will 
                choose the qualified residence in which the 
                individual will reside and the setting in which 
                the individual will receive home and community-
                based long-term care services;
                    (C) the State will continue to make 
                available, so long as the State operates its 
                qualified HCB program consistent with 
                applicable requirements, home and community-
                based long-term care services to each 
                individual who completes participation in the 
                MFP demonstration project for as long as the 
                individual remains eligible for medical 
                assistance for such services under such 
                qualified HCB program (including meeting a 
                requirement relating to requiring a level of 
                care provided in an inpatient facility and 
                continuing to require such services, and, if 
                the State applies a more stringent level of 
                care standard as a result of implementing the 
                State plan option permitted under section 
                1915(i) of the Social Security Act, meeting the 
                requirement for at least the level of care 
                which had resulted in the individual's 
                admission to the institution).
            (7) Rebalancing.--The application shall--
                    (A) provide such information as the 
                Secretary may require concerning the dollar 
                amounts of State Medicaid expenditures for the 
                fiscal year, immediately preceding the first 
                fiscal year of the State's MFP demonstration 
                project, for long-term care services and the 
                percentage of such expenditures that were for 
                institutional long-term care services or were 
                for home and community-based long-term care 
                services;
                    (B)(i) specify the methods to be used by 
                the State to increase, for each fiscal year 
                during the MFP demonstration project, the 
                dollar amount of such total expenditures for 
                home and community-based long-term care 
                services and the percentage of such total 
                expenditures for long-term care services that 
                are for home and community-based long-term care 
                services; and
                    (ii) describe the extent to which the MFP 
                demonstration project will contribute to 
                accomplishment of objectives described in 
                subsection (a).
            (8) Money follows the person.--The application 
        shall describe the methods to be used by the State to 
        eliminate any legal, budgetary, or other barriers to 
        flexibility in the availability of Medicaid funds to 
        pay for long-term care services for eligible 
        individuals participating in the project in the 
        appropriate settings of their choice, including costs 
        to transition from an institutional setting to a 
        qualified residence.
            (9) Maintenance of effort and cost-effectiveness.--
        The application shall contain or be accompanied by such 
        information and assurances as may be required to 
        satisfy the Secretary that--
                    (A) total expenditures under the State 
                Medicaid program for home and community-based 
                long-term care services will not be less for 
                any fiscal year during the MFP demonstration 
                project than for the greater of such 
                expenditures for--
                            (i) fiscal year 2005; or
                            (ii) any succeeding fiscal year 
                        before the first year of the MFP 
                        demonstration project; and
                    (B) in the case of a qualified HCB program 
                operating under a waiver under subsection (c) 
                or (d) of section 1915 of the Social Security 
                Act (42 U.S.C. 1396n), but for the amount 
                awarded under a grant under this section, the 
                State program would continue to meet the cost-
                effectiveness requirements of subsection 
                (c)(2)(D) of such section or comparable 
                requirements under subsection (d)(5) of such 
                section, respectively.
            (10) Waiver requests.--The application shall 
        contain or be accompanied by requests for any 
        modification or adjustment of waivers of Medicaid 
        requirements described in subsection (d)(3), including 
        adjustments to the maximum numbers of individuals 
        included and package of benefits, including one-time 
        transitional services, provided.
            (11) Quality assurance and quality improvement.--
        The application shall include--
                    (A) a plan satisfactory to the Secretary 
                for quality assurance and quality improvement 
                for home and community-based long-term care 
                services under the State Medicaid program, 
                including a plan to assure the health and 
                welfare of individuals participating in the MFP 
                demonstration project; and
                    (B) an assurance that the State will 
                cooperate in carrying out activities under 
                subsection (f) to develop and implement 
                continuous quality assurance and quality 
                improvement systems for home and community-
                based long-term care services.
            (12) Optional program for self-directed services.--
        If the State elects to provide for any home and 
        community-based long-term care services as self-
        directed services (as defined in subsection (b)(8)) 
        under the MFP demonstration project, the application 
        shall provide the following:
                    (A) Meeting requirements.--A description of 
                how the project will meet the applicable 
                requirements of such subsection for the 
                provision of self-directed services.
                    (B) Voluntary election.--A description of 
                how eligible individuals will be provided with 
                the opportunity to make an informed election to 
                receive self-directed services under the 
                project and after the end of the project.
                    (C) State support in service plan 
                development.--Satisfactory assurances that the 
                State will provide support to eligible 
                individuals who self-direct in developing and 
                implementing their service plans.
                    (D) Oversight of receipt of services.--
                Satisfactory assurances that the State will 
                provide oversight of eligible individual's 
                receipt of such self-directed services, 
                including steps to assure the quality of 
                services provided and that the provision of 
                such services are consistent with the service 
                plan under such subsection.

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

                      Subchapter C--Miscellaneous

SEC. 6081. MEDICAID TRANSFORMATION GRANTS.

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

SEC. 6082. HEALTH OPPORTUNITY ACCOUNTS.

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

                     ``HEALTH OPPORTUNITY ACCOUNTS

    ``Sec. 1938. (a) Authority.--
            ``(1) In general.--Notwithstanding any other 
        provision of this title, the Secretary shall establish 
        a demonstration program under which States may provide 
        under their State plans under this title (including 
        such a plan operating under a statewide waiver under 
        section 1115) in accordance with this section for the 
        provision of alternative benefits consistent with 
        subsection (c) for eligible population groups in one or 
        more geographic areas of the State specified by the 
        State. An amendment under the previous sentence is 
        referred to in this section as a `State demonstration 
        program'.
            ``(2) Initial demonstration.--
                    ``(A) In general.--The demonstration 
                program under this section shall begin on 
                January 1, 2007. During the first 5 years of 
                such program, the Secretary shall not approve 
                more than 10 States to conduct demonstration 
                programs under this section, with each State 
                demonstration program covering 1 or more 
                geographic areas specified by the State. After 
                such 5-year period--
                            ``(i) unless the Secretary finds, 
                        taking into account cost-effectiveness, 
                        quality of care, and other criteria 
                        that the Secretary specifies, that a 
                        State demonstration program previously 
                        implemented has been unsuccessful, such 
                        a demonstration program may be extended 
                        or made permanent in the State; and
                            ``(ii) unless the Secretary finds, 
                        taking into account cost-effectiveness, 
                        quality of care, and other criteria 
                        that the Secretary specifies, that all 
                        State demonstration programs previously 
                        implemented were unsuccessful, other 
                        States may implement State 
                        demonstration programs.
                    ``(B) GAO report.--
                            ``(i) In general.--Not later than 3 
                        months after the end of the 5-year 
                        period described in subparagraph (A), 
                        the Comptroller General of the United 
                        States shall submit a report to 
                        Congress evaluating the demonstration 
                        programs conducted under this section 
                        during such period.
                            ``(ii) Appropriation.--Out of any 
                        funds in the Treasury not otherwise 
                        appropriated, there is appropriated to 
                        the Comptroller General of the United 
                        States, $550,000 for the period of 
                        fiscal years 2007 through 2010 to carry 
                        out clause (i).
            ``(3) Approval.--The Secretary shall not approve a 
        State demonstration program under paragraph (1) unless 
        the program includes the following:
                    ``(A) Creating patient awareness of the 
                high cost of medical care.
                    ``(B) Providing incentives to patients to 
                seek preventive care services.
                    ``(C) Reducing inappropriate use of health 
                care services.
                    ``(D) Enabling patients to take 
                responsibility for health outcomes.
                    ``(E) Providing enrollment counselors and 
                ongoing education activities.
                    ``(F) Providing transactions involving 
                health opportunity accounts to be conducted 
                electronically and without cash.
                    ``(G) Providing access to negotiated 
                provider payment rates consistent with this 
                section.
        Nothing in this section shall be construed as 
        preventing a State demonstration program from providing 
        incentives for patients obtaining appropriate 
        preventive care (as defined for purposes of section 
        223(c)(2)(C) of the Internal Revenue Code of 1986), 
        such as additional account contributions for an 
        individual demonstrating healthy prevention practices.
            ``(4) No requirement for statewideness.--Nothing in 
        this section or any other provision of law shall be 
        construed to require that a State must provide for the 
        implementation of a State demonstration program on a 
        Statewide basis.
    ``(b) Eligible Population Groups.--
            ``(1) In general.--A State demonstration program 
        under this section shall specify the eligible 
        population groups consistent with paragraphs (2) and 
        (3).
            ``(2) Eligibility limitations during initial 
        demonstration period.--During the initial 5 years of 
        the demonstration program under this section, a State 
        demonstration program shall not apply to any of the 
        following individuals:
                    ``(A) Individuals who are 65 years of age 
                or older.
                    ``(B) Individuals who are disabled, 
                regardless of whether or not their eligibility 
                for medical assistance under this title is 
                based on such disability.
                    ``(C) Individuals who are eligible for 
                medical assistance under this title only 
                because they are (or were within the previous 
                60 days) pregnant.
                    ``(D) Individuals who have been eligible 
                for medical assistance for a continuous period 
                of less than 3 months.
            ``(3) Additional limitations.--A State 
        demonstration program shall not apply to any individual 
        within a category of individuals described in section 
        1937(a)(2)(B).
            ``(4) Limitations.--
                    ``(A) State option.--This subsection shall 
                not be construed as preventing a State from 
                further limiting eligibility.
                    ``(B) On enrollees in medicaid managed care 
                organizations.--Insofar as the State provides 
                for eligibility of individuals who are enrolled 
                in medicaid managed care organizations, such 
                individuals may participate in the State 
                demonstration program only if the State 
                provides assurances satisfactory to the 
                Secretary that the following conditions are met 
                with respect to any such organization:
                            ``(i) In no case may the number of 
                        such individuals enrolled in the 
                        organization who participate in the 
                        program exceed 5 percent of the total 
                        number of individuals enrolled in such 
                        organization.
                            ``(ii) The proportion of enrollees 
                        in the organization who so participate 
                        is not significantly disproportionate 
                        to the proportion of such enrollees in 
                        other such organizations who 
                        participate.
                            ``(iii) The State has provided for 
                        an appropriate adjustment in the per 
                        capita payments to the organization to 
                        account for such participation, taking 
                        into account differences in the likely 
                        use of health services between 
                        enrollees who so participate and 
                        enrollees who do not so participate.
            ``(5) Voluntary participation.--An eligible 
        individual shall be enrolled in a State demonstration 
        program only if the individual voluntarily enrolls. 
        Except in such hardship cases as the Secretary shall 
        specify, such an enrollment shall be effective for a 
        period of 12 months, but may be extended for additional 
        periods of 12 months each with the consent of the 
        individual.
            ``(6) 1-year moratorium for reenrollment.--An 
        eligible individual who, for any reason, is disenrolled 
        from a State demonstration program conducted under this 
        section shall not be permitted to reenroll in such 
        program before the end of the 1-year period that begins 
        on the effective date of such disenrollment.
    ``(c) Alternative Benefits.--
            ``(1) In general.--The alternative benefits 
        provided under this section shall consist, consistent 
        with this subsection, of at least--
                    ``(A) coverage for medical expenses in a 
                year for items and services for which benefits 
                are otherwise provided under this title after 
                an annual deductible described in paragraph (2) 
                has been met; and
                    ``(B) contribution into a health 
                opportunity account.
        Nothing in subparagraph (A) shall be construed as 
        preventing a State from providing for coverage of 
        preventive care (referred to in subsection (a)(3)) 
        within the alternative benefits without regard to the 
        annual deductible.
            ``(2) Annual deductible.--The amount of the annual 
        deductible described in paragraph (1)(A) shall be at 
        least 100 percent, but no more than 110 percent, of the 
        annualized amount of contributions to the health 
        opportunity account under subsection (d)(2)(A)(i), 
        determined without regard to any limitation described 
        in subsection (d)(2)(C)(i)(II).
            ``(3) Access to negotiated provider payment 
        rates.--
                    ``(A) Fee-for-service enrollees.--In the 
                case of an individual who is participating in a 
                State demonstration program and who is not 
                enrolled with a medicaid managed care 
                organization, the State shall provide that the 
                individual may obtain demonstration program 
                medicaid services from--
                            ``(i) any participating provider 
                        under this title at the same payment 
                        rates that would be applicable to such 
                        services if the deductible described in 
                        paragraph (1)(A) was not applicable; or
                            ``(ii) any other provider at 
                        payment rates that do not exceed 125 
                        percent of the payment rate that would 
                        be applicable to such services 
                        furnished by a participating provider 
                        under this title if the deductible 
                        described in paragraph (1)(A) was not 
                        applicable.
                    ``(B) Treatment under medicaid managed care 
                plans.--In the case of an individual who is 
                participating in a State demonstration program 
                and is enrolled with a medicaid managed care 
                organization, the State shall enter into an 
                arrangement with the organization under which 
                the individual may obtain demonstration program 
                medicaid services from any provider described 
                in clause (ii) of subparagraph (A) at payment 
                rates that do not exceedthe payment rates that 
may be imposed under that clause.
                    ``(C) Computation.--The payment rates 
                described in subparagraphs (A) and (B) shall be 
                computed without regard to any cost sharing 
                that would be otherwise applicable under 
                sections 1916 and 1916A.
                    ``(D) Definitions.--For purposes of this 
                paragraph:
                            ``(i) The term `demonstration 
                        program medicaid services' means, with 
                        respect to an individual participating 
                        in a State demonstration program, 
                        services for which the individual would 
                        be provided medical assistance under 
                        this title but for the application of 
                        the deductible described in paragraph 
                        (1)(A).
                            ``(ii) The term `participating 
                        provider' means--
                                    ``(I) with respect to an 
                                individual described in 
                                subparagraph (A), a health care 
                                provider that has entered into 
                                a participation agreement with 
                                the State for the provision of 
                                services to individuals 
                                entitled to benefits under the 
                                State plan; or
                                    ``(II) with respect to an 
                                individual described in 
                                subparagraph (B) who is 
                                enrolled in a medicaid managed 
                                care organization, a health 
                                care provider that has entered 
                                into an arrangement for the 
                                provision of services to 
                                enrollees of the organization 
                                under this title.
            ``(4) No effect on subsequent benefits.--Except as 
        provided under paragraphs (1) and (2), alternative 
        benefits for an eligible individual shall consist of 
        the benefits otherwise provided to the individual, 
        including cost sharing relating to such benefits.
            ``(5) Overriding cost sharing and comparability 
        requirements for alternative benefits.--The provisions 
        of this title relating to cost sharing for benefits 
        (including sections 1916 and 1916A) shall not apply 
        with respect to benefits to which the annual deductible 
        under paragraph (1)(A) applies. The provisions of 
        section 1902(a)(10)(B) (relating to comparability) 
        shall not apply with respect to the provision of 
        alternative benefits (as described in this subsection).
            ``(6) Treatment as medical assistance.--Subject to 
        subparagraphs (D) and (E) of subsection (d)(2), 
        payments for alternative benefits under this section 
        (including contributions into a health opportunity 
        account) shall be treated as medical assistance for 
        purposes of section 1903(a).
            ``(7) Use of tiered deductible and cost sharing.--
                    ``(A) In general.--A State--
                            ``(i) may vary the amount of the 
                        annual deductible applied under 
                        paragraph (1)(A) based on the income of 
                        the family involved so long as it does 
                        not favor families with higher income 
                        over those with lower income; and
                            ``(ii) may vary the amount of the 
                        maximum out-of-pocket cost sharing (as 
                        defined in subparagraph (B)) based on 
                        the income of the family involved so 
                        long as it does not favor families with 
                        higher income over those with lower 
                        income.
                    ``(B) Maximum out-of-pocket cost sharing.--
                For purposes of subparagraph (A)(ii), the term 
                `maximum out-of-pocket cost sharing' means, for 
                an individual or family, the amount by which 
                the annual deductible level applied under 
                paragraph (1)(A) to the individual or family 
                exceeds the balance in the health opportunity 
                account for the individual or family.
            ``(8) Contributions by employers.--Nothing in this 
        section shall be construed as preventing an employer 
        from providing health benefits coverage consisting of 
        the coverage described in paragraph (1)(A) to 
        individuals who are provided alternative benefits under 
        this section.
    ``(d) Health Opportunity Account.--
            ``(1) In general.--For purposes of this section, 
        the term `health opportunity account' means an account 
        that meets the requirements of this subsection.
            ``(2) Contributions.--
                    ``(A) In general.--No contribution may be 
                made into a health opportunity account except--
                            ``(i) contributions by the State 
                        under this title; and
                            ``(ii) contributions by other 
                        persons and entities, such as 
                        charitable organizations, as permitted 
                        under section 1903(w).
                    ``(B) State contribution.--A State shall 
                specify the contribution amount that shall be 
                deposited under subparagraph (A)(i) into a 
                health opportunity account.
                    ``(C) Limitation on annual state 
                contribution provided and permitting imposition 
                of maximum account balance.--
                            ``(i) In general.--A State--
                                    ``(I) may impose 
                                limitations on the maximum 
                                contributions that may be 
                                deposited under subparagraph 
                                (A)(i) into a health 
                                opportunity account in a year;
                                    ``(II) may limit 
                                contributions into such an 
                                account once the balance in the 
                                account reaches a level 
                                specified by the State; and
                                    ``(III) subject to clauses 
                                (ii) and (iii) and subparagraph 
                                (D)(i), may not provide 
                                contributions described in 
                                subparagraph (A)(i) to a health 
                                opportunity account on behalf 
                                of an individual or family to 
                                the extent the amount of such 
                                contributions (including both 
                                State and Federal shares) 
                                exceeds, on an annual basis, 
                                $2,500 for each individual (or 
                                family member) who is an adult 
                                and $1,000 for each individual 
                                (or family member) who is a 
                                child.
                            ``(ii) Indexing of dollar 
                        limitations.--For each year after 2006, 
                        the dollar amounts specified in clause 
                        (i)(III) shall be annually increased by 
                        the Secretary by a percentage that 
                        reflects the annual percentage increase 
                        in the medical care component of the 
                        consumer price index for all urban 
                        consumers.
                            ``(iii) Budget neutral 
                        adjustment.--A State may provide for 
                        dollar limitations in excess of those 
                        specified in clause (i)(III) (as 
                        increased under clause (ii)) for 
                        specified individuals if the State 
                        provides assurances satisfactory to the 
                        Secretary that contributions otherwise 
                        made to other individuals will be 
                        reduced in a manner so as to provide 
                        for aggregate contributions that do not 
                        exceed the aggregate contributions that 
                        would otherwise be permitted under this 
                        subparagraph.
                    ``(D) Limitations on federal matching.--
                            ``(i) State contribution.--A State 
                        may contribute under subparagraph 
                        (A)(i) amounts to a health opportunity 
                        account in excess of the limitations 
                        provided under subparagraph 
                        (C)(i)(III), but no Federal financial 
                        participation shall be provided under 
                        section 1903(a) with respect to 
                        contributions in excess of such 
                        limitations.
                            ``(ii) No ffp for private 
                        contributions.--No Federal financial 
                        participation shall be provided under 
                        section 1903(a) with respect to any 
                        contributions described in subparagraph 
                        (A)(ii) to a health opportunity 
                        account.
                    ``(E) Application of different matching 
                rates.--The Secretary shall provide a method 
                under which, for expenditures made from a 
                health opportunity account for medical care for 
                which the Federal matching rate under section 
                1903(a) exceeds the Federal medical assistance 
                percentage, a State may obtain payment under 
                such section at such higher matching rate for 
                such expenditures.
            ``(3) Use.--
                    ``(A) General uses.--
                            ``(i) In general.--Subject to the 
                        succeeding provisions of this 
                        paragraph, amounts in a health 
                        opportunity account may be used for 
                        payment of such health care 
                        expenditures as the State specifies.
                            ``(ii) General limitation.--Subject 
                        to subparagraph (B)(ii), in no case 
                        shall such account be used for payment 
                        for health care expenditures that are 
                        not payment of medical care (as defined 
                        by section 213(d) of the Internal 
                        Revenue Code of 1986).
                            ``(iii) State restrictions.--In 
                        applying clause (i), a State may 
                        restrict payment for--
                                    ``(I) providers of items 
                                and services to providers that 
                                are licensed or otherwise 
                                authorized under State law to 
                                provide the item or service and 
                                may deny payment for such a 
                                provider on the basis that the 
                                provider has been found, 
                                whether with respect to this 
                                title or any other health 
                                benefit program, to have failed 
                                to meet quality standards or to 
                                have committed 1 or more acts 
                                of fraud or abuse; and
                                    ``(II) items and services 
                                insofar as the State finds they 
                                are not medically appropriate 
                                or necessary.
                            ``(iv) Electronic withdrawals.--The 
                        State demonstration program shall 
                        provide for a method whereby 
                        withdrawals may be made from the 
                        account for such purposes using an 
                        electronic system and shall not permit 
                        withdrawals from the account in cash.
                    ``(B) Maintenance of health opportunity 
                account after becoming ineligible for public 
                benefit.--
                            ``(i) In general.--Notwithstanding 
                        any other provision of law, if an 
                        account holder of a health opportunity 
                        account becomes ineligible for benefits 
                        under this title because of an increase 
                        in income or assets--
                                    ``(I) no additional 
                                contribution shall be made into 
                                the account under paragraph 
                                (2)(A)(i);
                                    ``(II) subject to clause 
                                (iii), the balance in the 
                                account shall be reduced by 25 
                                percent; and
                                    ``(III) subject to the 
                                succeeding provisions of this 
                                subparagraph, the account shall 
                                remain available to the account 
                                holder for 3 years after the 
                                date on which the individual 
                                becomes ineligible for such 
                                benefits for withdrawals under 
                                the same terms and conditions 
                                as if the account holder 
                                remained eligible for such 
                                benefits, and such withdrawals 
                                shall be treated as medical 
                                assistance in accordance with 
                                subsection (c)(6).
                            ``(ii) Special rules.--Withdrawals 
                        under this subparagraph from an 
                        account--
                                    ``(I) shall be available 
                                for the purchase of health 
                                insurance coverage; and
                                    ``(II) may, subject to 
                                clause (iv), be made available 
                                (at the option of the State) 
                                for such additional 
                                expenditures (such as job 
                                training and tuition expenses) 
                                specified by the State (and 
                                approved by the Secretary) as 
                                the State may specify.
                            ``(iii) Exception from 25 percent 
                        savings to government for private 
                        contributions.--Clause (i)(II) shall 
                        not apply to the portion of the account 
                        that is attributable to contributions 
                        described in paragraph (2)(A)(ii). For 
                        purposes of accounting for such 
                        contributions, withdrawals from a 
                        health opportunity account shall first 
                        be attributed to contributions 
                        described in paragraph (2)(A)(i).
                            ``(iv) Condition for non-health 
                        withdrawals.--No withdrawal may be made 
                        from an account under clause (ii)(II) 
                        unless the account holder has 
                        participated in the program under this 
                        section for at least 1 year.
                            ``(v) No requirement for 
                        continuation of coverage.--An account 
                        holder of a health opportunity account, 
                        after becoming ineligible for medical 
                        assistance under this title, is not 
                        required to purchase high-deductible or 
                        other insurance as a condition of 
                        maintaining or using the account.
            ``(4) Administration.--A State may coordinate 
        administration of health opportunity accounts through 
        the use of a third party administrator and reasonable 
        expenditures for the use of such administrator shall be 
        reimbursable to the State in the same manner as other 
        administrative expenditures under section 1903(a)(7).
            ``(5) Treatment.--Amounts in, or contributed to, a 
        health opportunity account shall not be counted as 
        income or assets for purposes of determining 
        eligibility for benefits under this title.
            ``(6) Unauthorized withdrawals.--A State may 
        establish procedures--
                    ``(A) to penalize or remove an individual 
                from the health opportunity account based on 
                nonqualified withdrawals by the individual from 
                such an account; and
                    ``(B) to recoup costs that derive from such 
                nonqualified withdrawals.''.

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

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

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

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

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

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

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

    (a) Home and Community-Based Services as an Optional 
Benefit for Elderly and Disabled Individuals.--Section 1915 of 
the Social Security Act (42 U.S.C. 1396n) is amended by adding 
at the end the following new subsection:
    ``(i) State Plan Amendment Option To Provide Home and 
Community-Based Services for Elderly and Disabled 
Individuals.--
            ``(1) In general.--Subject to the succeeding 
        provisions of this subsection, a State may provide 
        through a State plan amendment for the provision of 
        medical assistance for home and community-based 
        services (within the scope of services described in 
        paragraph (4)(B) of subsection (c) for which the 
        Secretary has the authority to approve a waiver and not 
        including room and board or such other services 
        requested by the State as the Secretary may approve) 
        for individuals eligible for medical assistance under 
        the State plan whose income does not exceed 150 percent 
        of the poverty line (as defined in section 2110(c)(5)), 
        without determining that but for the provision of such 
        services the individuals would require the level of 
        care provided in a hospital or a nursing facility or 
        intermediate care facility for the mentally retarded, 
        but only if the State meets the following requirements:
                    ``(A) Needs-based criteria for eligibility 
                for, and receipt of, home and community-based 
                services.--The State establishes needs-based 
                criteria for determining an individual's 
                eligibility under the State plan for medical 
                assistance for such home and community-based 
                services, and if the individual is eligible for 
                such services, the specific home and community-
                based services that the individual will 
                receive.
                    ``(B) Establishment of more stringent 
                needs-based eligibility criteria for 
                institutionalized care.--The State establishes 
                needs-based criteria for determining whether an 
                individual requires the level of care provided 
                in a hospital, a nursing facility, or an 
                intermediate care facility for the mentally 
                retarded under the State plan or under any 
                waiver of such plan that are more stringent 
                than the needs-based criteria established under 
                subparagraph (A) for determining eligibility 
                for home and community-based services.
                    ``(C) Projection of number of individuals 
                to be provided home and community-based 
                services.--
                            ``(i) In general.--The State 
                        submits to the Secretary, in such form 
                        and manner, and upon such frequency as 
                        the Secretary shall specify, the 
                        projected number of individuals to be 
                        provided home and community-based 
                        services.
                            ``(ii) Authority to limit number of 
                        eligible individuals.--A State may 
                        limit the number of individuals who are 
                        eligible for such services and may 
                        establish waiting lists for the receipt 
                        of such services.
                    ``(D) Criteria based on individual 
                assessment.--
                            ``(i) In general.--The criteria 
                        established by the State for purposes 
                        of subparagraphs (A) and (B) requires 
                        an assessment of an individual's 
                        support needs and capabilities, and may 
                        take into account the inability of the 
                        individual to perform 2 or more 
                        activities of daily living (as defined 
                        in section 7702B(c)(2)(B) of the 
                        Internal Revenue Code of 1986) or the 
                        need for significant assistance to 
                        perform such activities, and such other 
                        risk factors as the State determines to 
                        be appropriate.
                            ``(ii) Adjustment authority.--The 
                        State plan amendment provides the State 
                        with the option to modify the criteria 
                        established under subparagraph (A) 
                        (without having to obtain prior 
                        approval from the Secretary) in the 
                        event that the enrollment of 
                        individuals eligible for home and 
                        community-based services exceeds the 
                        projected enrollment submitted for 
                        purposes of subparagraph (C), but only 
                        if--
                                    ``(I) the State provides at 
                                least 60 days notice to the 
                                Secretary and the public of the 
                                proposed modification;
                                    ``(II) the State deems an 
                                individual receiving home and 
                                community-based services on the 
                                basis of the most recent 
                                version of the criteria in 
                                effect prior to the effective 
                                date of the modification to be 
                                eligible for such services for 
                                a period of at least 12 months 
                                beginning on the date the 
                                individual first received 
                                medical assistance for such 
                                services; and
                                    ``(III) after the effective 
                                date of such modification, the 
                                State, at a minimum, applies 
                                the criteria for determining 
                                whether an individual requires 
                                the level of care provided in a 
                                hospital, a nursing facility, 
                                or an intermediate care 
                                facility for the mentally 
                                retarded under the State plan 
                                or under any waiver of such 
                                plan which applied prior to the 
                                application of the more 
                                stringent criteria developed 
                                under subparagraph (B).
                    ``(E) Independent evaluation and 
                assessment.--
                            ``(i) Eligibility determination.--
                        The State uses an independent 
                        evaluation for making the 
                        determinations described in 
                        subparagraphs (A) and (B).
                            ``(ii) Assessment.--In the case of 
                        an individual who is determined to be 
                        eligible for home and community-based 
                        services, the State uses an independent 
                        assessment, based on the needs of the 
                        individual to--
                                    ``(I) determine a necessary 
                                level of services and supports 
                                to be provided, consistent with 
                                an individual's physical and 
                                mental capacity;
                                    ``(II) prevent the 
                                provision of unnecessary or 
                                inappropriate care; and
                                    ``(III) establish an 
                                individualized care plan for 
                                the individual in accordance 
                                with subparagraph (G).
                    ``(F) Assessment.--The independent 
                assessment required under subparagraph (E)(ii) 
                shall include the following:
                            ``(i) An objective evaluation of an 
                        individual's inability to perform 2 or 
                        more activities of daily living (as 
                        defined in section 7702B(c)(2)(B) of 
                        the Internal Revenue Code of 1986) or 
                        the need for significant assistance to 
                        perform such activities.
                            ``(ii) A face-to-face evaluation of 
                        the individual by an individual trained 
                        in the assessment and evaluation of 
                        individuals whose physical or mental 
                        conditions trigger a potential need for 
                        home and community-based services.
                            ``(iii) Where appropriate, 
                        consultation with the individual's 
                        family, spouse, guardian, or other 
                        responsible individual.
                            ``(iv) Consultation with 
                        appropriate treating and consulting 
                        health and support professionals caring 
                        for the individual.
                            ``(v) An examination of the 
                        individual's relevant history, medical 
                        records, and care and support needs, 
                        guided by best practices and research 
                        on effective strategies that result in 
                        improved health and quality of life 
                        outcomes.
                            ``(vi) If the State offers 
                        individuals the option to self-direct 
                        the purchase of, or control the receipt 
                        of, home and community-based service, 
                        an evaluation of the ability of the 
                        individual or the individual's 
                        representative to self-direct the 
                        purchase of, or control the receipt of, 
                        such services if the individual so 
                        elects.
                    ``(G) Individualized care plan.--
                            ``(i) In general.--In the case of 
                        an individual who is determined to be 
                        eligiblefor home and community-based 
services, the State uses the independent assessment required under 
subparagraph (E)(ii) to establish a written individualized care plan 
for the individual.
                            ``(ii) Plan requirements.--The 
                        State ensures that the individualized 
                        care plan for an individual--
                                    ``(I) is developed--
                                            ``(aa) in 
                                        consultation with the 
                                        individual, the 
                                        individual's treating 
                                        physician, health care 
                                        or support 
                                        professional, or other 
                                        appropriate 
                                        individuals, as defined 
                                        by the State, and, 
                                        where appropriate the 
                                        individual's family, 
                                        caregiver, or 
                                        representative; and
                                            ``(bb) taking into 
                                        account the extent of, 
                                        and need for, any 
                                        family or other 
                                        supports for the 
                                        individual;
                                    ``(II) identifies the 
                                necessary home and community-
                                based services to be furnished 
                                to the individual (or, if the 
                                individual elects to self-
                                direct the purchase of, or 
                                control the receipt of, such 
                                services, funded for the 
                                individual); and
                                    ``(III) is reviewed at 
                                least annually and as needed 
                                when there is a significant 
                                change in the individual's 
                                circumstances.
                            ``(iii) State option to offer 
                        election for self-directed services.--
                                    ``(I) Individual choice.--
                                At the option of the State, the 
                                State may allow an individual 
                                or the individual's 
                                representative to elect to 
                                receive self-directed home and 
                                community-based services in a 
                                manner which gives them the 
                                most control over such services 
                                consistent with the 
                                individual's abilities and the 
                                requirements of subclauses (II) 
                                and (III).
                                    ``(II) Self-directed 
                                services.--The term `self-
                                directed' means, with respect 
                                to the home and community-based 
                                services offered under the 
                                State plan amendment, such 
                                services for the individual 
                                which are planned and purchased 
                                under the direction and control 
                                of such individual or the 
                                individual's authorized 
                                representative, including the 
                                amount, duration, scope, 
                                provider, and location of such 
                                services, under the State plan 
                                consistent with the following 
                                requirements:
                                            ``(aa) 
                                        Assessment.--There is 
                                        an assessment of the 
                                        needs, capabilities, 
                                        and preferences of the 
                                        individual with respect 
                                        to such services.
                                            ``(bb) Service 
                                        plan.--Based on such 
                                        assessment, there is 
                                        developed jointly with 
                                        such individual or the 
                                        individual's authorized 
                                        representative a plan 
                                        for such services for 
                                        such individual that is 
                                        approved by the State 
                                        and that satisfies the 
                                        requirements of 
                                        subclause (III).
                                    ``(III) Plan 
                                requirements.--For purposes of 
                                subclause (II)(bb), the 
                                requirements of this subclause 
                                are that the plan--
                                            ``(aa) specifies 
                                        those services which 
                                        the individual or the 
                                        individual's authorized 
                                        representative would be 
                                        responsible for 
                                        directing;
                                            ``(bb) identifies 
                                        the methods by which 
                                        the individual or the 
                                        individual's authorized 
                                        representative will 
                                        select, manage, and 
                                        dismiss providers of 
                                        such services;
                                            ``(cc) specifies 
                                        the role of family 
                                        members and others 
                                        whose participation is 
                                        sought by the 
                                        individual or the 
                                        individual's authorized 
                                        representative with 
                                        respect to such 
                                        services;
                                            ``(dd) is developed 
                                        through a person-
                                        centered process that 
                                        is directed by the 
                                        individual or the 
                                        individual's authorized 
                                        representative, builds 
                                        upon the individual's 
                                        capacity to engage in 
                                        activities that promote 
                                        community life and that 
                                        respects the 
                                        individual's 
                                        preferences, choices, 
                                        and abilities, and 
                                        involves families, 
                                        friends, and 
                                        professionals as 
                                        desired or required by 
                                        the individual or the 
                                        individual's authorized 
                                        representative;
                                            ``(ee) includes 
                                        appropriate risk 
                                        management techniques 
                                        that recognize the 
                                        roles and sharing of 
                                        responsibilities in 
                                        obtaining services in a 
                                        self-directed manner 
                                        and assure the 
                                        appropriateness of such 
                                        plan based upon the 
                                        resources and 
                                        capabilities of the 
                                        individual or the 
                                        individual's authorized 
                                        representative; and
                                            ``(ff) may include 
                                        an individualized 
                                        budget which identifies 
                                        the dollar value of the 
                                        services and supports 
                                        under the control and 
                                        direction of the 
                                        individual or the 
                                        individual's authorized 
                                        representative.
                                    ``(IV) Budget process.--
                                With respect to individualized 
                                budgetsdescribed in subclause 
(III)(ff), the State plan amendment--
                                            ``(aa) describes 
                                        the method for 
                                        calculating the dollar 
                                        values in such budgets 
                                        based on reliable costs 
                                        and service 
                                        utilization;
                                            ``(bb) defines a 
                                        process for making 
                                        adjustments in such 
                                        dollar values to 
                                        reflect changes in 
                                        individual assessments 
                                        and service plans; and
                                            ``(cc) provides a 
                                        procedure to evaluate 
                                        expenditures under such 
                                        budgets.
                    ``(H) Quality assurance; conflict of 
                interest standards.--
                            ``(i) Quality assurance.--The State 
                        ensures that the provision of home and 
                        community-based services meets Federal 
                        and State guidelines for quality 
                        assurance.
                            ``(ii) Conflict of interest 
                        standards.--The State establishes 
                        standards for the conduct of the 
                        independent evaluation and the 
                        independent assessment to safeguard 
                        against conflicts of interest.
                    ``(I) Redeterminations and appeals.--The 
                State allows for at least annual 
                redeterminations of eligibility, and appeals in 
                accordance with the frequency of, and manner in 
                which, redeterminations and appeals of 
                eligibility are made under the State plan.
                    ``(J) Presumptive eligibility for 
                assessment.--The State, at its option, elects 
                to provide for a period of presumptive 
                eligibility (not to exceed a period of 60 days) 
                only for those individuals that the State has 
                reason to believe may be eligible for home and 
                community-based services. Such presumptive 
                eligibility shall be limited to medical 
                assistance for carrying out the independent 
                evaluation and assessment under subparagraph 
                (E) to determine an individual's eligibility 
                for such services and if the individual is so 
                eligible, the specific home and community-based 
                services that the individual will receive.
            ``(2) Definition of individual's representative.--
        In this section, the term `individual's representative' 
        means, with respect to an individual, a parent, a 
        family member, or a guardian of the individual, an 
        advocate for the individual, or any other individual 
        who is authorized to represent the individual.
            ``(3) Nonapplication.--A State may elect in the 
        State plan amendment approved under this section to not 
        comply with the requirements of section 1902(a)(1) 
        (relating to statewideness) and section 
        1902(a)(10)(C)(i)(III) (relating to income and resource 
        rules applicable in the community), but only for 
        purposes of provided home and community-based services 
        in accordance with such amendment. Any such election 
        shall not be construed to apply to the provision of 
        services to an individual receiving medical assistance 
        in an institutionalized setting as a result of a 
        determination that the individual requires the level of 
        care provided in a hospital or a nursing facility or 
        intermediate care facility for the mentally retarded.
            ``(4) No effect on other waiver authority.--Nothing 
        in this subsection shall be construed as affecting the 
        option of a State to offer home and community-based 
        services under a waiver under subsections (c) or (d) of 
        this section or under section 1115.
            ``(5) Continuation of federal financial 
        participation for medical assistance provided to 
        individuals as of effective date of state plan 
        amendment.--Notwithstanding paragraph (1)(B), Federal 
        financial participation shall continue to be available 
        for an individual who is receiving medical assistance 
        in an institutionalized setting, or home and community-
        based services provided under a waiver under this 
        section or section 1115 that is in effect as of the 
        effective date of the State plan amendment submitted 
        under this subsection, as a result of a determination 
        that the individual requires the level of care provided 
        in a hospital or a nursing facility or intermediate 
        care facility for the mentally retarded, without regard 
        to whether such individuals satisfy the more stringent 
        eligibility criteria established under that paragraph, 
        until such time as the individual is discharged from 
        the institution or waiver program or no longer requires 
        such level of care.''.
    (b) Quality of Care Measures.--
            (1) In general.--The Secretary, acting through the 
        Director of the Agency for Healthcare Research and 
        Quality, shall consult with consumers, health and 
        social service providers and other professionals 
        knowledgeable about long-term care services and 
        supports to develop program performance indicators, 
        client function indicators, and measures of client 
        satisfaction with respect to home and community-based 
        services offered under State Medicaid programs.
            (2) Best practices.--The Secretary shall--
                    (A) use the indicators and measures 
                developed under paragraph (1) to assess such 
                home and community-based services, the outcomes 
                associated with the receipt of such services 
                (particularly with respect to the health and 
                welfare of the recipient of the services), and 
                the overall system for providing home and 
                community-based services under the Medicaid 
                program under title XIX of the Social Security 
                Act; and
                    (B) make publicly available the best 
                practices identified through such assessment 
                and a comparative analyses of the system 
                features of each State.
            (3) Appropriation.--Out of any funds in the 
        Treasury not otherwise appropriated, there is 
        appropriated to the Secretary of Health and Human 
        Services, $1,000,000 for the period of fiscal years 
        2006 through 2010 to carry out this subsection.
    (c) Effective Date.--The amendments made by subsections (a) 
and (b) take effect on January 1, 2007, and apply to 
expenditures for medical assistance for home and community-
based services provided in accordance with section 1915(i) of 
the Social Security Act (as added by subsections (a) and (b)) 
on or after that date.

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

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

                           Subtitle B--SCHIP

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

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

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

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

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

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

                       Subtitle C--Katrina Relief

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

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

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

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

SEC. 6203. IMPLEMENTATION FUNDING.

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

            TITLE VII--HUMAN RESOURCES AND OTHER PROVISIONS

SEC. 7002. REFERENCES.

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

                            Subtitle A--TANF

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

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

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

    (a) Recalibration of Caseload Reduction Credit.--
            (1) In general.--Section 407(b)(3)(A) (42 U.S.C. 
        607(b)(3)(A)) is amended--
                    (A) in clause (i), by inserting ``or any 
                other State program funded with qualified State 
                expenditures (as defined in section 
                409(a)(7)(B)(i))'' after ``this part'' ; and
                    (B) by striking clause (ii) and inserting 
                the following:
                            ``(ii) the average monthly number 
                        of families that received assistance 
                        under any State program referred to in 
                        clause (i) during fiscal year 2005.''.
            (2) Conforming amendment.--Section 407(b)(3)(B) (42 
        U.S.C. 607(b)(3)(B)) is amended by striking ``and 
        eligibility criteria'' and all that follows through the 
        close parenthesis and inserting ``and the eligibility 
        criteria in effect during fiscal year 2005''.
    (b) Inclusion of Families Receiving Assistance Under 
Separate State Programs in Calculation of Participation 
Rates.--
            (1) Section 407 (42 U.S.C. 607) is amended in each 
        of subsections (a)(1), (a)(2), (b)(1)(B)(i), 
        (c)(2)(A)(i), (e)(1), and (e)(2), by inserting ``or any 
        other State program funded with qualified State 
        expenditures (as defined in section 409(a)(7)(B)(i))'' 
        after ``this part''.
            (2) Section 411(a)(1) (42 U.S.C. 611(a)(1)) is 
        amended--
                    (A) in subparagraph (A), by inserting ``or 
                any other State program funded with qualified 
                State expenditures (as defined in section 
                409(a)(7)(B)(i))'' before the colon; and
                    (B) in subparagraph (B)(ii), by inserting 
                ``and any other State programs funded with 
                qualified State expenditures (as defined in 
                section 409(a)(7)(B)(i))'' after ``this part''.
    (c) Improved Verification and Oversight of Work 
Participation.--
            (1) In general.--Section 407(i) (42 U.S.C. 607(i)) 
        is amended to read as follows:
    ``(i) Verification of Work and Work-Eligible Individuals in 
Order To Implement Reforms.--
            ``(1) Secretarial direction and oversight.--
                    ``(A) Regulations for determining whether 
                activities may be counted as `work activities', 
                how to count and verify reported hours of work, 
                and determining who is a work-eligible 
                individual.--
                            ``(i) In general.--Not later than 
                        June 30, 2006, the Secretary shall 
                        promulgate regulations to ensure 
                        consistent measurement of work 
                        participation rates under State 
                        programs funded under this part and 
                        State programs funded with qualified 
                        State expenditures (as defined in 
                        section 409(a)(7)(B)(i)), which shall 
                        include information with respect to--
                                    ``(I) determining whether 
                                an activity of a recipient of 
                                assistance may be treated as a 
                                work activity under subsection 
                                (d);
                                    ``(II) uniform methods for 
                                reporting hours of work by a 
                                recipient of assistance;
                                    ``(III) the type of 
                                documentation needed to verify 
                                reported hours of work by a 
                                recipient of assistance; and
                                    ``(IV) the circumstances 
                                under which a parent who 
                                resides with a child who is a 
                                recipient of assistance should 
                                be included in the work 
                                participation rates.
                            ``(ii) Issuance of regulations on 
                        an interim final basis.--The 
                        regulations referred to in clause (i) 
                        may be effective and final immediately 
                        on an interim basis as of the date of 
                        publication of the regulations. If the 
                        Secretary provides for an interim final 
                        regulation, the Secretary shall provide 
                        for a period of public comment on the 
                        regulation after the date of 
                        publication. The Secretary may change 
                        or revise the regulation after the 
                        public comment period.
                    ``(B) Oversight of state procedures.--The 
                Secretary shall review the State procedures 
                established in accordance with paragraph (2) to 
                ensure that such procedures are consistent with 
                the regulations promulgated under subparagraph 
                (A) and are adequate to ensure an accurate 
                measurement of work participation under the 
                State programs funded under this part and any 
                other State programs funded with qualified 
                State expenditures (as so defined).
            ``(2) Requirement for states to establish and 
        maintain work participation verification procedures.--
        Not later than September 30, 2006, a State to which a 
        grant is made under section 403 shall establish 
        procedures for determining, with respect to recipients 
        of assistance under the State program funded under this 
        part or under any State programs funded with qualified 
        State expenditures (as so defined), whether activities 
        may be counted as work activities, how to count and 
        verify reported hours of work, and who is a work-
        eligible individual, in accordance with the regulations 
        promulgated pursuant to paragraph (1)(A)(i) and shall 
        establish internal controls to ensure compliance with 
        the procedures.''.
            (2) State penalty for failure to establish or 
        comply with work participation verification 
        procedures.--Section 409(a) (42 U.S.C. 609(a)) is 
        amended by adding at the end the following:
            ``(15) Penalty for failure to establish or comply 
        with work participation verification procedures.--
                    ``(A) In general.--If the Secretary 
                determines that a State to which a grant is 
                made under section 403 in a fiscal year has 
                violated section 407(i)(2) during the fiscal 
                year, the Secretary shall reduce the grant 
                payable to the State under section 403(a)(1) 
                for the immediately succeeding fiscal year by 
                an amount equal to not less than 1 percent and 
                not more than 5 percent of the State family 
                assistance grant.
                    ``(B) Penalty based on severity of 
                failure.--The Secretary shall impose reductions 
                under subparagraph (A) with respect to a fiscal 
                year based on the degree of noncompliance.''.
    (d) Effective Date.--The amendments made by subsections (a) 
and (b) shall take effect on October 1, 2006.

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

    (a) Healthy Marriage and Family Funds.--Section 403(a)(2) 
(42 U.S.C. 603(a)(2)) is amended to read as follows:
            ``(2) Healthy marriage promotion and responsible 
        fatherhood grants.--
                    ``(A) In general.--
                            ``(i) Use of funds.--Subject to 
                        subparagraphs (B) and (C), the 
                        Secretary may use the funds made 
                        available under subparagraph (D) for 
                        the purpose of conducting and 
                        supporting research and demonstration 
                        projects by public or private entities, 
                        and providing technical assistance to 
                        States, Indian tribes and tribal 
                        organizations, and such other entities 
                        as the Secretary may specify that are 
                        receiving a grant under another 
                        provision of this part.
                            ``(ii) Limitations.--The Secretary 
                        may not award funds made available 
                        under this paragraph on a 
                        noncompetitive basis, and may not 
                        provide any such funds to an entity for 
                        the purpose of carrying out healthy 
                        marriage promotion activities or for 
                        the purpose of carrying out activities 
                        promoting responsible fatherhood unless 
                        the entity has submitted to the 
                        Secretary an application which--
                                    ``(I) describes--
                                            ``(aa) how the 
                                        programs or activities 
                                        proposed in the 
                                        application will 
                                        address, as 
                                        appropriate, issues of 
                                        domestic violence; and
                                            ``(bb) what the 
                                        applicant will do, to 
                                        the extent relevant, to 
                                        ensure that 
                                        participation in the 
                                        programs or activities 
                                        is voluntary, and to 
                                        inform potential 
                                        participants that their 
                                        participation is 
                                        voluntary; and
                                    ``(II) contains a 
                                commitment by the entity--
                                            ``(aa) to not use 
                                        the funds for any other 
                                        purpose; and
                                            ``(bb) to consult 
                                        with experts in 
                                        domestic violence or 
                                        relevant community 
                                        domestic violence 
                                        coalitions in 
                                        developing the programs 
                                        and activities.
                            ``(iii) Healthy marriage promotion 
                        activities.--In clause (ii), the term 
                        `healthy marriage promotion activities' 
                        means the following:
                                    ``(I) Public advertising 
                                campaigns on the value of 
                                marriage and the skills needed 
                                to increase marital stability 
                                and health.
                                    ``(II) Education in high 
                                schools on the value of 
                                marriage, relationship skills, 
                                and budgeting.
                                    ``(III) Marriage education, 
                                marriage skills, and 
                                relationship skills programs, 
                                that may include parenting 
                                skills, financial management, 
                                conflict resolution, and job 
                                and career advancement, for 
                                non-married pregnant women and 
                                non-married expectant fathers.
                                    ``(IV) Pre-marital 
                                education and marriage skills 
                                training for engaged couples 
                                and for couples or individuals 
                                interested in marriage.
                                    ``(V) Marriage enhancement 
                                and marriage skills training 
                                programs for married couples.
                                    ``(VI) Divorce reduction 
                                programs that teach 
                                relationship skills.
                                    ``(VII) Marriage mentoring 
                                programs which use married 
                                couples as role models and 
                                mentors in at-risk communities.
                                    ``(VIII) Programs to reduce 
                                the disincentives to marriage 
                                in means-tested aid programs, 
                                if offered in conjunction with 
                                any activity described in this 
                                subparagraph.
                    ``(B) Limitation on use of funds for 
                demonstration projects for coordination of 
                provision of child welfare and tanf services to 
                tribal families at risk of child abuse or 
                neglect.--
                            ``(i) In general.--Of the amounts 
                        made available under subparagraph (D) 
                        for a fiscal year, the Secretary may 
                        not award more than $2,000,000 on a 
                        competitive basis to fund demonstration 
                        projects designed to test the 
                        effectiveness of tribal governments or 
                        tribal consortia in coordinating the 
                        provision to tribal families at risk of 
                        child abuse or neglect of child welfare 
                        services and services under tribal 
                        programs funded under this part.
                            ``(ii) Limitation on use of 
                        funds.--A grant made pursuant to clause 
                        (i) to such a project shall not be used 
                        for any purpose other than--
                                    ``(I) to improve case 
                                management for families 
                                eligible for assistance from 
                                such a tribal program;
                                    ``(II) for supportive 
                                services and assistance to 
                                tribal children in out-of-home 
                                placements and the tribal 
                                families caring for such 
                                children, including families 
                                who adopt such children; and
                                    ``(III) for prevention 
                                services and assistance to 
                                tribal families at risk of 
                                child abuse and neglect.
                            ``(iii) Reports.--The Secretary may 
                        require a recipient of funds awarded 
                        under this subparagraph to provide the 
                        Secretary with such information as the 
                        Secretary deems relevant to enable the 
                        Secretary to facilitate and oversee the 
                        administration of any project for which 
                        funds are provided under this 
                        subparagraph.
                    ``(C) Limitation on use of funds for 
                activities promoting responsible fatherhood.--
                            ``(i) In general.--Of the amounts 
                        made available under subparagraph (D) 
                        for a fiscal year, the Secretary may 
                        not award more than $50,000,000 on a 
                        competitive basis to States, 
                        territories, Indian tribes and tribal 
                        organizations, and public and nonprofit 
                        community entities, including religious 
                        organizations, for activities promoting 
                        responsible fatherhood.
                            ``(ii) Activities promoting 
                        responsible fatherhood.--In this 
                        paragraph, the term `activities 
                        promoting responsible fatherhood' means 
                        the following:
                                    ``(I) Activities to promote 
                                marriage or sustain marriage 
                                through activities such as 
                                counseling, mentoring, 
                                disseminating information about 
                                the benefits of marriage and 2-
                                parent involvement for 
                                children, enhancing 
                                relationship skills, education 
                                regarding how to control 
                                aggressive behavior, 
                                disseminating information on 
                                the causes of domestic violence 
                                and child abuse, marriage 
                                preparation programs, 
                                premarital counseling, marital 
                                inventories, skills-based 
                                marriage education, financial 
                                planning seminars, including 
                                improving a family's ability to 
                                effectively manage family 
                                business affairs by means such 
                                as education, counseling, or 
                                mentoring on matters related to 
                                family finances, including 
                                household management, 
                                budgeting, banking, and 
                                handling of financial 
                                transactions and home 
                                maintenance, and divorce 
                                education and reduction 
                                programs, including mediation 
                                and counseling.
                                    ``(II) Activities to 
                                promote responsible parenting 
                                through activities such as 
                                counseling, mentoring, and 
                                mediation, disseminating 
                                information about good 
                                parenting practices, skills-
                                based parenting enducation, 
                                encouraging child support 
                                payments, and other methods.
                                    ``(III) Activities to 
                                foster economic stability by 
                                helping fathers improve their 
                                economic status by providing 
                                activities such as work first 
                                services, job search, job 
                                training, subsidized 
                                employment, job retention, job 
                                enhancement, and encouraging 
                                education, including career-
                                advancing education, 
                                dissemination of employment 
                                materials, coordination with 
                                existing employment services 
                                such as welfare-to-work 
                                programs, referrals to local 
                                employment training 
                                initiatives, and other methods.
                                    ``(IV) Activities to 
                                promote responsible fatherhood 
                                that are conducted through a 
                                contract with a nationally 
                                recognized, nonprofit 
                                fatherhood promotion 
                                organization, such as the 
                                development, promotion, and 
                                distribution of a media 
                                campaign to encourage the 
                                appropriate involvement of 
                                parents in the life of any 
                                child and specifically the 
                                issue of responsible 
                                fatherhood, and the development 
                                of a national clearinghouse to 
                                assist States and communities 
                                in efforts to promote and 
                                support marriage and 
                                responsible fatherhood.
                    ``(D) Appropriation.--Out of any money in 
                the Treasury of the United States not otherwise 
                appropriated, there are appropriated 
                $150,000,000 for each of fiscal years 2006 
                through 2010, for expenditure in accordance 
                with this paragraph.''.
    (b) Counting of Spending on Certain Pro-Family 
Activities.--Section 409(a)(7)(B)(i) (42 U.S.C. 
609(a)(7)(B)(i)) is amended by adding at the end the following:
                                    ``(V) Counting of spending 
                                on certain pro-family 
                                activities.--The term 
                                `qualified State expenditures' 
                                includes the total expenditures 
                                by the State during the fiscal 
                                year under all State programs 
                                for a purpose described in 
                                paragraph (3) or (4) of section 
                                401(a).''.

                         Subtitle B--Child Care

SEC. 7201. ENTITLEMENT FUNDING.

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

                       Subtitle C--Child Support

SEC. 7301. ASSIGNMENT AND DISTRIBUTION OF CHILD SUPPORT.

    (a) Modification of Rule Requiring Assignment of Support 
Rights as a Condition of Receiving TANF.--Section 408(a)(3) (42 
U.S.C. 608(a)(3)) is amended to read as follows:
            ``(3) No assistance for families not assigning 
        certain support rights to the state.--A State to which 
        a grant is made under section 403 shall require, as a 
        condition of paying assistance to a family under the 
        State program funded under this part, that a member of 
        the family assign to the State any right the family 
        member may have (on behalf of the family member or of 
        any other person for whom the family member has applied 
        for or is receiving such assistance) to support from 
        any other person, not exceeding the total amount of 
        assistance so paid to the family, which accrues during 
        the period that the family receives assistance under 
        the program.''.
    (b) Increasing Child Support Payments to Families and 
Simplifying Child Support Distribution Rules.--
            (1) Distribution rules.--
                    (A) In general.--Section 457(a) (42 U.S.C. 
                657(a)) is amended to read as follows:
    ``(a) In General.--Subject to subsections (d) and (e), the 
amounts collected on behalf of a family as support by a State 
pursuant to a plan approved under this part shall be 
distributed as follows:
            ``(1) Families receiving assistance.--In the case 
        of a family receiving assistance from the State, the 
        State shall--
                    ``(A) pay to the Federal Government the 
                Federal share of the amount collected, subject 
                to paragraph (3)(A);
                    ``(B) retain, or pay to the family, the 
                State share of the amount collected, subject to 
                paragraph (3)(B); and
                    ``(C) pay to the family any remaining 
                amount.
            ``(2) Families that formerly received assistance.--
        In the case of a family that formerly received 
        assistance from the State:
                    ``(A) Current support.--To the extent that 
                the amount collected does not exceed the 
                current support amount, the State shall pay the 
                amount to the family.
                    ``(B) Arrearages.--Except as otherwise 
                provided in an election made under section 
                454(34), to the extent that the amount 
                collected exceeds the current support amount, 
                the State--
                            ``(i) shall first pay to the family 
                        the excess amount, to the extent 
                        necessary to satisfy support arrearages 
                        not assigned pursuant to section 
                        408(a)(3);
                            ``(ii) if the amount collected 
                        exceeds the amount required to be paid 
                        to the family under clause (i), shall--
                                    ``(I) pay to the Federal 
                                Government the Federal share of 
                                the excess amount described in 
                                this clause, subject to 
                                paragraph (3)(A); and
                                    ``(II) retain, or pay to 
                                the family, the State share of 
                                the excess amount described in 
                                this clause, subject to 
                                paragraph (3)(B); and
                            ``(iii) shall pay to the family any 
                        remaining amount.
            ``(3) Limitations.--
                    ``(A) Federal reimbursements.--The total of 
                the amounts paid by the State to the Federal 
                Government under paragraphs (1) and (2) of this 
                subsection with respect to a family shall not 
                exceed the Federal share of the amount assigned 
                with respect to the family pursuant to section 
                408(a)(3).
                    ``(B) State reimbursements.--The total of 
                the amounts retained by the State under 
                paragraphs (1) and (2) of this subsection with 
                respect to a family shall not exceed the State 
                share of the amount assigned with respect to 
                the family pursuant to section 408(a)(3).
            ``(4) Families that never received assistance.--In 
        the case of any other family, the State shall 
        distribute to the family the portion of the amount so 
        collected that remains after withholding any fee 
        pursuant to section 454(6)(B)(ii).
            ``(5) Families under certain agreements.--
        Notwithstanding paragraphs (1) through (3), in the case 
        of an amount collected for a family in accordance with 
        a cooperative agreement under section 454(33), the 
        State shall distribute the amount collected pursuant to 
        the terms of the agreement.''.
                    (B) State option to pass through additional 
                support with federal financial participation 
                beginning with fiscal year 2009.--
                            (i) In general.--Section 457(a) (42 
                        U.S.C. 657(a)) is amended by adding at 
                        the end the following:
            ``(7) State option to pass through additional 
        support with federal financial participation.--
                    ``(A) Families that formerly received 
                assistance.--Notwithstanding paragraph (2), a 
                State shall not be required to pay to the 
                Federal Government the Federal share of an 
                amount collected on behalf of a family that 
                formerly received assistance from the State to 
                the extent that the State pays the amount to 
                the family.
                    ``(B) Families that currently receive 
                assistance.--
                            ``(i) In general.--Notwithstanding 
                        paragraph (1), in the case of a family 
                        that receives assistance from the 
                        State, a State shall not be required to 
                        pay to the Federal Government the 
                        Federal share of the excepted portion 
                        (as defined in clause (ii)) of any 
                        amount collected on behalf of such 
                        family during a month to the extent 
                        that--
                                    ``(I) the State pays the 
                                excepted portion to the family; 
                                and
                                    ``(II) the excepted portion 
                                is disregarded in determining 
                                the amount and type of 
                                assistance provided to the 
                                family under such program.
                            ``(ii) Excepted portion defined.--
                        For purposes of this subparagraph, the 
                        term ``excepted portion'' means that 
                        portion of the amount collected on 
                        behalf of a family during a month that 
                        does not exceed $100 per month, or in 
                        the case of a family that includes 2 or 
                        more children, that does not exceed an 
                        amount established by the State that is 
                        not more than $200 per month.''.
                            (ii) Effective date.--The amendment 
                        made by clause (i) shall take effect on 
                        October 1, 2008.
                            (iii) Redesignation.--Effective 
                        October 1, 2009, paragraph (7) of 
                        section 457(a) of the Social Security 
                        Act (as added by clause (i)) is 
                        redesignated as paragraph (6).
                    (C) State plan to include election as to 
                which rules to apply in distributing child 
                support arrearages collected on behalf of 
                families formerly receiving assistance.--
                Section 454 (42 U.S.C. 654) is amended--
                            (i) by striking ``and'' at the end 
                        of paragraph (32);
                            (ii) by striking the period at the 
                        end of paragraph (33) and inserting ``; 
                        and''; and
                            (iii) by inserting after paragraph 
                        (33) the following:
            ``(34) include an election by the State to apply 
        section 457(a)(2)(B) of this Act or former section 
        457(a)(2)(B) of this Act (as in effect for the State 
        immediately before the date this paragraph first 
        applies to the State) to the distribution of the 
        amounts which are the subject of such sections and, for 
        so long as the State elects to so apply such former 
        section, the amendments made by subsection (b)(1) of 
        section 7301 of the Deficit Reduction Act of 2005 shall 
        not apply with respect to the State, notwithstanding 
        subsection (e) of such section 7301.''.
            (2) Current support amount defined.--Section 457(c) 
        (42 U.S.C. 657(c)) is amended by adding at the end the 
        following:
            ``(5) Current support amount.--The term `current 
        support amount' means, with respect to amounts 
        collected as support on behalf of a family, the amount 
        designated as the monthly support obligation of the 
        noncustodial parent in the order requiring the support 
        or calculated by the State based on the order.''.
    (c) State Option to Discontinue Older Support 
Assignments.--Section 457(b) (42 U.S.C. 657(b)) is amended to 
read as follows:
    ``(b) Continuation of Assignments.--
            ``(1) State option to discontinue pre-1997 support 
        assignments.--
                    ``(A) In general.--Any rights to support 
                obligations assigned to a State as a condition 
                of receiving assistance from the State under 
                part A and in effect on September 30, 1997 (or 
                such earlier date on or after August 22, 1996, 
                as the State may choose), may remain assigned 
                after such date.
                    ``(B) Distribution of amounts after 
                assignment discontinuation.--If a State chooses 
                to discontinue the assignment of a support 
                obligation described in subparagraph (A), the 
                State may treat amounts collected pursuant to 
                the assignment as if the amounts had never been 
                assigned and may distribute the amounts to the 
                family in accordance with subsection (a)(4).
            ``(2) State option to discontinue post-1997 
        assignments.--
                    ``(A) In general.--Any rights to support 
                obligations accruing before the date on which a 
                family first receives assistance under part A 
                that are assigned to a State under that part 
                and in effect before the implementation date of 
                this section may remain assigned after such 
                date.
                    ``(B) Distribution of amounts after 
                assignment discontinuation.--If a State chooses 
                to discontinue the assignment of a support 
                obligation described in subparagraph (A), the 
                State may treat amounts collected pursuant to 
                the assignment as if the amounts had never been 
                assigned and may distribute the amounts to the 
                family in accordance with subsection (a)(4).''.
    (d) Conforming Amendments.--Section 6402(c) of the Internal 
Revenue Code of 1986 (relating to offset of past-due support 
against overpayments) is amended--
            (1) in the first sentence, by striking ``the Social 
        Security Act.'' and inserting ``of such Act.''; and
            (2) by striking the third sentence and inserting 
        the following: ``The Secretary shall apply a reduction 
        under this subsection first to an amount certified by 
        the State as past due support under section 464 of the 
        Social Security Act before any other reductions allowed 
        by law.''.
    (e) Effective Date.--
            (1) In general.--Except as otherwise provided in 
        this section, the amendments made by the preceding 
        provisions of this section shall take effect on October 
        1, 2009, and shall apply to payments under parts A and 
        D of title IV of the Social Security Act for calendar 
        quarters beginning on or after such date, and without 
        regard to whether regulations to implement the 
        amendments (in the case of State programs operated 
        under such part D) are promulgated by such date.
            (2) State option to accelerate effective date.--
        Notwithstanding paragraph (1), a State may elect to 
        have the amendments made by the preceding provisions of 
        this section apply to the State and to amounts 
        collected by the State (and the payments under parts A 
        and D), on and after such date as the State may select 
        that is not earlier than October 1, 2008, and not later 
        than September 30, 2009.
    (f) Use of Tax Refund Intercept Program to Collect Past-Due 
Child Support on Behalf of Children Who Are Not Minors.--
            (1) In general.--Section 464 (42 U.S.C. 664) is 
        amended--
                    (A) in subsection (a)(2)(A), by striking 
                ``(as that term is defined for purposes of this 
                paragraph under subsection (c))''; and
                    (B) in subsection (c)--
                            (i) in paragraph (1)--
                                    (I) by striking ``(1) 
                                Except as provided in paragraph 
                                (2), as used in'' and inserting 
                                ``In''; and
                                    (II) by inserting 
                                ``(whether or not a minor)'' 
                                after ``a child'' each place it 
                                appears; and
                            (ii) by striking paragraphs (2) and 
                        (3).
            (2) Effective date.--The amendments made by 
        paragraph (1) shall take effect on October 1, 2007.
    (g) State Option to Use Statewide Automated Data Processing 
and Information Retrieval System for Interstate Cases.--Section 
466(a)(14)(A)(iii) (42 U.S.C. 666(a)(14)(A)(iii)) is amended by 
inserting before the semicolon the following: ``(but the 
assisting State may establish a corresponding case based on 
such other State's request for assistance)''.

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

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

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

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

SEC. 7304. MAINTENANCE OF TECHNICAL ASSISTANCE FUNDING.

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

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

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

SEC. 7306. INFORMATION COMPARISONS WITH INSURANCE DATA.

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

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

    (a) State Agencies Required to Seek Medical Support From 
Either Parent.--
            (1) In general.--Section 466(a)(19)(A) (42 U.S.C. 
        666(a)(19)(A)) is amended by striking ``which include a 
        provision for the health care coverage of the child are 
        enforced'' and inserting ``shall include a provision 
        for medical support for the child to be provided by 
        either or both parents, and shall be enforced''.
            (2) Conforming amendments.--
                    (A) Title iv-d.--
                            (i) Section 452(f) (42 U.S.C. 
                        652(f)) is amended by striking 
                        ``include medical support as part of 
                        any child support order and enforce 
                        medical support'' and inserting 
                        ``enforce medical support included as 
                        part of a child support order''.
                            (ii) Section 466(a)(19) (42 U.S.C. 
                        666(a)(19)), as amended by paragraph 
                        (1) of this subsection, is amended--
                                    (I) in subparagraph (A)--
                                            (aa) by striking 
                                        ``section 
                                        401(e)(3)(C)'' and 
                                        inserting ``section 
                                        401(e)''; and
                                            (bb) by striking 
                                        ``section 
                                        401(f)(5)(C)'' and 
                                        inserting ``section 
                                        401(f)'';
                                    (II) in subparagraph (B)--
                                            (aa) by striking 
                                        ``noncustodial'' each 
                                        place it appears; and
                                            (bb) in clause 
                                        (iii), by striking 
                                        ``section 466(b)'' and 
                                        inserting ``subsection 
                                        (b)''; and
                                    (III) in subparagraph (C), 
                                by striking ``noncustodial'' 
                                each place it appears and 
                                inserting ``obligated''.
                    (B) State or local governmental group 
                health plans.--Section 401(e)(2) of the Child 
                Support Performance and Incentive Act of 1998 
                (29 U.S.C. 1169 note) is amended, in the matter 
                preceding subparagraph (A), by striking ``who 
                is a noncustodial parent of the child''.
                    (C) Church plans.--Section 401(f)(5)(C) of 
                the Child Support Performance and Incentive Act 
                of 1998 (29 U.S.C. 1169 note) is amended by 
                striking ``noncustodial'' each place it 
                appears.
    (b) Enforcement of Medical Support Requirements.--Section 
452(f) (42 U.S.C. 652(f)), as amended by subsection 
(a)(2)(A)(i), is amended by inserting after the first sentence 
the following: ``A State agency administering the program under 
this part may enforce medical support against a custodial 
parent if health care coverage is available to the custodial 
parent at a reasonable cost, notwithstanding any other 
provision of this part.''.
    (c) Definition of Medical Support.--Section 452(f) (42 
U.S.C. 652(f)), as amended by subsections (a)(2)(A)(i) and (b) 
of this section, is amended by adding at the end the following: 
``For purposes of this part, the term `medical support' may 
include health care coverage, such as coverage under a health 
insurance plan (including payment of costs of premiums, co-
payments, and deductibles) and payment for medical expenses 
incurred on behalf of a child.''.

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

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

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

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

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

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

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

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

                       Subtitle D--Child Welfare

SEC. 7401. STRENGTHENING COURTS.

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

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

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

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

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

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

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

                Subtitle E--Supplemental Security Income

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

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

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

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

       Subtitle F--Repeal of Continued Dumping and Subsidy Offset

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

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

                       Subtitle G--Effective Date

SEC. 7701. EFFECTIVE DATE.

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

          TITLE VIII--EDUCATION AND PENSION BENEFIT PROVISIONS

                Subtitle A--Higher Education Provisions

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

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

SEC. 8002. MODIFICATION OF 50/50 RULE.

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

SEC. 8003. ACADEMIC COMPETITIVENESS GRANTS.

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

``SEC. 401A. ACADEMIC COMPETITIVENESS GRANTS.

    ``(a) Academic Competitiveness Grant Program.--
            ``(1) Academic competitiveness grants authorized.--
        The Secretary shall award grants, in the amounts 
        specified in subsection (d)(1), to eligible students to 
        assist the eligible students in paying their college 
        education expenses.
            ``(2) Academic competitiveness council.--
                    ``(A) Establishment.--There is established 
                an Academic Competitiveness Council (referred 
                to in this paragraph as the `Council'). From 
                the funds made available under subsection (e) 
                for fiscal year 2006, $50,000 shall be 
                available to the Council to carry out the 
                duties described in subparagraph (B). The 
                Council shall be chaired by the Secretary of 
                Education, and the membership of the Council 
                shall consist of officials from Federal 
                agencies with responsibilities for managing 
                existing Federal programs that promote 
                mathematics and science (or designees of such 
                officials with significant decision-making 
                authority).
                    ``(B) Duties.--The Council shall--
                            ``(i) identify all Federal programs 
                        with a mathematics or science focus;
                            ``(ii) identify the target 
                        populations being served by such 
                        programs;
                            ``(iii) determine the effectiveness 
                        of such programs;
                            ``(iv) identify areas of overlap or 
                        duplication in such programs; and
                            ``(v) recommend ways to efficiently 
                        integrate and coordinate such programs.
                    ``(C) Report.--Not later than one year 
                after the date of enactment of the Higher 
                Education Reconciliation Act of 2005, the 
                Council shall transmit a report to each 
                committee of Congress with jurisdiction over a 
                Federal program identified under subparagraph 
                (B)(i), detailing the findings and 
                recommendations under subparagraph (B), 
                including recommendations for legislative or 
                administrative action.
    ``(b) Designation.--A grant under this section--
            ``(1) for the first or second academic year of a 
        program of undergraduate education shall be known as an 
        `Academic Competitiveness Grant'; and
            ``(2) for the third or fourth academic year of a 
        program of undergraduate education shall be known as a 
        `National Science and Mathematics Access to Retain 
        Talent Grant' or a `National SMART Grant'.
    ``(c) Definition of Eligible Student.--In this section the 
term `eligible student' means a full-time student who, for the 
academic year for which the determination of eligibility is 
made--
            ``(1) is a citizen of the United States;
            ``(2) is eligible for a Federal Pell Grant; and
            ``(3) in the case of a student enrolled or accepted 
        for enrollment in--
                    ``(A) the first academic year of a program 
                of undergraduate education at a two- or four-
                year degree-granting institution of higher 
                education--
                            ``(i) has successfully completed, 
                        after January 1, 2006, a rigorous 
                        secondary school program of study 
                        established by a State or local 
                        educational agency and recognized as 
                        such by the Secretary; and
                            ``(ii) has not been previously 
                        enrolled in a program of undergraduate 
                        education;
                    ``(B) the second academic year of a program 
                of undergraduate education at a two- or four-
                year degree-granting institution of higher 
                education--
                            ``(i) has successfully completed, 
                        after January 1, 2005, a rigorous 
                        secondary school program of study 
                        established by a State or local 
                        educational agency and recognized as 
                        such by the Secretary; and
                            ``(ii) has obtained a cumulative 
                        grade point average of at least 3.0 (or 
                        the equivalent as determined under 
                        regulations prescribed by the 
                        Secretary) at the end of the first 
                        academic year of such program of 
                        undergraduate education; or
                    ``(C) the third or fourth academic year of 
                a program of undergraduate education at a four-
                year degree-granting institution of higher 
                education--
                            ``(i) is pursuing a major in--
                                    ``(I) the physical, life, 
                                or computer sciences, 
                                mathematics, technology, or 
                                engineering (as determined by 
                                the Secretary pursuant to 
                                regulations); or
                                    ``(II) a foreign language 
                                that the Secretary, in 
                                consultation with the Director 
                                of National Intelligence, 
                                determines is critical to the 
                                national security of the United 
                                States; and
                            ``(ii) has obtained a cumulative 
                        grade point average of at least 3.0 (or 
                        the equivalent as determined under 
                        regulations prescribed by the 
                        Secretary) in the coursework required 
                        for the major described in clause (i).
    ``(d) Grant Award.--
            ``(1) Amounts.--
                    ``(A) The Secretary shall award a grant 
                under this section in the amount of--
                            ``(i) $750 for an eligible student 
                        under subsection (d)(3)(A);
                            ``(ii) $1,300 for an eligible 
                        student under subsection (d)(3)(B); or
                            ``(iii) $4,000 for an eligible 
                        student under subsection (d)(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 (f) for any fiscal 
                        year is less than the amount required 
                        to provide 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 (d)(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 (d)(3)(A);
                            ``(ii) one academic year under 
                        subsection (d)(3)(B); or
                            ``(iii) two academic years under 
                        subsection (d)(3)(C).
    ``(e) Funding.--
            ``(1) Authorization and appropriation of funds.--
        There are authorized to be appropriated, and there are 
        appropriated, out of any money in the Treasury not 
        otherwise appropriated, for the Department of Education 
        to carry out this section--
                    ``(A) $790,000,000 for fiscal year 2006;
                    ``(B) $850,000,000 for fiscal year 2007;
                    ``(C) $920,000,000 for fiscal year 2008;
                    ``(D) $960,000,000 for fiscal year 2009; 
                and
                    ``(E) $1,010,000,000 for fiscal year 2010.
            ``(2) Use of excess funds.--If, at the end of a 
        fiscal year, the funds available for awarding grants 
        under this section exceed the amount necessary to make 
        such grants in the amounts authorized by subsection 
        (d), then all of the excess funds shall remain 
        available for awarding grants under this section during 
        the subsequent fiscal year.
    ``(f) Recognition of Programs of Study.--The Secretary 
shall recognize at least one rigorous secondary school program 
of study in each State under subsection (c)(3)(A) and (B) for 
the purpose of determining student eligibility under such 
subsection.
    ``(g) Sunset Provision.--The authority to make grants under 
this section shall expire at the end of academic year 2010-
2011.''.

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

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

SEC. 8005. LOAN LIMITS.

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

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

    (a) PLUS Loans.--Section 427A(l)(2) (20 U.S.C. 1077a(l)(2)) 
is amended by striking ``7.9 percent'' and inserting ``8.5 
percent''.
    (b) Conforming Amendments for Special Allowances.--
            (1) Amendments.--Subparagraph (I) of section 
        438(b)(2) (20 U.S.C. 1087-1(b)(2)) is amended--
                    (A) in clause (iii), by striking ``, 
                subject to clause (v) of this subparagraph'';
                    (B) in clause (iv), by striking ``, subject 
                to clause (vi) of this subparagraph''; and
                    (C) by striking clauses (v), (vi), and 
                (vii) and inserting the following:
                            ``(v) Recapture of excess 
                        interest.--
                                    ``(I) Excess credited.--
                                With respect to a loan on which 
                                the applicable interest rate is 
                                determined under subsection (k) 
                                or (l) of section 427A and for 
                                which the first disbursement of 
                                principal is made on or after 
                                April 1, 2006, if the 
                                applicable interest rate for 
                                any 3-month period exceeds the 
                                special allowance support level 
                                applicable to such loan under 
                                this subparagraph for such 
                                period, then an adjustment 
                                shall be made by calculating 
                                the excess interest in the 
                                amount computed under subclause 
                                (II) of this clause, and by 
                                crediting the excess interest 
                                to the Government not less 
                                often than annually.
                                    ``(II) Calculation of 
                                excess.--The amount of any 
                                adjustment of interest on a 
                                loan to be made under this 
                                subsection for any quarter 
                                shall be equal to--
                                            ``(aa) the 
                                        applicable interest 
                                        rate minus the special 
                                        allowance support level 
                                        determined under this 
                                        subparagraph; 
                                        multiplied by
                                            ``(bb) the average 
                                        daily principal balance 
                                        of the loan (not 
                                        including unearned 
                                        interest added to 
                                        principal) during such 
                                        calendar quarter; 
                                        divided by
                                            ``(cc) four.
                                    ``(III) Special allowance 
                                support level.--For purposes of 
                                this clause, the term `special 
                                allowance support level' means, 
                                for any loan, a number 
                                expressed as a percentage equal 
                                to the sum of the rates 
                                determined under subclauses (I) 
                                and (III) of clause (i), and 
                                applying any substitution rules 
                                applicable to such loan under 
                                clauses (ii), (iii), and (iv) 
                                in determining such sum.''.
            (2) Effective date.--The amendments made by this 
        subsection shall not apply with respect to any special 
        allowance payment made under section 438 of the Higher 
        Education Act of 1965 (20 U.S.C 1087-1) before April 1, 
        2006.

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

    (a) Federal Family Education Loans.--Section 428(b)(1)(M) 
(20 U.S.C. 1078(b)(1)(M)) is amended--
            (1) by striking ``or'' at the end of clause (ii);
            (2) by redesignating clause (iii) as clause (iv); 
        and
            (3) by inserting after clause (ii) the following 
        new clause:
                            ``(iii) not in excess of 3 years 
                        during which the borrower--
                                    ``(I) is serving on active 
                                duty during a war or other 
                                military operation or national 
                                emergency; or
                                    ``(II) is performing 
                                qualifying National Guard duty 
                                during a war or other military 
                                operation or national 
                                emergency; or''.
    (b) Direct Loans.--Section 455(f)(2) (20 U.S.C. 
1087e(f)(2)) is amended--
            (1) by redesignating subparagraph (C) as 
        subparagraph (D); and
            (2) by inserting after subparagraph (B) the 
        following new subparagraph:
                    ``(C) not in excess of 3 years during which 
                the borrower--
                            ``(i) is serving on active duty 
                        during a war or other military 
                        operation or national emergency; or
                            ``(ii) is performing qualifying 
                        National Guard duty during a war or 
                        other military operation or national 
                        emergency; or''.
    (c) Perkins Loans.--Section 464(c)(2)(A) (20 U.S.C. 
1087dd(c)(2)(A)) is amended--
            (1) by redesignating clauses (iii) and (iv) as 
        clauses (iv) and (v), respectively; and
            (2) by inserting after clause (ii) the following 
        new clause:
                            ``(iii) not in excess of 3 years 
                        during which the borrower--
                                    ``(I) is serving on active 
                                duty during a war or other 
                                military operation or national 
                                emergency; or
                                    ``(II) is performing 
                                qualifying National Guard duty 
                                during a war or other military 
                                operation or national 
                                emergency;''.
    (d) Definitions.--Section 481 (20 U.S.C. 1088) is amended 
by adding at the end the following new subsection:
    ``(d) Definitions for Military Deferments.--For purposes of 
parts B, D, and E of this title:
            ``(1) Active duty.--The term `active duty' has the 
        meaning given such term in section 101(d)(1) of title 
        10, United States Code, except that such term does not 
        include active duty for training or attendance at a 
        service school.
            ``(2) Military operation.--The term `military 
        operation' means a contingency operation as such term 
        is defined in section 101(a)(13) of title 10, United 
        States Code.
            ``(3) National emergency.--The term `national 
        emergency' means the national emergency by reason of 
        certain terrorist attacks declared by the President on 
        September 14, 2001, or subsequent national emergencies 
        declared by the President by reason of terrorist 
        attacks.
            ``(4) Serving on active duty.--The term `serving on 
        active duty during a war or other military operation or 
        national emergency' means service by an individual who 
        is--
                    ``(A) a Reserve of an Armed Force ordered 
                to active duty under section 12301(a), 
                12301(g), 12302, 12304, or 12306 of title 10, 
                United States Code, or any retired member of an 
                Armed Force ordered to active duty under 
                section 688 of such title, for service in 
                connection with a war or other military 
                operation or national emergency, regardless of 
                the location at which such active duty service 
                is performed; and
                    ``(B) any other member of an Armed Force on 
                active duty in connection with such emergency 
                or subsequent actions or conditions who has 
                been assigned to a duty station at a location 
                other than the location at which such member is 
                normally assigned.
            ``(5) Qualifying national guard duty.--The term 
        `qualifying National Guard duty during a war or other 
        military operation or national emergency' means service 
        as a member of the National Guard on full-time National 
        Guard duty (as defined in section 101(d)(5) of title 
        10, United States Code) under a call to active service 
        authorized by the President or the Secretary of Defense 
        for a period of more than 30 consecutive days under 
        section 502(f) of title 32, United States Code, in 
        connection with a war, other military operation, or a 
        national emergency declared by the President and 
        supported by Federal funds.''.
    (e) Rule of Construction.--Nothing in the amendments made 
by this section shall be construed to authorize any refunding 
of any repayment of a loan.
    (f) Effective Date.--The amendments made by this section 
shall apply with respect to loans for which the first 
disbursement is made on or after July 1, 2001.

SEC. 8008. ADDITIONAL LOAN TERMS AND CONDITIONS.

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

SEC. 8009. CONSOLIDATION LOAN CHANGES.

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

SEC. 8010. REQUIREMENTS FOR DISBURSEMENTS OF STUDENT LOANS.

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

SEC. 8011. SCHOOL AS LENDER.

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

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

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

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

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

SEC. 8014. ADDITIONAL ADMINISTRATIVE PROVISIONS.

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

SEC. 8015. FUNDS FOR ADMINISTRATIVE EXPENSES.

    Section 458 is amended to read as follows:

``SEC. 458. FUNDS FOR ADMINISTRATIVE EXPENSES.

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

SEC. 8016. COST OF ATTENDANCE.

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

SEC. 8017. FAMILY CONTRIBUTION.

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

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

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

SEC. 8019. ADDITIONAL NEED ANALYSIS AMENDMENTS.

    (a) Treating Active Duty Members of the Armed Forces as 
Independent Students.--Section 480(d)(3) (20 U.S.C. 
1087vv(d)(3)) is amended by inserting before the semicolon at 
the end the following: ``or is currently serving on active duty 
in the Armed Forces for other than training purposes''.
    (b) Definition of Assets.--Section 480(f)(1) (20 U.S.C. 
1087vv(f)(1)) is amended by inserting ``qualified education 
benefits (except as provided in paragraph (3)),'' after ``tax 
shelters,''.
    (d) 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.''.
    (f) Designated Assistance.--Section 480(j) (20 U.S.C. 
1087vv(j)) is amended--
            (1) in the subsection heading, by striking ``; 
        Tuition Prepayment Plans'';
            (2) by striking paragraph (2);
            (3) by redesignating paragraph (3) as paragraph 
        (2); and
            (4) by adding at the end the following new 
        paragraph:
    ``(3) Notwithstanding paragraph (1) and section 472, 
assistance not received under this title may be excluded from 
both estimated financial assistance and cost of attendance, if 
that assistance is provided by a State and is designated by 
such State to offset a specific component of the cost of 
attendance. If that assistance is excluded from either 
estimated financial assistance or cost of attendance, it shall 
be excluded from both.''.

SEC. 8020. GENERAL PROVISIONS.

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

SEC. 8021. STUDENT ELIGIBILITY.

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

SEC. 8022. INSTITUTIONAL REFUNDS.

    Section 484B (20 U.S.C. 1091b) is amended--
            (1) in the matter preceding clause (i) of 
        subsection (a)(2)(A), by striking ``a leave of'' and 
        inserting ``1 or more leaves of'';
            (2) in subsection (a)(3)(B)(ii), by inserting ``(as 
        determined in accordance with subsection (d))'' after 
        ``student has completed'';
            (3) in subsection (a)(3)(C)(i), by striking ``grant 
        or loan assistance under this title'' and inserting 
        ``grant assistance under subparts 1 and 3 of part A, or 
        loan assistance under parts B, D, and E,'';
            (4) in subsection (a)(4), by amending subparagraph 
        (A) to read as follows:
                    ``(A) In general.--After determining the 
                eligibility of the student for a late 
                disbursement or post-withdrawal disbursement 
                (as required in regulations prescribed by the 
                Secretary), the institution of higher education 
                shall contact the borrower and obtain 
                confirmation that the loan funds are still 
                required by the borrower. In making such 
                contact, the institution shall explain to the 
                borrower the borrower's obligation to repay the 
                funds following any such disbursement. The 
                institution shall document in the borrower's 
                file the result of such contact and the final 
                determination made concerning such 
                disbursement.'';
            (5) in subsection (b)(1), by inserting ``not later 
        than 45 days from the determination of withdrawal'' 
        after ``return'';
            (6) in subsection (b)(2), by amending subparagraph 
        (C) to read as follows:
                    ``(C) Grant overpayment requirements.--
                            ``(i) In general.--Notwithstanding 
                        subparagraphs (A) and (B), a student 
                        shall only be required to return grant 
                        assistance in the amount (if any) by 
                        which--
                                    ``(I) the amount to be 
                                returned by the student (as 
                                determined under subparagraphs 
                                (A) and (B)), exceeds
                                    ``(II) 50 percent of the 
                                total grant assistance received 
                                by the student under this title 
                                for the payment period or 
                                period of enrollment.
                            ``(ii) Minimum.--A student shall 
                        not be required to return amounts of 
                        $50 or less.'';
            (7) in subsection (d), by striking ``(a)(3)(B)(i)'' 
        and inserting ``(a)(3)(B)''; and
            (8) in subsection (d)(2), by striking ``clock 
        hours--'' and all that follows through the period and 
        inserting ``clock hours scheduled to be completed by 
        the student in that period as of the day the student 
        withdrew.''.

SEC. 8023. COLLEGE ACCESS INITIATIVE.

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

``SEC. 485D. COLLEGE ACCESS INITIATIVE.

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

SEC. 8024. WAGE GARNISHMENT REQUIREMENT.

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

                          Subtitle B--Pensions

SEC. 8201. INCREASES IN PBGC PREMIUMS.

    (a) Flat-Rate Premiums.--
            (1) Single-employer plans.--
                    (A) In general.--Clause (i) of section 
                4006(a)(3)(A) of the Employee Retirement Income 
                Security Act of 1974 (29 U.S.C. 1306(a)(3)(A)) 
                is amended by striking ``$19'' and inserting 
                ``$30''.
                    (B) Adjustment for inflation.--Section 
                4006(a)(3) of such Act (29 U.S.C. 1306(a)(3)) 
                is amended by adding at the end the following 
                new subparagraph:
    ``(F) For each plan year beginning in a calendar year after 
2006, there shall be substituted for the premium rate specified 
in clause (i) of subparagraph (A) an amount equal to the 
greater of--
            ``(i) the product derived by multiplying the 
        premium rate specified in clause (i) of subparagraph 
        (A) by the ratio of--
                    ``(I) the national average wage index (as 
                defined in section 209(k)(1) of the Social 
                Security Act) for the first of the 2 calendar 
                years preceding the calendar year in which such 
                plan year begins, to
                    ``(II) the national average wage index (as 
                so defined) for 2004; and
            ``(ii) the premium rate in effect under clause (i) 
        of subparagraph (A) for plan years beginning in the 
        preceding calendar year.
If the amount determined under this subparagraph is not a 
multiple of $1, such product shall be rounded to the nearest 
multiple of $1.''.
            (2) Multiemployer plans.--
                    (A) In general.--Section 4006(a)(3)(A) of 
                such Act (29 U.S.C. 1306(a)(3)(A)) is amended--
                            (i) in clause (iii)--
                                    (I) by inserting ``and 
                                before January 1, 2006,'' after 
                                ``Act of 1980,''; and
                                    (II) by striking the period 
                                at the end and inserting ``, 
                                or''; and
                            (ii) by adding at the end the 
                        following:
            ``(iv) in the case of a multiemployer plan, for 
        plan years beginning after December 31, 2005, $8.00 for 
        each individual who is a participant in such plan 
        during the applicable plan year.''.
                    (B) Adjustment for inflation.--Section 
                4006(a)(3) of such Act (29 U.S.C. 1306(a)(3)), 
                as amended by this subsection, is amended by 
                adding at the end the following new 
                subparagraph:
    ``(G) For each plan year beginning in a calendar year after 
2006, there shall be substituted for the premium rate specified 
in clause (iv) of subparagraph (A) an amount equal to the 
greater of--
            ``(i) the product derived by multiplying the 
        premium rate specified in clause (iv) of subparagraph 
        (A) by the ratio of--
                    ``(I) the national average wage index (as 
                defined in section 209(k)(1) of the Social 
                Security Act) for the first of the 2 calendar 
                years preceding the calendar year in which such 
                plan year begins, to
                    ``(II) the national average wage index (as 
                so defined) for 2004; and
            ``(ii) the premium rate in effect under clause (iv) 
        of subparagraph (A) for plan years beginning in the 
        preceding calendar year.
If the amount determined under this subparagraph is not a 
multiple of $1, such product shall be rounded to the nearest 
multiple of $1.''.
    (b) Premium Rate for Certain Terminated Single-Employer 
Plans.--Subsection (a) of section 4006 of such Act (29 U.S.C. 
1306) is amended by adding at the end the following:
    ``(7) Premium Rate for Certain Terminated Single-Employer 
Plans.--
            ``(A) In general.--If there is a termination of a 
        single-employer plan under clause (ii) or (iii) of 
        section 4041(c)(2)(B) or section 4042, there shall be 
        payable to the corporation, with respect to each 
        applicable 12-month period, a premium at a rate equal 
        to $1,250 multiplied by the number of individuals who 
        were participants in the plan immediately before the 
        termination date. Such premium shall be in addition to 
        any other premium under this section.
            ``(B) Special rule for plans terminated in 
        bankruptcy reorganization.--In the case of a single-
        employer plan terminated under section 
        4041(c)(2)(B)(ii) or under section 4042 during pendency 
        of any bankruptcy reorganization proceeding under 
        chapter 11 of title 11, United States Code, or under 
        any similar law of a State or a political subdivision 
        of a State (or a case described in section 
        4041(c)(2)(B)(i) filed by or against such person has 
        been converted, as of such date, to such a case in 
        which reorganization is sought), subparagraph (A) shall 
        not apply to such plan until the date of the discharge 
        or dismissal of such person in such case.
            ``(C) Applicable 12-month period.--For purposes of 
        subparagraph (A)--
                    ``(i) In general.--The term `applicable 12-
                month period' means--
                            ``(I) the 12-month period beginning 
                        with the first month following the 
                        month in which the termination date 
                        occurs, and
                            ``(II) each of the first two 12-
                        month periods immediately following the 
                        period described in subclause (I).
                    ``(ii) Plans terminated in bankruptcy 
                reorganization.--In any case in which the 
                requirements of subparagraph (B)(i)(I) are met 
                in connection with the termination of the plan 
                with respect to 1 or more persons described in 
                such subparagraph, the 12-month period 
                described in clause (i)(I) shall be the 12-
                month period beginning with the first month 
                following the month which includes the earliest 
                date as of which each such person is discharged 
                or dismissed in the case described in such 
                clause in connection with such person.
            ``(D) Coordination with section 4007.--
                    ``(i) Notwithstanding section 4007--
                            ``(I) premiums under this paragraph 
                        shall be due within 30 days after the 
                        beginning of any applicable 12-month 
                        period, and
                            ``(II) the designated payor shall 
                        be the person who is the contributing 
                        sponsor as of immediately before the 
                        termination date.
                    ``(ii) The fifth sentence of section 
                4007(a) shall not apply in connection with 
                premiums determined under this paragraph.
            ``(E) Termination.--Subparagraph (A) shall not 
        apply with respect to any plan terminated after 
        December 31, 2010.''.
    (c) Conforming Amendment.--Section 4006(a)(3)(B) of such 
Act (29 U.S.C. 1306(a)(3)(B)) isamended by striking 
``subparagraph (A)(iii)'' and inserting ``clause (iii) or (iv) of 
subparagraph (A)''.
    (d) Effective Dates.--
            (1) In general.--Except as otherwise provided in 
        this subsection, the amendments made by this section 
        shall apply to plan years beginning after December 31, 
        2005.
            (2) Premium rate for certain terminated single-
        employer plans.--
                    (A) In general.--Except as provided in 
                subparagraph (B), the amendment made by 
                subsection (b) shall apply to plans terminated 
                after December 31, 2005.
                    (B) Special rule for plans terminated in 
                bankruptcy.--The amendment made by subsection 
                (b) shall not apply to a termination of a 
                single-employer plan that is terminated during 
                the pendency of any bankruptcy reorganization 
                proceeding under chapter 11 of title 11, United 
                States Code (or under any similar law of a 
                State or political subdivision of a State), if 
                the proceeding is pursuant to a bankruptcy 
                filing occurring before October 18, 2005.

                      TITLE IX--LIHEAP PROVISIONS

SEC. 9001. FUNDING AVAILABILITY.

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

                 TITLE X--JUDICIARY RELATED PROVISIONS

                  Subtitle A--Civil Filing Adjustments

SEC. 10001. CIVIL CASE FILING FEE INCREASES.

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

                      Subtitle B--Bankruptcy Fees

SEC. 10002. BANKRUPTCY FEES.

    (a) Bankruptcy Filing Fees.--Section 1930(a) of title 28, 
United States Code, is amended--
            (1) in paragraph (1)--
                    (A) in subparagraph (A) by striking 
                ``$220'' and inserting ``$245''; and
                    (B) in subparagraph (B) by striking 
                ``$150'' and inserting ``$235''; and
            (2) in paragraph (2) by striking ``$1,000'' and 
        inserting ``$2,750''.
    (b) Expenditure Limitation.--Incremental amounts collected 
by reason of the amendments made by subsection (a) shall be 
deposited in a special fund in the Treasury to be established 
after the enactment of this Act. Such amounts shall be 
available for the purposes specified in section 1931(a) of 
title 28, United States Code, but only to the extent 
specifically appropriated by an Act of Congress enacted after 
the enactment of this Act.
    (c) Effective Date.--This section and the amendments made 
by this section shall take effect 60 days after the date of the 
enactment of this Act.
      And the House agree to the same.
                For consideration of the Senate bill, and the 
                House amendment thereto, and modifications 
                committed to conference:
                                   Jim Nussle,
                                   Jim Ryun,
                                   Ander Crenshaw,
                                   Adam Putnam,
                                   Roger F. Wicker,
                                   Kenny C. Hulshof,
                                   Paul D. Ryan,
                                   Roy Blunt,
                                   Tom DeLay,
                From the Committee on Agriculture, for 
                consideration of title I of the Senate bill and 
                title I of the House amendment, and 
                modifications committed to conference:
                                   Bob Goodlatte,
                                   Frank D. Lucas,
                From the Committee on Education and the 
                Workforce, for consideration of title VII of 
                the Senate bill and title II and subtitle C of 
                title III of the House amendment, and 
                modifications committed to conference:
                                   John Boehner,
                                   Howard P. McKeon,
                From the Committee on Energy and Commerce, for 
                consideration of title III and title VI of the 
                Senate bill and title III of the House 
                amendment, and modifications committed to 
                conference:
                                   Joe Barton,
                                   Nathan Deal,
                From the Committee on Financial Services, for 
                consideration of title II of the Senate bill 
                and title IV of the House amendment, and 
                modifications committed to conference:
                                   Michael G. Oxley,
                                   Spencer Baucus,
                                           (Provided that Mr. Ney is 
                                               appointed in lieu of Mr. 
                                               Bachus for consideration 
                                               of subtitles C and D of 
                                               title II of the Senate 
                                               bill and subtitle B of 
                                               title IV of the House 
                                               amendment:)
                From the Committee on the Judiciary, for 
                consideration of title VIII of the Senate bill 
                and title V of the House amendment, and 
                modifications committed to conference:
                                   F. James Sensenbrenner, Jr.,
                                   Lamar Smith,
                From the Committee on Resources, for 
                consideration of title IV of the Senate bill 
                and title VI of the House amendment, and 
                modifications committed to conference:
                                   Richard Pombo,
                                   Jim Gibbons,
                From the Committee on Transportation and 
                Infrastructure, for consideration of title V 
                and division A of the Senate bill and title VII 
                of the House amendment, and modifications 
                committed to conference:
                                   Don Young,
                                   Frank LoBiondo,
                From the Committee on Ways and Means, for 
                consideration of sections 6039, 6071, and 
                subtitle B of title VI of the Senate bill and 
                title VIII of the House amendment, and 
                modifications committed to conference:
                                   William Thomas,
                                   Wally Herger,
                                 Managers on the Part of the House.

                                   Judd Gregg,
                                   Pete Domenici,
                                   Chuck Grassley,
                                   Michael B. Enzi,
                                   Wayne Allard,
                                   Jeff Sessions,
                                   Ted Stevens,
                                   Richard Shelby,
                                   Arlen Specter,
                                   Saxby Chambliss,
                                   Mitch McConnell,
                                Managers on the Part of the Senate.
       JOINT EXPLANATORY STATEMENT OF THE COMMITTEE OF CONFERENCE

      The managers on the part of the House and the Senate at 
the conference on the disagreeing votes of the two Houses on 
the amendment of the House to the bill (S. 1932), to provide 
for reconciliation pursuant to section 202(a) of the concurrent 
resolution on the budget for fiscal year 2006 (H. Con. Res. 
95), submit the following joint statement to the House and the 
Senate in explanation of the effect of the action agreed upon 
by the managers and recommended in the accompanying conference 
report:
      The House amendment struck all of the Senate bill after 
the enacting clause and inserted a substitute text:
      The Senate recedes from its disagreement to the amendment 
of the House with an amendment that is a substitute for the 
Senate bill and the House amendment. The differences between 
the Senate bill, the House amendment, and the substitute agreed 
to in conference are noted below, except for clerical 
corrections, conforming changes made necessary by agreements 
reached by the conferees, and minor drafting and clarifying 
changes.
      The managers representing authorizing committees 
submitted separate joint statements explaining the provisions 
within their respective jurisdictions: Committee on 
Agriculture, Committee on Education and the Workforce, 
Committee on Energy and Commerce, Committee on Financial 
Services, Committee on Transportation and Infrastructure, 
Committee on Ways and Means.

                   Title I--Committee on Agriculture

(1) Short Title
      The Senate bill cites this Title as the ``Agricultural 
Reconciliation Act of 2005.'' (Section 1001)
      The House amendment cites this Title as the 
``Agricultural Reconciliation Act of 2005'' and contains a 
table of contents. (Section 1001)
      The Conference substitute adopts the Senate provision.

                     Subtitle A--Commodity Programs

(2) Reduction of Commodity Program Payments
      The Senate bill adds a new section to Title I of the Farm 
Security and Rural Investment Act to reauthorize direct 
payments, counter-cyclical payments and marketing assistance 
loans through 2011 and reduce these program payments 2.5 
percent for crop years 2006 through 2010. It also reduces by 
2.5 percent payments to dairy producers pursuant to section 
1502 of the Farm Security and Rural Investment Act (known as 
``MILC'') during the period of October 1, 2005, through 
September 30, 2007. The reauthorization does not include 
1104(f) and 1304(g) which specify the times at which the 
Secretary is required to make partial counter-cyclical 
payments. It also does not include section 1307(a)(6) which 
requires the Secretary to pay storage, handling, and other 
costs for peanut crops. Further, the Senate bill extends the 
period during which the prevailing world market price for 
upland cotton must be further adjusted to July 31, 2012, and 
extends the extra long staple competitiveness program through 
July 31, 2012. (Section 1101)
      The House amendment amends section 1103 of the Farm 
Security and Rural Investment Act to reduce the total amount of 
direct payments to be paid to producers of covered commodities 
by 1 percent for crop years 2006 and 2007, and for crop years 
2008 and 2009 if direct payments are made in these years. The 
House amendment also amends section 1303 of the Farm Security 
and Rural Investment Act to reduce the total amount of the 
direct payments to be paid to producers of peanuts by 1 percent 
for crop years 2006 and 2007, and for crop years 2008 and 2009 
if direct payments are made in these years. (Section 1101)
      The Conference substitute adopts neither provision.
(3) Forfeiture Penalty for Nonrecourse Sugar Loans
      The Senate bill amends the Federal Agriculture 
Improvement and Reform (FAIR) Act of 1996 to require that a 
penalty be assessed on the forfeiture of any sugar from the 
2006 through 2010 crops of sugar beets and sugarcane pledged as 
collateral for a nonrecourse loan. It provides that the penalty 
is 1.2 percent of the loan rate established under section 156 
of the FAIR Act. Further, it reduces payments owed to a 
producer by a processor that forfeits sugar pledged as 
collateral in proportion to the penalty incurred by the 
processor. (Section 1102)
      The House amendment has no comparable provision.
      The Conference substitute deletes the Senate provision.
(4) Cotton Competitiveness Provisions
      The Senate bill amends the Farm Security and Rural 
Investment Act to eliminate authority for the establishment of 
the upland cotton user marketing certificate program known as 
``Step 2.'' It also repeals section 136 of the Federal 
Agriculture Improvement and Reform Act of 1996 which has 
duplicate language for the establishment of Step 2. Further, it 
provides that the above amendments take effect on August 1, 
2006. (Section 1103)
      The House amendment has identical language. (Section 
1103)
      The Conference substitute adopts the Senate provision 
with an amendment that eliminates the language repealing 
section 136 of the Federal Agriculture Improvement and Reform 
Act of 1996.
(5) National dairy market loss payments
      The Senate bill amends the MILC Program (section 1502 of 
the Farm Security and Rural Investment Act) by extending until 
September 30, 2007, the period during which the Secretary must 
offer to enter into contracts with producers. It also includes 
a new provision that decreases the multiplier used to calculate 
payments from 45 percent to 34 percent during the period of 
October 1, 2005, through September 30, 2007. In addition it 
extends until September 30, 2007, the period during which 
eligible production must be covered in any contract entered 
into by a producer. It also strikes section 1502(h) of the Farm 
Security and Rural Investment Act and strikes an obsolete 
reference to section 1502. (Section 1104)
      The House amendment has no comparable provision.
      The Conference substitute adopts the Senate provision 
with an amendment that will decrease the multiplier used to 
calculate payments from 45 percent to 34 percent during the 
period from October 1, 2005, through August 31, 2007, and from 
34 percent to 0 percent after September 1, 2007.
(6) Advance direct payments
      The Senate bill reduces the direct payment amounts that 
producers are eligible to receive in advance for the 2006 
through 2011 crop years. It gives producers the option of 
receiving up to 40 percent of their direct payments in advance 
for the 2006 crop year and up to 29 percent of their direct 
payments in advance for any of the 2007 through 2011 crop 
years.
      The Senate bill provides for a corresponding reduction in 
the direct payment amount that peanut producers may receive in 
advance for any of the 2006 through 2011 crop years. It gives 
peanut producers the option of receiving up to 40 percent of 
their direct payments in advance for the 2006 crop year and up 
to 29 percent of their direct payments in advance for any of 
the 2007 through 2011 crop years. (Section 1105)
      The House amendment reduces the direct payment amounts 
that producers are eligible to receive in advance for the 2006 
and 2007 crop years. It gives producers the option of receiving 
up to 40 percent of their direct payments in advance for the 
2006 and 2007 crop years.
      The House amendment provides for a corresponding 
reduction in the direct payment amounts that producers of 
peanuts are eligible to receive in advance for the 2006 and 
2007 crop years. It gives peanut producers the option of 
receiving up to 40 percent of their direct payments in advance 
for the 2006 and 2007 crop years. (Section 1102)
      The Conference substitute adopts the House provision with 
an amendment that reduces the direct payment amounts that 
producers are eligible to receive in advance from 50 percent to 
40 percent for the 2006 crop year and to 22 percent for the 
2007 crop year. Advance direct payments to peanut producers are 
reduced in an identical fashion.

                        Subtitle B--Conservation

(7) Conservation Reserve Program
      The Senate bill extends the Conservation Reserve Program 
(CRP) through 2011. It decreases the amount of acres that the 
Secretary is authorized to maintain in the conservation reserve 
program to 36.4 million acres through calendar year 2010, and 
38.3 million acres in 2011. It extends the period during which 
the Secretary may enroll acres, and it extends the requirement 
to enroll wetland and buffer acreage in reserve through 2011.
      It also requires the Secretary, in implementing the 
amendments made by this section, to achieve the new maximum 
acreage enrollment limit not later than 2 years after the date 
of enactment of the bill without affecting conservation reserve 
existing contracts. (Section 1201)
      The House amendment has no comparable provision.
      The Conference substitute deletes the Senate provision.
(8) Conservation Security Program
      The Senate bill extends the authorization for the 
Conservation Security Program (CSP) through 2011. It strikes 
the current limitation on funding and inserts a new limitation 
with two restraints. The new limits are $1,954,000,000 for 
fiscal years 2006 through 2010 and $5,200,000,000 for fiscal 
years 2006 through 2015. (Section 1202).
      The House amendment extends the authorization for the 
Conservation Security Program through 2011, strikes the current 
limitation on funding and inserts a new limitation with two 
restraints. The new limits are $2,213,000,000 for fiscal years 
2006 through 2010 and $5,729,000,000 for fiscal years 2006 
through 2015. (Section 1202)
      The Conference substitute adopts the Senate provision 
with an amendment that provides for a limit of $5,650,000,000 
for fiscal years 2006 through 2015.
(9) Environmental Quality Incentives Program
      The Senate bill extends the authorization for the 
Environmental Quality Incentives Program (EQIP) through 2011, 
and extends the aggregate payment limit for all EQIP payments 
through 2011. It also amends the funding provisions to provide: 
$1,017,000,000 for fiscal year 2005; $1,185,000,000 for fiscal 
year 2006; $1,270,000,000 for fiscal year 2007 through 2010; 
and $1,300,000,000 for fiscal year 2011. (Section 1203)
      The House amendment has no comparable provision.
      The Conference substitute adopts the Senate provision 
with an amendment that provides for $1,270,000,000 in each of 
fiscal years 2007 and 2009 and $1,300,000,000 in fiscal year 
2010, limits payments under this program to $450,000 during any 
six-year period, and extends the authorization for EQIP through 
fiscal year 2010.
(10) Limitation on use of Commodity Credit Corporation funds to carry 
        out watershed rehabilitation program
      The Senate bill has no comparable provision.
      The House amendment removes the requirement that funds 
for the watershed rehabilitation program remain available to 
the Secretary until expended. It reduces funding for the 
watershed rehabilitation program by $15 million in fiscal year 
2007, and it rescinds funds that are previously made available 
and are unobligated as of September 30, 2006. (Section 1201)
      The Conference substitute adopts the House provision with 
an amendment that cancels the authority to obligate funds 
previously made available for a fiscal year and unobligated as 
of October 1, 2006, but permits funding to remain available 
until expended and maintains funding at $65,000,000 for fiscal 
year 2007.
(11) Limitation on use of Commodity Credit Corporation funds to carry 
        out the agricultural management assistance program
      The Senate bill has no comparable provision.
      The House amendment eliminates funding for the 
agricultural management assistance program in 2007. (Section 
1203)
      The Conference substitute deletes the House provision.

                Subtitle C--Miscellaneous (Senate Bill)

                 Subtitle E--Research (House Amendment)

(12) Initiative for Future Agriculture and Food Systems
      The Senate bill reduces the amount of funds the Secretary 
is required to transfer on October 1, 2005, to $104 million and 
on October 1, 2006 through 2009 to $130 million. It provides 
$200,000,000 of funding in 2010 and in subsequent fiscal years, 
and provides that the amendments take effect on October 1, 
2005. (Section 1301)
      The House amendment eliminates funding for the Initiative 
for Future Agriculture and Food Systems in fiscal years 2007, 
2008, and 2009. It provides $200,000,000 of funding in 2010 and 
in subsequent fiscal years, and limits availability of fiscal 
year 2006 funds to the one year period beginning on October 1, 
2005, while maintaining the two-year period of availability for 
funds made available in other fiscal years. (Section 1501)
      The Conference substitute adopts the House provision.

                           Subtitle C--Energy

(13) Termination of use of commodity credit funds to carry out 
        renewable energy systems and energy efficiency improvement 
        program
      The Senate bill has no comparable provision.
      The House amendment eliminates the requirement that the 
Secretary make funding available for loans and grants under the 
renewable energy systems and energy efficiency improvements 
program. (Section 1301)
      The Conference substitute adopts the House provision with 
an amendment that maintains $3,000,000 of funding for this 
program in fiscal year 2007.

                     Subtitle D--Rural Development

(14) Enhanced access to broadband telecommunication services in rural 
        areas
      The Senate bill has no comparable provision.
      The House amendment eliminates the requirement that the 
Secretary provide loans for enhanced broadband access in fiscal 
year 2007, prohibits funding for this program from remaining 
available until expended, and rescinds all funding that is 
available and unobligated as of September 30, 2006. (Section 
1401)
      The Conference substitute adopts the House provision with 
an amendment that cancels funding previously made available for 
a fiscal year and unobligated as of October 1, 2006, but 
permits funding to remain available until expended and 
maintains the funding for fiscal year 2007.
(15) Value-added agricultural product market development grants
      The Senate bill has no comparable provision.
      The House amendment eliminates funding for value-added 
agricultural product grants in fiscal year 2007, prohibits 
funding for this program from remaining available until 
expended, and rescinds all funding that is available and 
unobligated as of September 30, 2006. (Section 1402)
      The Conference substitute adopts the House provision with 
an amendment that cancels funding previously made available for 
a fiscal year and unobligated as of October 1, 2006, but 
permits funding to remain available until expended and 
maintains the funding for fiscal year 2007.
(16) Rural business investment program
      The Senate bill has no comparable provision.
      The House amendment eliminates funding for the rural 
business investment program in fiscal year 2007, prohibits 
funding for this program from remaining available until 
expended, and rescinds all funding that is available and 
unobligated as of September 30, 2006. (Section 1403).
      The Conference substitute adopts the House provision with 
an amendment that eliminates funding in fiscal year 2007 and 
rescinds all funding that is available and unobligated as of 
October 1, 2006, but permits funding to remain available until 
expended.
(17) Rural business strategic investment grants
      Senate bill has no comparable provision.
      The House amendment eliminates funding for rural business 
strategic investment grants in fiscal year 2007 and rescinds 
all funding that is available and unobligated as of September 
30, 2006. (Section 1404)
      The Conference substitute adopts the House provision with 
an amendment that cancels funding previously made for a fiscal 
year and unobligated as of October 1, 2006, but maintains the 
funding for fiscal year 2007.
(18) Rural firefighters and emergency personnel grants
      The Senate bill has no comparable provision.
      The House amendment eliminates funding for rural 
firefighter and emergency personnel grants in fiscal year 2007, 
prohibits funding for this program from remaining available 
until expended, and rescinds all funding that is available and 
unobligated as of September 30, 2006. (Section 1405).
      The Conference substitute adopts the House provision with 
an amendment that permits funding to remain available until 
expended, but eliminates funding in fiscal year 2007, and 
rescinds all funding that is available and unobligated as of 
October 1, 2006.

                         Subtitle F--Nutrition

(19) Eligible households
      The Senate bill has no comparable provision.
      The House amendment amends the Food Stamp Act to restrict 
categorical eligibility status, during fiscal years 2006 
through 2010, to only those households in which each member 
receives cash benefits under the Temporary Assistance for Needy 
Families program (TANF). It provides an exception to the ``cash 
benefits'' rule for households in which each member receives 
substantial and ongoing non-cash benefits under TANF. It 
further provides that such non-cash benefits must be provided 
for purposes of shelter, utilities, child care, health care, 
transportation, or job training, and it requires that such 
households must have a monthly income that does not exceed 150 
percent of the poverty line.
      The House amendment reauthorizes provisions in the Food 
Stamp Act through 2011 (except assistance for community food 
projects (section 25(b)) and innovative programs for addressing 
common community problems (section 25(h)). It also amends the 
eligibility categories for free school lunch and breakfast to 
provide a new eligibility category that will include a child 
who is a member of a household: (1) in which each member 
receives or is eligible to receive non-cash or in-kind benefits 
under TANF; and (2) that has a gross monthly income at or below 
200 percent of the Federal poverty level. (Section 1601)
      The Conference substitute deletes the House provision.
(20) Availability of commodities for the Emergency Food Assistance 
        Program
      The Senate bill has no comparable provision.
      The House amendment reauthorizes the purchase of 
$140,000,000 worth of commodities per year for the Emergency 
Food Assistance Program through 2011, and it authorizes the 
purchase of an additional $12,000,000 worth of commodities in 
2006 to be distributed to States affected by Hurricanes Katrina 
and Rita. (Section 1602)
      The Conference substitute deletes the House provision.
(21) Residency requirement
      The Senate bill has no comparable provision.
      The House amendment amends the Personal Responsibility 
and Work Opportunity Reconciliation Act to require that, until 
fiscal year 2010, non-citizens must reside in the U.S. for 7 
years or more before becoming eligible for food stamp benefits. 
It provides an exemption, however, for aliens who currently 
receive food stamp benefits and who are 60 years of age or 
older or have petitioned for naturalization as a U.S. citizen. 
It also provides that on October 1, 2010, these provisions will 
expire. (Section 1603)
      The Conference substitute deletes the House provision.
(22) Disaster Food Stamp Program
      The Senate bill has no comparable provision.
      The House amendment authorizes the Secretary of 
Agriculture to pay to state agencies 100 percent of the 
administrative costs incurred in the delivery of food stamp 
benefits under the disaster food stamp program initiated in 
response to Hurricanes Katrina and Rita (Section 1604)
      The Conference substitute deletes the House provision.

Title II--Senate Committee on Banking and House Committee on Financial 
                                Services

                   Subtitle A--FHA Asset Disposition

       SUMMARY OF FHA RECONCILIATION LANGUAGE (DECEMBER 15, 2005)

      The House Financial Services and Senate Banking 
Committees approved reconciliation language that will make 
several FHA multifamily authorities subject to appropriations. 
This move to discretionary spending will enable the 
Administration and Congress to set the level of activity for 
these FHA authorities and better control their use. This 
legislation authorizes $100 million to be appropriated for 
fiscal year 2006 to make these reforms.
Bill summary
      Originally proposed in the President's budget, the FHA 
Asset Disposition Act of 2005 will make several FHA multifamily 
authorities subject to appropriations, including (1) discount 
property sales; (2) discount loan sales; and (3) up-front grant 
assistance.
      The Congressional Budget Office estimate of total savings 
in outlays are as follows (in millions):

------------------------------------------------------------------------
  FY 2006      FY 2007      FY 2008     FY 2009     FY 2010      Total
------------------------------------------------------------------------
      $30          $60          $60         $60         $60        $270
------------------------------------------------------------------------

      The savings from this proposal, taken together with 
Deposit Insurance Reform, constitute the reconciliation 
recommendations of the House Financial Services and Senate 
Banking Committees. Together the proposals will save an 
estimated $520 million over fiscal years 2006-10, with $30 
million in fiscal 2006. This amount is the savings target for 
these committees contemplated in the budget resolution.
Background
      Since 1934, FHA and HUD have insured almost 33 million 
home mortgages and multifamily project mortgages. Within HUD, 
FHA provides mortgage insurance to lenders to protect against 
losses as a result of borrower default. Currently, FHA has the 
authority to sell, at below-market rates, properties taken over 
by the agency because of mortgage defaults. FHA also has the 
authority to sell discount loans. This legislation will make 
these mandatory authorities discretionary and subject to 
appropriations. Additionally, FHA can provide up-front grants 
to rehabilitate dilapidated multifamily properties. Funding for 
the grants currently comes from the General Insurance Fund, 
which collects money from premiums and servicing of insured 
mortgages. The amount spent on the grants is left to the 
discretion of FHA. Under this legislation, funding for these 
grants will no longer be drawn from the General Insurance Fund 
and would be subject to appropriations. Finally, this proposal 
is effective during fiscal years 2006 through 2010.

                     Subtitle B--Deposit Insurance

             SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

Section 2101. Short title; table of contents
      This section establishes the short title of the subtitle, 
the `Federal Deposit Insurance Reform Act of 2005,' and 
provides a table of contents.
Section 2102. Merging the BIF and SAIF
      This section amends provisions of the Federal Deposit 
Insurance Act to merge the Bank Insurance Fund and the Savings 
Association Insurance Fund 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.
Section 2103. Increase in deposit insurance coverage
      This section provides for an inflation index for general 
depositors and a higher level of deposit insurance coverage for 
certain individual retirement accounts. Credit unions are 
provided with complete parity in coverage with other insured 
depository institutions.
      The section also retains the $100,000 deposit insurance 
limit on accounts at insured depository institutions, to be 
known as the ``standard maximum deposit insurance amount,'' 
subject to future cost of living adjustments.
      Beginning April 1, 2010, and every succeeding five years, 
the Board of Directors of the FDIC and the National Credit 
Union Administration Board shall jointly determine whether an 
increase in the standard maximum deposit insurance is 
appropriate after considering certain factors. If appropriate, 
the new standard maximum deposit insurance limit would be 
increased by a cost of living adjustment. This adjustment would 
be calculated according to the Personal Consumption 
Expenditures Chain-Type Index (PCE) published by the Department 
of Commerce and rounded down to the nearest $10,000. The FDIC 
and National Credit Union Administration (NCUA) Boards of 
Directors are required to publish the new standard maximum 
deposit insurance amount in the Federal Register and provide a 
corresponding report to Congress by April 5, 2010, and April 5 
of every succeeding fifth year. The approved adjustment in the 
standard maximum deposit insurance amount would automatically 
occur unless a Congressional act provides otherwise and would 
take effect on January 1 of the year immediately succeeding the 
calendar year in which the new amount is calculated.
      The section also provides pass-through coverage to 
certain employee benefit plans, even if the institution is not 
authorized to accept employee benefit plan deposits because it 
is not well-capitalized or adequately capitalized.
      The section also increases the deposit insurance limit 
for certain retirement accounts to $250,000, also subject to 
future cost-of-living adjustments.
Section 2104. Setting assessments and repeal of special rules relating 
        to minimum assessments and free deposit insurance
      This section allows the FDIC Board to set assessments in 
such amounts as it may determine to be necessary or 
appropriate. This provision also eliminates the existing 
restrictions on the FDIC's authority to levy assessments on any 
institution above amounts needed to achieve and maintain the 
existing DRR of 1.25 percent. The minimum statutory rate (23 
basis point cliff rate) applicable in certain circumstances is 
eliminated.
      This section also provides that under the FDIC's risk-
based assessment system, no depository institution shall be 
barred from the lowest-risk category solely because of size.
      The section also requires insured depository institutions 
to maintain all records that the FDIC may require for verifying 
the accuracy of any assessment for 3 years or, in the case of 
disputed assessments, until the dispute has been resolved, and 
increases the fees that the FDIC can impose for late payments 
of premium assessments from $100 to 1 percent of assessments 
per day, for institutions with assessments greater than 
$10,000. Institutions with assessments lower than $10,000 would 
face a maximum penalty of $100 for each day they were 
delinquent in paying their premium assessments.
      The bill repeals a number of provisions requiring the 
FDIC to set premiums on a semiannual basis, replacing them with 
a provision granting the FDIC greater flexibility in the timing 
of those evaluations.
Section 2105. Replacement of fixed designated reserve ratio with 
        reserve range
      This section eliminates the current 1.25 percent `hard 
target' DRR and provides the FDIC Board with the discretion to 
set the DRR within a range of 1.15 to 1.50 percent for any 
given year, using the following criteria as a basis for making 
these determinations: (1) present and future risk of losses to 
the deposit insurance fund; (2) economic conditions; and (3) 
any other factors the Board may determine to be appropriate.
      In designating the reserve ratio, the FDIC must follow 
notice-and-comment rulemaking procedures, and is required to 
publish a thorough analysis of the data and projections if it 
proposes to change the DRR.
Section 2106. Requirements applicable to the risk-based assessment 
        system
      This section directs the FDIC to collect information from 
all appropriate sources in determining risk of losses to the 
DIF. This provision does not authorize the FDIC to impose 
additional recordkeeping requirements on insured depository 
institutions.
      The FDIC is required to consult with the appropriate 
Federal banking agency in assessing the risk of loss to the DIF 
with respect to any insured depository institution. This risk 
of loss evaluation may be done on an aggregate basis for 
institutions that are determined to be well-capitalized and 
well-managed.
      The FDIC is also required to provide notice and 
opportunity for comment prior to revising or modifying the 
risk-based assessment system.
Section 2107. Refunds, dividends, and credits from Deposit Insurance 
        Fund
      This section provides for refunds or credits of any 
assessment payment that was made by an insured depository 
institution in excess of the amount due the FDIC.
      The section specifies two circumstances under which the 
FDIC is required to pay dividends to insured depository 
institutions: (1) whenever the reserve ratio of the DIF equals 
or exceeds 1.35 percent of estimated insured deposits and is 
less than or equal to 1.5 percent of such deposits, the FDIC is 
required to pay dividends equal to 50 percent of the amount in 
excess of what is required to maintain the reserve ratio at 
1.35 percent unless the FDIC determines that a significant risk 
of losses to the DIF exists and such losses justify the growth 
of the reserve ratio; and (2) whenever the reserve ratio of the 
DIF exceeds 1.5 percent of estimated insured deposits, the FDIC 
is required to pay dividends in the amount of the excess of 
what is necessary to maintain the ratio at 1.5 percent.
      The section also provides for a transitional credit of 
10.5 basis points of the total assessment base as of December 
31, 2001 (or about $4.7 billion) to eligible insured depository 
institutions based on their respective percentage of total 
industry assessable deposits held as of December 31, 1996. 
Eligible insured depositoryinstitutions had to be in existence 
at December 31, 1996, or be a successor to such an institution, and to 
have paid a deposit insurance assessment prior to that date.
      For purposes of allocating dividends, the FDIC is 
required to determine each insured depository institution's 
relative contribution to the DIF (or any predecessor deposit 
insurance fund), taking into account the institution's share of 
the assessment base as of December 31, 1996; the total amount 
of deposit insurance assessments paid by the institution after 
December 31, 1996; that portion of assessments paid by an 
institution that reflects higher levels of risk assumed by the 
institution; and such other factors as the FDIC deems 
appropriate. The FDIC's calculation, declaration and payment of 
dividends are made subject to notice-and-comment rulemaking.
      For any insured depository institution that exhibits 
financial, operational or compliance weaknesses ranging from 
moderately severe to unsatisfactory at the beginning of the 
assessment period, credits may not exceed the amount calculated 
by applying to that institution the average assessment rate on 
all insured depository institutions for that assessment period.
      In promulgating regulations establishing a system for 
dividends and credits, the FDIC is required to include 
provisions allowing insured depository institutions a 
reasonable opportunity to challenge administratively the amount 
of their dividends or credits.
      In determining the appropriate distribution of dividends, 
the FDIC must weigh a number of factors in its rulemaking 
process. The calculation should recognize past contributions to 
the deposit insurance funds by incorporating the ratio 
determined for an institution in the calculation of the 
institution's one-time credit based on total assessment base at 
year-end 1996, as well as the actual assessments paid since 
that time. In establishing the dividend system, the FDIC should 
also take into account and make adjustments that reflect the 
higher risk profiles of some institutions so that they are not 
rewarded for riskier behavior. The FDIC is given the discretion 
to incorporate additional factors, through the rulemaking 
process, as it deems appropriate.
Section 2108. Deposit Insurance Fund restoration plans
      Whenever the reserve ratio falls or is projected to fall 
below the low end of the range within which the FDIC is 
authorized to set the DRR, the FDIC is required, within 90 
days, to establish and implement a plan for restoring the DIF 
to that level within five years or a longer period in 
extraordinary circumstances. While such a restoration plan is 
in effect, the FDIC has the authority to restrict the use of 
assessment credits by insured depository institutions, but is 
required to apply to an institution's assessment an amount that 
is the lesser of the institution's assessment or 3 basis points 
of an institution's assessment base. The FDIC must publish the 
details of its restoration plan in the Federal Register within 
30 days of its implementation.
Section 2109. Regulations required
      This section provides that the FDIC has 270 days after 
the date of enactment to prescribe final regulations, after 
notice and opportunity for public comment, establishing the 
DRR, implementing increases in deposit insurance coverage, 
implementing the dividend requirement and the one-time 
assessment credit, and providing for premium assessments under 
the amended Act.
Section 2010. Studies of FDIC structure and expenses and certain 
        activities and further possible changes to deposit insurance 
        system
      This section provides that within one year of enactment, 
reports must be submitted to Congress on the following issues:
      (1) The efficiency and effectiveness of the 
administration of the prompt corrective action (PCA) program, 
including the degree of effectiveness of the Federal banking 
agencies in identifying troubled depository institutions and 
the degree of accuracy of the risk assessments made by the 
FDIC;
      (2) The appropriateness of the FDIC's organizational 
structure for the mission of the FDIC, to take into account the 
current size and complexity of the business of insured 
depository institutions; the extent to which the organizational 
structure contributes to or reduces operational inefficiencies 
that increase operational costs; and the effectiveness of 
internal controls;
      (3) The feasibility of establishing a voluntary deposit 
insurance system for deposits in excess of the maximum amount 
of deposit insurance for any depositor;
      (4) The feasibility of increasing the limit on deposit 
insurance for deposits of municipalities and other units of 
general local government;
      (5) The feasibility of privatizing all deposit insurance 
at insured depository institutions and insured credit unions; 
and,
      (6) The feasibility of using an alternative to estimated 
insured deposits in calculating the DIF's reserve ratio and the 
DRR.
      (7) The section directs the FDIC to conduct a study of 
the reserve methodology and loss accounting for insured 
depository institutions in a troubled condition over the period 
January 1, 1992 through December 31, 2004, and report its 
findings and conclusions to Congress within one year of the 
date of enactment. The FDIC is required to obtain comments on 
the design of this study from the Government Accountability 
Office (GAO), and to provide a draft of the final report to GAO 
prior to its submission to Congress.
      (8) The section directs the Comptroller General to report 
to the Committee on Financial Services of the House and the 
Committee on Banking, Housing, and Urban Affairs in the Senate, 
the potential impact on the United States financial system, the 
implementation of the new Basel Capital Accord and the proposed 
revisions to current reserve requirement regulations for non-
Basel II banks.
Section 2111. Bi-annual FDIC survey and report on increasing the 
        deposit base by encouraging use of depository institutions by 
        the unbanked
      This section requires the FDIC to conduct a bi-annual 
survey on efforts by insured depository institutions to bring 
the `unbanked' into the conventional finance system, and report 
its findings and conclusions to the House Committee on 
Financial Services and the Senate Committee on Banking, Housing 
and Urban Affairs, together with any recommendations for 
legislative or administrative action.
Section 2112. Technical and conforming amendments to the Federal 
        Deposit Insurance Act relating to the merger of the BIF and 
        SAIF
      This section makes numerous amendments to ensure the 
technical conformity of the Federal Deposit Insurance Reform 
Act to various provisions in the Federal Deposit Insurance Act 
and other banking laws, to include the authority of the DIF to 
borrow from insured depository institutions and the Federal 
Home Loan Banks.
      In particular, this section repeals section 5(d)(2) of 
the Federal Deposit Insurance Act, dealing with exit fees 
collected from institutions leaving the Savings Association 
Insurance Fund (SAIF). These funds will be returned to the DIF 
upon the repeal of this provision.
Section 2113. Other Technical and conforming amendments relating to the 
        merger of the BIF and SAIF
      This section ensures the technical conformity of the 
Federal Deposit Insurance Reform Act to various provisions in 
the Federal Deposit Insurance Act and other banking laws.
      The managers on the part of the House and Senate at the 
conference on the disagreeing votes of the two Houses on the 
amendment of the Senate to bill (S. 1932), to expedite the 
digital television (DTV) transition while helping consumers to 
continue to use their analog televisions, to free spectrum for 
public safety and commercial use, to improve emergency 
communications, to provide resources for the design and 
deployment of a temporary digital television broadcast system 
for New York City in response to the destruction of the World 
Trade Center during the terrorist attacks of September 11, 
2001, and to ensure continued air service to rural communities 
through the Essential Air Service program and for other 
purposes, submit the following joint statement to the House and 
Senate in explanation of the effect of the action agreed upon 
by the managers and recommended in the accompanying conference 
report.

                        CONGRESSIONAL DIRECTIVES

      The statement of the managers remains silent on 
provisions that were in both the House and Senate bills that 
remain unchanged by this conference agreement, except as noted 
in this statement of the managers.
      The conferees agree that executive branch wishes cannot 
substitute for Congress' own statements as to the best evidence 
of congressional intentions--that is, the official reports of 
the Congress.

                Title III--Digital Television Transition

Section 3001. Short title
      Section 3001 would provide that this Title may be cited 
as the ``Digital Television Transition and Public Safety Act of 
2005.''
Sec. 3002. Analog spectrum recovery; firm deadline
      Section 3002 directs the Federal Communication Commission 
(FCC) to take all steps necessary to require, by February 18, 
2009, that full-power television stations stop analog 
broadcasting, and that Class A stations, whether broadcasting 
in analog or digital format, and full-power television stations 
broadcasting in digital format, conduct such broadcasting on 
channels 2 to 36 and 38 to 51. This enables channels 52 to 62 
and 65 to 67 to be auctioned, and channels 63, 64, 68, and 69 
to be used for public-safety purposes. Among the necessary 
steps the FCC will need to take are to issue a report and order 
on the digital television table of channel allotments, and to 
coordinate those allotments with Canada and Mexico to resolve 
any international interference issues.
      Section 3002 also clarifies that only full-power 
stations, not low-power stations, must cease analog 
broadcasting by February 18, 2009. Low-power stations, 
including Class A stations, may continue broadcasting in analog 
format after February 18, 2009, subject to future decisions by 
the FCC on how to complete the digital television transition 
for such stations. Low-power stations other than Class A 
stations may also continue such analog broadcasting above 
channel 51, subject to future FCC decisions, so long as those 
stations' use of those channels is secondary to the use of 
those channels by the auction winners and public safety 
officials.
Section 3003. Auction of recovered spectrum
      Section 3003 would amend the Communications Act of 1934 
to require the FCC to conduct an auction of the recovered 
spectrum commencing by January 28, 2008. The FCC's auction 
authority would be extended through September 30, 2011.
Sec. 3004. Reservation of auction proceeds
      This provision requires that the proceeds from the 
auction of analog spectrum be deposited in a single separate 
fund in the Treasury, to be called the ``Digital Television 
Transition and Public Safety Fund,'' in order to fund several 
programs. On September 30, 2009, $7,363,000,000 shall be 
transferred from the Digital Television Transition and Public 
Safety Fund to the general fund of the Treasury.
Section 3005. Digital transition and public safety fund
      To help consumers who wish to continue receiving 
broadcast programming over the air using analog-only 
televisions not connected to cable or satellite service, the 
bill authorizes the National Telecommunications and Information 
Administration (NTIA) to create a digital-to-analog converter 
box assistance program. Under the program, the NTIA is 
initially allocated up to $990 million of the spectrum auction 
revenues to send by U.S. mail up to two $40 coupons to each 
U.S. household that requests to participate in the program. 
Consumers may use the coupons toward the purchase of eligible 
digital-to-analog converter-boxes. Such boxes, and over-the-air 
digital televisions in general, can work with the antennas 
consumers already use in their homes for analog over-the-air 
broadcasts. The NTIA may use up to $100 million of the $990 
million for administrative costs. Up to $5,000,000 of the 
administrative funds may be used to educate consumers about the 
digital television transition and the digital-to-analog 
converter-box program. If, as the program progresses, it 
appears the NTIA will need additional funds, the NTIA may 
certify to Congress that it cannot operate the program without 
more money, at which point the funds available for the program 
shall increase to $1.5 billion and the cap on administrative 
expenses shall increase to $160 million. The NTIA would be 
allowed access to the additional funds 60 days after the 
certification.
      Even if NTIA spends $100 million on administrative costs, 
the remaining $890 million in converter-box program proceeds 
would fund 22,250,000 coupons. And each additional $40 the NTIA 
does not spend on administration is another coupon it can make 
available to consumers. Thus, the Managers expect in any NTIA 
certification to raise the caps that the NTIA explain in detail 
why access to additional funds is necessary, whether those 
funds are to be used for administrative costs or for the 
coupons themselves, and why the NTIA was unable to operate the 
program within the $990 million overall cap and $100 million 
administrative cap.
      The Managers note that the February 17, 2009, firm 
deadline will have little impact on most television households. 
Only consumers relying on over-the-air broadcasts should need 
to participate in the converter-box program. Only 14.86 percent 
of U.S. television households relied exclusively on over-the-
air transmission as of June 2004, according to the FCC. By 
contrast, the FCC reports that 92.3 million households, 
representing 85.14 percent, subscribed to a multichannel video 
programming distribution (MVPD) service, such as those offered 
by a cable or satellite operator.
      The coupon structure of the program and requiring 
consumers to make affirmative requests for coupons takes into 
account that many consumers will neither need nor want a 
subsidized converter box. By contrast, if converter-boxes were 
made directly available at subsidized rates at stores, or 
coupons were automatically sent to every U.S. household, 
impulse participation by consumers who do not really need 
either a converter-box or a subsidy would cause the program to 
run out of funds before consumers who really do need a 
subsidized box avail themselves of the program.
      The Managers expect NTIA to promulgate regulations within 
nine months of enactment governing: (1) the content and 
distribution of coupon request forms and coupons; (2) consumer 
redemption of, and retailer reimbursement for, the coupons; (3) 
the types of converter boxes that shall be eligible for 
purchase with a coupon; (4) certification, education, and 
auditing of retailers involved in the program; and (5) consumer 
and retailer appeals. The requirement to send the coupons 
through the U.S. mail is designed to help NTIA administer the 
two-coupon per household limit. That limit would be much more 
difficult to implement if the coupons themselves were 
distributed electronically or simply made available at 
government buildings such as post offices. The U.S. mail 
requirement is also intended to reduce fraud that might occur 
with electronically distributed coupons. The Managers expect 
NTIA to take additional measures to reduce fraud and abuse, 
such as including anti-counterfeit measures and perhaps unique 
serial numbers on the coupons. The Managers do expect NTIA to 
use the efficiencies of electronic media and networks, however, 
to make other aspects of the program more efficient, such as 
outreach efforts, the distribution of coupon request forms, and 
the reimbursement of retailers for coupons that consumers 
redeem. NTIA should also take measures to protect consumer 
privacy in the use of information provided in conjunction with 
participation in the program.
Sec. 3006. Public safety interoperable communications
      Section 3006 provides funding in the amount of 
$1,000,000,000 to help ensure interoperability for our nation's 
first responders. In order to obtain a grant under this 
section, a public safety agency shall--(1) submit an 
application to the Assistant Secretary at such time, in such 
form, and containing or accompanied by such information and 
assurances as the Assistant Secretary shall require; (2) agree 
that, if awarded a grant, thepublic safety agency will submit 
annual reports to the Assistant Secretary for the duration of the grant 
award period with respect to--(A) the expenditure of grant funds; and 
(B) progress toward acquiring and deploying interoperable 
communications systems funded by the grant; and (3) agree to remit to 
the Assistant Secretary any grant funds that remain unexpended at the 
end of the 3-year period of the grant.
      Grants under this section shall be awarded in the form of 
a single grant for a period of not more that 3 years. At the 
end of 3 years, any grant funds that remain unexpended should 
be remitted by the grantee to the Assistant Secretary, and, may 
be awarded to other eligible grant recipients. At the end of 
fiscal year 2010, any such re-awarded grant funds that remain 
unexpended shall be remitted by the grantee to the Assistant 
Secretary and may not be re-awarded to other grantees.
      In order to ensure consistency amongst various federal 
interoperable communications grant programs, the Managers 
expect the Assistant Secretary, in consultation with the 
Secretary of the Department of Homeland Security, to administer 
the grant program in a manner consistent with the recommended 
guidance for public safety communications and interoperability 
grants established by the Office of Grant and Training of the 
Preparedness Directorate and the SAFECOM Program of the Office 
for Interoperability and Compatibility of the Science and 
Technology Directorate of the Department of Homeland Security. 
In addition, the Managers expect that the Assistant Secretary, 
in consultation with the Secretary of the Department of 
Homeland Security, will ensure that the grants awarded under 
this program are utilized by public safety agencies in a manner 
which is consistent with applicable state interoperable 
communications plans, state and urban area homeland security 
strategies, and the National Preparedness Goal and accompanying 
guidance.
      Moreover, in order to minimize the paperwork and 
administrative burden of public safety agencies applying for 
funds under this grant program, the Managers expect the 
Assistant Secretary, in consultation with the Secretary of the 
Department of Homeland Security, to enable a public safety 
agency to utilize, to the maximum extent practicable, the 
identical application such public safety agency may have 
submitted to the Department of Homeland Security for any 
interoperable communications funding from the Department of 
Homeland Security and to take any other steps to minimize the 
administrative burden of public safety agencies that may be 
applying both for funds under this grant program and funds for 
interoperable communications from the Department of Homeland 
Security.
      The Managers intend that grants under this section may be 
used for the acquisition costs associated with designing an 
interoperable communications system so that the system is 
properly engineered based upon the topography, population 
density, or other characteristics of the area in which the 
system will operate. The Managers note that there is a diverse 
array of technological and engineering solutions that enable 
interoperable communications systems.
      The Managers encourage the Assistant Secretary, in 
consultation with the Secretary of the Department of Homeland 
Security, to consider distributing a limited portion of grant 
funds under this section in a manner that gives priority to 
those public safety agencies in areas designated as at high 
risk for natural disasters and threats of terrorism to the 
agriculture, food, banking, and chemical industries; the 
defense industrial base; emergency services; energy; government 
facilities; postal, shipping, public health, health care, 
information technology, telecommunications, and transportation 
systems; water; dams; commercial facilities; and national 
monuments and icons.
Section 3007. NYC 9/11 digital transition
      The funding provided under this section, $30,000,000, 
would enable New York City broadcasters can build interim 
facilities to ensure that the New York metropolitan area could 
receive an adequate digital broadcast signal until the new 
facilities atop the Freedom tower can be completed. The 
Managers do not intend this program to alter or affect the 
FCC's authority with respect to licensing, interference, or 
other regulation.
Sec. 3008. Low-power television and translator digital to analog 
        conversion
      Section 3008 provides funding to facilitate continued 
service for the viewers of low power television stations over 
their analog TVs. The Assistant Secretary shall determine the 
maximum amount of compensation such a low-power television 
station may receive based on the average cost of such digital-
to-analog conversion devices during the time period such low-
power broadcast television station purchased the digital-to-
analog conversion device, but in no case shall such 
compensation exceed $1,000.
Section 3009. Low-power and translator upgrade program
      The funding provided under this section would make 
available $65,000,000 for a program to convert low-power 
television stations and television translator stations from 
analog to digital transmissions.
Sec. 3010. National alert and tsunami warning program
      The funding provided under this section, $156,000,000, 
will provide for a modern all hazards alert and warning program 
to provide alerts in response to natural disasters, man-made 
accidents, and terrorist incidents. The program will encourage, 
but not mandate, new technologies such as wireless 
communication devices, satellite radios, and personal computers 
to enhance the nation's current emergency warning capability. 
The goal of the program will be to help ensure that regardless 
of what communication technology an individual relies upon they 
will get an alert to a threat to public safety.
      The funding will be used to develop technologies to allow 
emergency managers to precisely geographically target their 
alerts to only populations at risk. Research and development 
will be encouraged, but not mandated, to be conducted through a 
cooperative research program with the telecommunications 
industry. The funds should also be used to provide emergency 
managers with the tools necessary to input alerts into a 
national alerting system and have them retransmitted across all 
appropriate communication mediums. There should be established 
a procedure to provide credentials to emergency managers who 
wish to use the system to ensure the integrity of emergency 
alert communications to the public. The office responsible for 
managing the system should also ensure that personnel using the 
system are appropriately trained on how and when to use the 
system and understand that the system should only be used for 
grave threats to public safety. Personnel should also be 
trained to issue alerts that provide the public with 
information on what to do to protect themselves from the 
threat.
Section 3011. ENHANCE 911
      The funding provided under this section would make 
available $43,500,000 in grants to implement the ENHANCE 911 
Act of 2004.
Section 3012. Essential air service program
      The funding provided under this section would make 
$30,000,000 in grants to the Essential Air Service program.
Section 3013. Supplemental license fees
      This section provides for additional fees to be assessed 
by the Federal Communications Commission in the aggregate 
amount of $10,000,000 during fiscal year 2006.

                           Title V--Medicare

                           Subtitle A--Part A

Hospital Quality Improvement (Section 5001 of the Conference Agreement, 
        Section 6110 of the Senate Bill and no provision in the House 
        Bill)
Current Law
      Each year, Medicare's operating payments to hospitals are 
increased or updated by a factor that is determined in part by 
the projected annual change in the hospital market basket (MB), 
a measure that estimates price inflation affecting hospitals. 
Congress establishes the update for Medicare's inpatient 
prospective payment system (IPPS) for operating costs in acute 
care hospitals, often several years in advance. Currently, 
through FY2007, the IPPS operating update has been established 
as the MB for hospitals that submit specific quality 
information and as the MB minus 0.4 percentage points for 
hospitals that do not provide such information. The required 
data are those ten quality indicators established by the 
Secretary of the Department of Health and Human Services (the 
Secretary) as of November 1, 2003. Starting in FY2008, the IPPS 
update will be the hospital MB. Any MB reduction does not apply 
when computing the applicable percentage increase in subsequent 
years.
      Outlier payments are intended to protect IPPS hospitals 
from the risk of financial losses associated with patients with 
exceptionally high costs or unusually long stays. Medicare 
cases qualify for outlier payments if they exceed a threshold 
or fixed loss amount that is established each year. As directed 
by statute, the total amount of any outlier payments for any 
year should equal no less than 5 percent nor more than 6 
percent of total projected operating diagnosis related group 
(DRG) payments. Outlier payments are financed by a reduction in 
the national average standardized amount, typically set at 5.1 
percent.
      For the purpose of establishing the correct IPPS payment, 
Medicare discharges are classified into diagnosis related 
groups (DRGs) primarily on the basis of the diagnosis and 
procedure code information included on the beneficiary's claim. 
The information includes the principal diagnosis (or main 
problem requiring inpatient care), up to eight secondary 
diagnoses codes as well as up to six procedures performed 
during the stay. Medicare pays for inpatient hospital services 
using per discharge rates that will vary by the DRG (and its 
calculated weight) to which a patient's stay is assigned. Each 
DRG weight represents the average resources required to provide 
care for cases in that specific DRG relative to the average 
resources used to treat cases in all DRGs. The Center for 
Medicare and Medicaid Services (CMS) annually reviews the DRG 
definitions and relative weights to (1) reflect changes in 
treatment patterns and technology improvements and (2) ensure 
that cases with clinically similar conditions requiring 
comparable resources are grouped together.
      Under the DRG classification system, certain secondary 
diagnoses are considered to be complications or comorbidities 
(CC). When present as a secondary condition (with a specific 
principal diagnosis), these diagnosis codes are considered to 
increase the length of stay by at least one day in at least 75 
percent of the patients. In FY2006, there are 3,285 diagnosis 
codes on the CC list. 524 DRGs are used for Medicare payment 
purposes and 121 paired DRGs are split into higher and lower 
paid DRGs on the presence or the absence of a CC. CMS has added 
and deleted codes from the standard list of CCs, but has never 
conducted a comprehensive review of the list. It is planning to 
review systematically the CC list for FY2007 Medicare payments.
Senate Bill
      The Medicare statute would be amended by adding a new 
Section l860E-2 which establishes the hospital value-based 
purchasing program for inpatient hospital services, starting 
FY2007. The program would make value-based payments to 
hospitals based on data reported under the quality measurement 
system established by the Secretary. Hospitals paid under 
Medicare's prospective payment system (PPS) that have 
substantially improved the quality of care over the prior year 
or exceeded an established quality threshold would receive a 
value-based payment as determined by the Secretary. A majority 
of the total amount available for value-based payments in any 
fiscal year would be paid to hospitals that are receiving such 
payments for exceeding a quality threshold. Starting in FY2008, 
the percentage of the total amount for value-based payments in 
any fiscal year that is paid to such hospitals would be greater 
than the equivalent percentage paid in the previous year. 
Hospitals would be required to comply with all the quality data 
reporting requirements and attest to the accuracy of the data 
in order to be eligible for a value-based payment. The total 
amount of value-based payments in a fiscal year would equal the 
total amount of available funding for such payments for that 
year. The payments would be based on the methods determined by 
the Secretary and would be made to hospitals no later than the 
close of the following fiscal year. No later than January 1, 
2007, the Secretary would provide each hospital with a 
description of how its payments for FY2006 would have been 
affected had the valuebased payment program been in effect that 
fiscal year.
      Value-based payments in a fiscal year would be made from 
Medicare's Part A Trust fund and would equal specified 
reductions in those trust fund expenditures as established in 
Section 6110(b) of the bill. Specifically, IPPS outlier 
payments would be established as no less than 5 percent and no 
more than 6 percent for fiscal years prior to 2007. In FY2007, 
outlier payments would be established as no less than 4 percent 
and no more than 5 percent. In FY2008, outlier payments would 
be established as no less than 3.75 percent and no more than 
4.75 percent. In FY2009, outlier payments would be established 
as no less than 3.5 percent and no more than 4.5 percent. In 
FY2010, outlier payments would be established as no less than 
3.25 percent and no more than 4.25 percent. In FY2011 and in 
subsequent years, outlier payments would be established as no 
less than 3 percent and no more than 4 percent.
      The Secretary would be directed to reduce the average 
standardized amount by certain percentages to fund outlier 
payments and the hospital value-based purchasing program. The 
reduction factor would be equal to a calculation where the 
numerator is the sum of the additional outlier payments (as 
discussed in the preceding paragraph) plus a specified 
percentage of total projected DRG prospective payment rates 
divided by the total projected DRG prospective payment rates. 
The specific percentages would be 0 percent for fiscal years 
prior to 2007, 1 percent in FY2007, 1.25 percent in FY2008, 1.5 
percent in FY2009, 1.75 percent in FY2010, and 2 percent in 
FY2011 and in subsequent years.
      Acute care hospitals that do not submit required quality 
data would receive the MB minus 2 percentage points for FY2007 
and each subsequent fiscal year. The reduction would apply only 
with respect to the fiscal year involved and would not be taken 
into account when computing subsequent updates. The required 
quality data would be that determined by the Secretary to be 
appropriate for the measurement of health care quality, 
including data necessary for the operation of the IPPS hospital 
value-based purchasing program.
House Bill
      No provision.
Conference Agreement
      Hospitals that do not submit the required data in FY2007 
and each subsequent year will have the applicable MB percentage 
increase reduced by 2 percentage points. Each IPPS hospital is 
required to submit data on measures selected by the Secretary 
in the established form, manner, and specified time. Any 
reduction applies only to the fiscal year in question and does 
not affect subsequent fiscal years.
      The conference agreement establishes that the Secretary 
will expand the number of quality indicators required to be 
reported by acute care hospitals. Beginning October 1, 2006 the 
Secretary will begin to adopt the baseline set of performance 
measures set forth in the November 2005 Institute of Medicine 
report that was required by section 238(b) of the Medicare 
Prescription Drug, Improvement, and Modernization Act of 2003. 
Beginning October 1, 2007, the Secretary will add other 
measures that reflect consensus among the affected parties. To 
the extent feasible and practicable, these measures will 
include those established by national consensus building 
entities. The Secretary is permitted to vary and replace any 
measures in appropriate cases, such as where all hospitals are 
effectively in compliance or where measures have been shown not 
to represent the best clinical practice.
      The Secretary is required to establish procedures for 
making the submitted quality data available to the public. 
These procedures will ensure that a hospital has the 
opportunity to review the data before they are made available 
to the public. The Secretary is required to report quality 
measures of process, structure, outcome, patients' perspective 
on care, efficiency, and costs of care that relate to inpatient 
services on the Internet website of CMS.
      The Secretary is required to develop a plan to implement 
a value-based purchasing program for IPPS payments to acute 
care hospitals beginning with FY2009. The plan will include 
consideration of (1) the on-going development, selection, and 
modification process for measures of quality and resource use 
in hospital inpatient settings; (2) the reporting, collection, 
and validation of the data; (3) the structure of value-based 
payment adjustments such as the determination of thresholds for 
a payment adjustment, the size of the payment adjustment and 
the sources of funding for the value-based payments; and (4) 
the disclosure of information on hospital performance. The 
Secretary will consult with relevant affected parties and 
consider experience with applicable demonstration programs.
      The Secretary is required to submit a report to Congress 
on the plan for the value-based purchasing program no later 
than August 1, 2007. The Medicare Payment Advisory Commission 
(MedPAC) is required to submit a report with detailed 
recommendations on the structure of the valued based payment 
adjustments no later than June 1, 2007. The report will include 
(1) a determination of thresholds, size of payments, sources of 
funds, and relationship of payments to quality measures; (2) 
analyses of hospital efficiency measures such as costs per 
discharge, related services (including physician services) 
within an episode of care; and (3) an identification of other 
changes that are needed within the IPPS payment structure.
      Starting for discharges on October 1, 2007, hospitals are 
required to report any secondary diagnosis codes applicable to 
patients at their admission. By October 1, 2007, the Secretary 
is required to identify at least 2 high cost or high volume (or 
both high cost and high volume) diagnoses codes with a DRG 
assignment that has a higher payment weight when present with 
secondary diagnoses. These diagnoses codes represent 
conditions, including certain hospital acquired infections, 
that could reasonably have been prevented through the 
application of evidence-based guidelines. Starting for 
discharges on October 1, 2008, the DRG assigned to a discharge 
with the identified diagnosis codes will be the DRG that does 
not result in higher payments based on the presence of these 
secondary diagnosis codes. This assignment of the lower paid 
DRG applies to discharges, where, at the time of the patient's 
admission, the beneficiary had none of the identified diagnosis 
codes. Adjustments to the relative weight that occur because of 
this action are not budget neutral. Specifically, aggregate 
payments for discharges in a fiscal year could be changed as a 
result of such adjustments.
      The list of selected diagnosis may be revised from time 
to time as long as there are at least two conditions selected 
for discharges occurring during any fiscal year. The Secretary 
is required to consult with the Centers for Disease Control and 
Prevention and other appropriate entities when selecting and 
revising the identified diagnosis codes. The list of diagnosis 
codes and DRGs are not subject to judicial review.
Clarification of Determination of Medicaid Patient Days for DSH 
        Computation (Section 5002 of the Conference Agreement, no 
        provision in the Senate Bill and no provision in the House 
        Bill)
Current Law
      Hospitals that serve a certain number of low income 
Medicare and Medicaid beneficiaries will receive a 
disproportionate share hospital (DSH) adjustment that increases 
their Medicare IPPS payments. Most DSH hospitals receive the 
additional payments based on their DSH patient percentage which 
is the proportion of the hospital's total days provided to 
Medicaid recipients added to the proportion of the hospital's 
Medicare inpatient days provided to poor Medicare beneficiaries 
(those who are eligible for Part A and receive Supplemental 
Security Income). After a minimum threshold of 15 percent is 
met, a hospital's DSH adjustment will vary by the hospital's 
bed size or urban or rural location.
      The policy of whether inpatient days provided to a 
patient covered under a demonstration project established by 
Section 1115 waivers could be included in the Medicare DSH 
calculation has changed over time. Prior to January 20, 2000, 
hospitals could not include the inpatient hospital days 
attributable to patients made eligible for Medicaid pursuant to 
a state's Social Security Act Section 1115 waiver. Starting on 
January 20, 2000, hospitals could include days for populations 
under the section 1115 waiver who were or could have been made 
eligible under a State Medicaid plan. This policy was corrected 
for discharge starting on October 1, 2003, when hospital 
inpatient days attributed to patients who do not receive 
coverage for inpatient benefits under Section 1115 
demonstration projects could not be counted in the Medicare DSH 
calculation. These policies were established by regulation in 
January, 2000 and August, 2003.
Senate Bill
      No provision.
House Bill
      No provision.
Conference Agreement
      The conference agreement permits the Secretary to include 
inpatient hospital days of patients eligible for medical 
assistance under a Section 1115 demonstration waiver in the 
Medicare DSH calculation. These days will be counted as if they 
were provided to patients who were eligible for medical 
assistance under an approved Medicaid state plan. The existing 
regulations and their effective date are ratified. No hospital 
cost reports that are closed on the enactment date will be 
reopened to implement this provision.
Improvements to the Medicare-Dependent Hospital (MDH) Program (Section 
        5003 of the Conference Agreement, Section 6101 of the Senate 
        Bill, and no provision in the House Bill)
Current Law
      Certain rural hospitals with 100 beds or less that have 
at least 60 percent of its inpatient days or discharges during 
FY1987 or during two of the three most recently audited cost 
reporting periods (for which there is a settled cost report) 
are attributed to patients covered under Medicare qualify for 
special treatment under the inpatient prospective payment 
system as Medicare dependent hospitals (MDH). MDH hospitals are 
paid at national standardized rate or, if higher, 50 percent of 
their adjusted FY1982 or FY1987 hospital-specific costs. This 
special treatment will lapse for discharges starting on October 
1, 2006.
      Certain hospitals that serve a high proportion of 
Medicaid patients or poor Medicare beneficiaries qualify for a 
disproportionate share hospital (DSH) adjustment to their 
inpatient payments. Small urban and most rural hospitals 
(except for rural referral centers) have their DSH adjustment 
capped at 12 percent.
Senate Bill
      The MDH status for qualifying rural hospitals would be 
extended through discharges occurring before October 1, 2011. 
Starting for discharges on October 1, 2006, a MDH would be able 
to elect payments based of its FY2002 hospital-specific costs 
if that would result in higher Medicare payments. MDH's 
payments would be based on 75 percent of their adjusted 
hospital-specific costs starting for discharges on October 1, 
2006. MDH's that qualify for a disproportionate share hospital 
(DSH) adjustment would not have the adjustment capped at 12 
percent.
House Bill
      No provision.
Conference Agreement
      The conference agreement adopts the Senate provision.
Reduction in Payments to Skilled Nursing Facilities for Bad Debt 
        (Section 5004 of the Conference Agreement, Section 6102 of the 
        Senate Bill, and no provision in the House Bill)
Current Law
      Medicare pays for the costs of certain items outside of 
the Prospective Payment System on a reasonable costs basis. 
Section 1861(v)(1)(A)(I) of the Social Security Act states that 
the costs for individuals covered by the Medicare program must 
not be borne by individuals not covered by the program, and the 
costs for individuals not covered by the program must not be 
borne by Medicare. Under this authority, the Secretary adopted 
a bad debt policy in 1966. Under this policy, Medicare 
reimburses certain providers for debt unpaid by beneficiaries 
for coinsurance and deductibles. Historically, CMS has 
reimbursed certain providers for 100 percent of this bad debt. 
SNFs are among the Medicare entities that are currently being 
reimbursed for 100 percent of beneficiary's bad debt.
      Effective beginning with cost reports starting in FY2001, 
Medicare began reimbursing hospitals for 70 percent of the 
reasonable costs associated with beneficiaries' bad debt. In 
2003, CMS issued a proposed rule (42 CFR Part 413, Medicare 
Program; Provider Bad Debt Payment) in which it described its 
intent to reduce reimbursement of bad debt for certain 
providers, including SNFs, by 30 percent. Within the rule, CMS 
explained that it believed that reducing the amount of Medicare 
debt reimbursement would encourage accountability and foster an 
incentive to be more efficient in bad debt collection efforts. 
It also stated that it believed that Medicare bad debt policy 
should be applied consistently and fairly among all providers 
eligible to receive bad debt reimbursement.
Senate Bill
      The provision would amend Section 1861(v)(1) of the 
Social Security Act to reduce the payment for the allowable bad 
debts attributable to Medicare deductibles and coinsurance 
amounts by 30 percent for services furnished in SNFs on or 
after October 1, 2005.
House Bill
      No provision.
Conference Agreement
      The conference agreement reduces payments for allowable 
bad debts attributable to Medicare coinsurance by 30 percent 
for those individuals who are not dually eligible for Medicare 
and Medicaid. Bad debt payments for individuals who are dually 
eligible for Medicare and Medicaid remain at 100 percent.
Extended Phase-in of the Inpatient Rehabilitation Facility 
        Classification Criteria (Section 5005 of the Conference 
        Agreement, Section 6103 of the Senate Bill, and no provision in 
        the House Bill)
Current Law
      Inpatient rehabilitation facilities (IRFs) are either 
freestanding hospitals or distinct part units of other 
hospitals that are exempt from Medicare's inpatient prospective 
payment system (IPPS) used to pay short-term general hospitals. 
The Medicare statute gives the Secretary discretion to 
establish the criteria that facilities must meet in order to be 
considered an IRF. Since 1983, CMS has required that a facility 
must treat a certain proportion of patients with specified 
medical conditions in order to qualify as an IRF and receive 
higher Medicare payments. The rule was suspended temporarily 
and reissued in 2004 with a revised set of qualifying 
conditions and a transition period for the compliance threshold 
as follows: at 50 percent from July 1, 2004 and before July 1, 
2005; at 60 percent from July 1, 2005 and before July 1, 2006; 
at 65 percent from July 1, 2006 and beforeJuly 1, 2007; and at 
75 percent from July 1, 2007 and thereafter. In April 2005, the 
Government Accountability Office issued a final report recommending 
that the Centers for Medicare and Medicaid Services (CMS) refine the 
rule to describe more thoroughly the subgroups of patients within a 
condition that require IRF services, possibly using functional status 
or other factors in addition to condition, to help ensure that IRFs can 
be classified appropriately and that only patients needing IRF services 
are admitted.
Senate Bill
      The provision would establish the compliance threshold at 
50 percent from July 1, 2005 through June 30, 2007. The 
Secretary would not be permitted to change the designation of 
an IRF that is in compliance with that threshold. The Secretary 
would be required to restore the status of a facility as an IRF 
from July 1, 2005 through the effective date of this provision 
because of not meeting the 60 percent threshold. The Secretary 
would be required to make appropriate payments to those 
facilities. IRFs that failed to meet the 50 percent compliance 
threshold would be deemed to meet that threshold while an 
additional 6 months of claims data is examined. If the review 
of the new data indicates that the IRF is not in compliance 
with the 50 percent threshold, the IRF's deemed status would be 
revoked retroactively to the beginning of the 6 month period. 
The Secretary would collect any overpayments made to the IRF. 
The Inspector General would be required to analyze the types of 
patients treated in IRFs that have a compliance rate between 50 
percent and 60 percent. A report would be submitted to Congress 
and the Secretary by January 1, 2005. A Rehabilitation Advisory 
Council would be established until September 30, 2010 to 
provide advice and recommendations concerning coverage of 
rehabilitation services under the Medicare program.
House Bill
      No provision.
Conference Agreement
      The conference agreement establishes the compliance 
threshold at 60 percent during the 12-month period beginning on 
July 1, 2006; at 65 percent during the 12-month period 
beginning on July 1, 2007; and at 75 percent beginning on July 
1, 2008 and subsequently. The conferees encourage CMS to 
conduct additional research and study on this issue.
Development of a strategic plan regarding physician investment in 
        specialty hospitals (Section 5006 of the Conference Agreement, 
        Section 6104 of the Senate Bill, and no provision in the House 
        Bill)
Current Law
      Physicians are generally prohibited from referring 
Medicare and Medicaid patients to facilities in which they (or 
their immediate family member) have financial interests. 
Physicians, however, are not prohibited from referring patients 
to hospitals where they have ownership or investment interest 
in the whole hospital itself (and not merely in a subdivision 
of the hospital). Section 507 of the Medicare Prescription Drug 
Improvement, and Modernization Act of 2003 (MMA) established 
that the exception for physician investment and self-referral 
would not extend to specialty hospitals for a period of 18-
months from enactment (or until June 8, 2004). In this 
instance, a specialty hospital is primarily or exclusively 
engaged in the care and treatment of patients with a cardiac 
condition, an orthopedic condition, those receiving a surgical 
procedure, or other specialized category of patient or cases 
that the Secretary designates as inconsistent with the purpose 
of permitting physician investment in a hospital. A specialty 
hospital does not include any hospital that is determined by 
the Secretary to be in operation or under development as of 
November 18, 2003, with the same number of physician investors 
as of such date that meets other specified requirements. For 
instance, an increase in the number of beds could only occur on 
the main campus of the hospital and could not exceed the 
greater of 50 percent of the number of beds in the hospital as 
of November 18, 2003, or 5 beds. The Secretary was directed to 
consider the certain factors in determining whether a hospital 
is under development, such as the completion of architectural 
plans, and the status of funding, zoning requirements, and 
necessary approvals from State agencies.
Senate Bill
      The prohibition on Medicare and Medicaid referrals to 
specialty hospitals by physician investors would be effective 
on and after December 8, 2003. The exception to the definition 
of specialty hospital would be modified to include those: (1) 
where the percent investment by physician investors is no 
greater than the percentage on June 8, 2005; (2) where the 
percent investment by any physician investor is no greater than 
the percentage on June 8, 2005; and (3) where the number of 
operating rooms is not greater than the number on June 8, 2005. 
The existing requirement concerning permissible changes in the 
number of beds in order to qualify for the specialty hospital 
exception would be modified. From December 8, 2003 through June 
7, 2005, an acceptable increase in the number of beds would 
only occur on the main campus of the hospital and could not 
exceed the greater of 50 percent of the number of beds in the 
hospital as of November 18, 2003, or 5 beds. After June 8, 
2005, the number of beds at the specialty hospital would not be 
able to increase. These amendments would be effective on June 
8, 2005.
House Bill
      No provision.
Conference Agreement
      The conference agreement directs the Secretary to develop 
a strategic and implementing plan regarding physician 
investment in specialty hospitals that addresses issues related 
to proportionality of investment return, bona fide investments, 
annual disclosure of investment information, and the provision 
of Medicaid and charity care by specialty hospitals. An interim 
report is due within three months and a final report no later 
than six months after date of enactment. The Secretary will 
continue the suspension on enrollment of new specialty 
hospitals until the earlier of the date of submission of the 
report or 6 months after date of enactment. If the Secretary 
fails to comply with the statutory requirement to submit the 
final report within the six month time period, then the 
suspension on enrollment will be extended an additional two 
months. In developing the strategic and implementing plan the 
Secretary may waive certain requirements under the 
Administrative Procedures Act.
Medicare demonstration projects to permit gainsharing arrangements 
        (Section 5007 of the Conference Agreement, no provision in the 
        Senate Bill, and no provision in the House Bill)
Current Law
      No provision.
Senate Bill
      No provision.
House Bill
      No provision.
Conference Agreement
      The conference agreement establishes a gainsharing 
demonstration project to test and evaluate arrangements between 
hospitals and other providers, including physicians, and 
practitioners, that govern the utilization of inpatient 
hospital resources to improve the quality and efficiency of 
care provided to Medicare beneficiaries and to improve 
operational efficiency and performance. The Secretary will 
solicit applications 90 days after enactment, will approve not 
more than 6 demonstration projects with at least 2 of which 
will be in a rural area, and will begin on January 1, 2007.
      The projects will meet certain requirements to maintain 
or improve quality while achieving cost savings. Such 
requirements include arrangements that provide remuneration as 
a share of savings, a written plan agreement, patient 
notification, quality and efficiency monitoring, independent 
review, and referral limitations. Restrictions on incentive 
payments in a project are waived, and similar protections 
extend to existing arrangements.
      Not later than December 1, 2006, the Secretary will 
report to Congress on the number of demonstration projects. Not 
later than December 1, 2007, the Secretary will provide a 
project update to Congress including improvements toward 
quality and efficiency. By December 1, 2008, the Secretary will 
report to Congress on quality improvement and savings from the 
program. A final report will be submitted to Congress by May 1, 
2010.
Post-acute care payment reform demonstration (Section 5008 of the 
        Conference Agreement, no provision in the Senate Bill, and no 
        provision in the House Bill)
Current Law
      No provision.
Senate Bill
      No provision.
House Bill
      No provision.
Conference Agreement
      By January 1, 2008, the Secretary shall establish a 
demonstration program to better understand costs and outcomes 
across different post-acute care sites. Under the program, for 
certain diagnoses specified by the Secretary, an individual 
receiving treatment for such diagnosis shall receive a 
comprehensive assessment on the date of discharge of clinical 
characteristics and patient needs, to determine appropriate 
placement of the patient in a post-acute care site. The 
Secretary shall use a standardized patient assessment 
instrument across all post-acute sites, to measure functional 
status and other factors during treatment and discharge from 
each provider. Participants shall provide information on the 
fixed and variable cost for each individual, and an additional 
comprehensive assessment shall be provided at the end of the 
individual's episode of care. The program will operate for a 
three year period, and shall be conducted with sufficient 
numbers to determine statistically reliable results.
      No later than 6 months after the end of the program, the 
Secretary will submit a report to Congress on results and 
recommendations.

               Subtitle B--Provisions Relating to Part B

                     CHAPTER 1--PAYMENT PROVISIONS

Beneficiary Ownership of Certain DME (Section 5101 of the Conference 
        Agreement, Sections 6109 and Section 6116 of Senate Bill, no 
        provision in the House Bill)
Current Law
      Medicare Part B pays for certain items of durable medical 
equipment such as hospital beds, nebulizers and power-driven 
wheelchairs under the capped rental category. Most items in 
this category are provided on a rental basis for a period that 
cannot exceed fifteen months. After using the equipment for ten 
months, beneficiaries must be given the option of purchasing it 
effective thirteen months after the start of the rental period. 
If they choose the purchase option, the title to the equipment 
is transferred to beneficiaries. If the purchase option is not 
chosen, the supplier retains ownership of the equipment. 
Beneficiaries can continue to use it, but Medicare rental 
payments to the supplier are terminated. In the case of a 
power-driven wheelchair, the supplier must offer the 
beneficiary the option of purchasing the equipment when it is 
first furnished.
      Medicare payments to suppliers for maintenance and 
servicing differ based on whether the beneficiary has purchased 
the equipment or whether the supplier continues to own it. In 
the case of a purchase agreement, payment for repairs and 
extensive maintenance recommended by the manufacturer is 
covered. When the equipment remains in the ownership of the 
supplier and continues to be used by a beneficiary after the 
fifteen month rental period, Medicare makes a payment to the 
supplier every six months for servicing and maintenance 
regardless of whether any maintenance and servicing is 
performed.
Senate Bill
      The Senate bill would require the supplier to transfer 
the title of durable medical equipment in the capped rental 
category to the beneficiary after a thirteen month rental 
period. The option for a fifteen month rental period with the 
supplier retaining ownership of the item would be eliminated. 
The option for beneficiaries to purchase power-driven 
wheelchairs when initially furnished would be retained.
      Automatic payments to the supplier every six months for 
maintenance and servicing would be eliminated. Such payments 
(for parts and labor not covered by the supplier's or 
manufacturer's warranty) would only be made if the Secretary 
determined them to be reasonable and necessary. This amendment 
would apply to items for which the first rental month occurred 
on or after January 1, 2006.
House Bill
      No provision.
Conference Agreement
      The conference agreement includes the Senate bill. The 
provisions apply to items for which the first rental month 
occurs on or after January 1, 2006.
      The agreement further provides that rental payments for 
oxygen equipment (including portable oxygen equipment) are 
converted to ownership at 36 months. The supplier is required 
to transfer the title of the equipment to the beneficiary after 
a 36 month rental period. After transfer of the title, monthly 
payments for oxygen contents (in the case of gaseous and liquid 
oxygen) will continue to be made, as provided for under current 
law, for the period of medical need. Payments for maintenance 
and servicing (for parts and labor not covered by the 
supplier's or manufacturer's warranty) will be made if the 
Secretary determines them to be reasonable and necessary. The 
agreement specifies that the provision takes effect on January 
1, 2006. In the case of an individual receiving oxygen 
equipment as of December 31, 2005, the 36-month period begins 
January 1, 2006.
Adjustments in Payments for Imaging Services (Section 5102 of the 
        Conference Agreement, no provision in the Senate Bill and no 
        provision in the House Bill)
Current Law
      Medicare has a long-standing policy of reducing payment 
for multiple surgical procedures performed by the same 
physician, on the same patient on the same day. Full payment is 
made for the highest priced procedure, with any subsequent 
procedure paid at 50 percent. In 1995, the policy was extended 
to certain nuclear medicine diagnostic procedures.
      Under the physician fee schedule, diagnostic imaging 
procedures are priced as follows: (1) the professional 
component (PC) represents the physician work, i.e. the 
interpretation; (2) the technical component (TC) represents 
practice expenses including clinical staff, supplies, and 
equipment; and (3) the global service which represents both the 
PC and TC. Diagnostic imaging services, even those paid on 
contiguous body parts, are generally paid at 100 percent for 
each procedure.
      In its March 2005 report, Medicare Payment Policy, the 
Medicare Payment Advisory Commission recommended that CMS 
expand its coding edit policy to help the program pay more 
accurately for multiple imaging services performed during the 
same encounter. It noted that a number of private plans use 
coding edits to adjust payments for multiple imaging services 
performed on contiguous body parts. Private insurers usually 
pay the full amount for the first service but a reduced amount 
(usually half) for the technical component of any additional 
study that is of the same modality. This is based on the 
premise that there are savings in clerical time, preparation, 
and supplies.
      In August 2005, CMS issued its proposed physician fee 
schedule for 2006 (Federal Register, vol. 70, no. 151, 45764-
46064). CMS noted that its analysis supported a 50 percent 
reduction in the TC for the subsequent imaging procedure 
performed on contiguous body parts. It did not propose to apply 
the multiple procedure reduction to PC services because it 
believed that physician work is not significantly affected for 
multiple procedures. When a global service code is billed, the 
TC portion, but not the PC portion, would be reduced. CMS 
identified 11 families of imaging procedures by imaging 
modality. It recommended extending the multiple procedure TC 
payment reduction only to procedures involving contiguous body 
parts within a family of codes, not across families.
      On November 21, 2005, CMS issued its final physician fee 
schedule regulation for 2006 (Federal Register, vol 70, no. 
223, 70116-70476). It retained the proposed reduction with 
modifications. The payment reduction is to be phased in with a 
25 percent reduction in 2006 and a 50 percent reduction in 
2007. Further, the budget neutrality adjustment is to be 
applied only to practice expense relative value units rather 
than to both work and practice expense relative value units.
      When the Secretary revises the relative values for the 
work, practice expense and malpractice components of physician 
payments, the revisions may not change the amount of physician 
expenditures by more than $20 million. Thus, changes must be 
budget neutral. When reducing practice expenses for imaging, 
the Secretary is required to increase practice expenses for 
other physician services to maintain budget neutrality.
Senate Bill
      No provision.
House Bill
      No provision.
Conference Agreement
      The conference agreement specifies that, effective for 
fee schedules established beginning with 2007, the reduced 
expenditures attributable to the multiple procedure payment 
reduction for imaging (under the final rule published November 
21, 2005) will not be taken into account for purposes of the 
budget neutrality calculation for fee schedules for 2006 and 
2007.
      The agreement further provides that for specified imaging 
services furnished on or after January 1, 2007, the technical 
component (including the technical component of the global fee) 
for a service will be reduced if it exceeds (without regard to 
the geographic wage adjustment factor) the outpatient 
department (OPD) fee schedule amount for the service 
established under the prospective payment system for hospital 
outpatient departments. In such cases, the Secretary will 
provide for the use of that OPD amount, adjusted by the 
geographic adjustment factor under the physician fee schedule. 
The services this policy applies to 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. Not included are 
diagnostic and screening mammography. This change will not be 
taken into account for purposes of the budget neutrality 
calculation beginning in 2007.
      This provision moves toward payment neutrality across 
sites of service delivery.
Limitation on Payments for Procedures in Ambulatory Surgical Centers 
        (Section 5103 of the Conference Agreement, no provision in the 
        Senate Bill, and no provision in the House Bill)
Current Law
      Medicare uses a fee schedule to pay for the facility 
services related to a surgery provided in an ambulatory care 
surgery center (ASC). The associated physician services 
(surgery and anesthesia) are reimbursed under the physician fee 
schedule. CMS maintains a list of approved ASC procedures which 
is required to be updated every two years. The approved ASC 
procedures are categorized into one of nine payment groups that 
comprise the ASC facility fee schedule. The nine payment rates 
reflect the national median cost of procedures in that group 
adjusted to reflect geographic price variation.
      The Secretary is required under the MMA to implement a 
new payment system for ASCs no later than January 2008.
      Medicare reimbursement for hospital outpatient department 
(OPD) services is based on a fee schedule established by a 
separate prospective payment system (OPPS). Under OPPS, the 
unit of payment is the individual service or procedure as 
assigned to an ambulatory payment classification (APC). The 
payment rate for each service is determined by multiplying the 
relative weight for the service's APC by the conversion factor.
Senate Bill
      No provision.
House Bill
      No provision.
Conference Agreement
      Beginning on January 1, 2007, when the ASC facility 
payment (without application of any geographic price 
differences) is greater than the Medicare OPD fee schedule 
amount established under OPPS (without application of any 
geographic adjustment) for the same service, the ASC will be 
paid the OPD fee schedule amount. This adjustment applies to 
ASC payments until the revised ASC payment system is 
implemented. Total payments to ASCs will be held budget neutral 
between the year prior to implementation of the new payment 
system and the first year of the new payment system.
      This provision moves toward payment neutrality across 
sites of service delivery.
Update for Physicians' Services for 2006 (Section 5104 of the 
        Conference Agreement, Section 6105 of Senate Bill, and no 
        provision in the House Bill)
Current Law
      Medicare payments for services of physicians and certain 
nonphysician practitioners are made on the basis of a fee 
schedule. The fee schedule assigns relative values to services 
that reflect physician work (i.e., the time, skill, and 
intensity it takes to provide the service), practice expenses, 
and malpractice costs. The relative values are adjusted for 
geographic variations in costs. The adjusted relative values 
are then converted into a dollar payment amount by a conversion 
factor. The conversion factor for 2005 is $37.8975.
      The conversion factor is the same for all services. It is 
updated each year according to a formula specified in law. The 
intent of the formula is to place a restraint on overall 
spending for physicians' services. Several factors enter into 
the calculation of the formula. These include: (1) the 
sustainable growth rate (SGR) which is essentially a cumulative 
target for Medicare spending growth over time (with 1996 
serving as the base period); (2) the Medicare economic index 
(MEI) which measures inflation in the inputs needed to produce 
physicians services; and (3) the update adjustment factor which 
modifies the update, which would otherwise be allowed by the 
MEI, to bring spending in line with the SGR target. In no case 
can the adjustment factor be less than minus seven percent or 
more than plus three percent.
      The law specifies a formula for calculating the SGR. It 
is based on changes in four factors: (1) estimated changes in 
fees; (2) estimated change in the average number of Part B 
enrollees (excluding Medicare Advantage beneficiaries); (3) 10-
year rolling average change in real gross domestic product 
(GDP) growth per capita; and (4) estimated change in 
expenditures due to changes in law or regulations.
      The SGR target is not a limit on expenditures. Rather, 
the fee schedule update reflects the success or failure in 
meeting the target. If expenditures exceed the target, the 
update for a future year is reduced. This is what occurred for 
2002. It was also slated to occur in 2003 and 2004; however, 
the MMA prevented this from occurring through 2005. A negative 
4.4 percent update is slated to occur in 2006.
Senate Bill
      The Senate bill would specify that the update to the 
conversion factor in 2006 could not be less than one percent. 
The provision would further specify that these amendments would 
not be considered as a change in law for purposes of 
calculating the SGR.
House Bill
      No provision.
Conference Agreement
      The conference agreement specifies that the update for 
2006 is zero percent. These amendments are not considered as a 
change in law for purposes of calculating the SGR.
      MedPAC is required to report to Congress by March, 2007 
on mechanisms to replace the Sustainable Growth Rate system.
Three-year Transition of the Hold Harmless Payments for Small Rural 
        Hospitals Under the Prospective Payment System For Hospital 
        Outpatient Department Services (Section 5105 of the Conference 
        Agreement, Section 6106 of the Senate Bill, and no provision of 
        the House Bill)
Current Law
      The prospective payment system for services provided by 
hospital outpatient departments (OPD) was implemented in August 
2000 for most acute care hospitals. Under hold harmless 
provisions, as modified by the MMA, rural hospitals with no 
more than 100 beds and sole community hospitals (SCH) located 
in rural areas are paid no less under this payment system than 
they would have received under the prior reimbursement system 
for covered OPD services provided before January 1, 2006.
Senate Bill
      The hold harmless provisions governing OPD reimbursement 
for small rural hospitals and rural SCH would be extended to 
January 1, 2007.
House Bill
      No provision.
Conference Agreement
      The conference agreement establishes that small rural 
hospitals (with no more than 100 beds that are not SCHs) can 
receive additional Medicare payments, if their outpatient 
payments under the prospective payment system are less than 
under the prior reimbursement system. For calendar year (CY) 
2006, these hospitals will receive 95 percent of the difference 
between the prospective payment system and the prior 
reimbursement system. The hospitals will receive 90 percent of 
the difference in CY2007 and 85 percent of the difference in 
CY2008
      On November 10, 2005, CMS issued its final hospital 
outpatient prospective payment system regulation for CY2006 
(Federal Register, vol. 70, no. 217, 68516-68980). Under this 
rule, rural sole community hospitals will receive a 7.1 percent 
increase on January 1, 2006.
Update to the Composite Rate Component of the Basic Case-Mix Adjusted 
        Prospective Payment System for Dialysis Services (Section 5106 
        of the Conference Agreement, Section 6107 of the Senate Bill, 
        no provision in the House Bill)
Current Law
      The Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (MMA) required the Secretary to 
establish a basic case-mix adjusted prospective payment system 
for dialysis services furnished either at a facility or in a 
patient's home, for services furnished beginning on January 1, 
2005. The basic case-mix adjusted system has two components: 
(1) the composite rate, which covers services, including 
dialysis; and (2) a drug add-on adjustment for the difference 
between the payment amounts for separately billable drugs and 
biologicals and their acquisition costs, as determined by the 
Inspector General Report.
      The Secretary is required to update the basic case-mix 
adjusted payment amounts annually beginning with 2006, but only 
for that portion of the case-mix adjusted system that is 
represented by the add-on adjustment and not for the portion 
represented by the composite rate.
Senate Bill
      The provision would increase the composite rate component 
of the basic case-mix adjusted system for services beginning 
January 1, 2006 by 1.6 percent above the amount paid for such 
services furnished on December 31, 2005.
House Bill
      No provision.
Conference Agreement
      The conference agreement follows the Senate bill.
Revisions to Payments for Therapy Services (Section 5107 of the 
        Conference Agreement, Section 6108 of Senate Bill and no 
        provision in the House Bill)
Current Law
      The Balanced Budget Act of 1997 established annual per 
beneficiary payment limits for all outpatient therapy services 
provided by non-hospital providers. The limits applied to 
services provided by independent therapists as well as to those 
provided by comprehensive outpatient rehabilitation facilities 
(CORFs) and other rehabilitation agencies. The limits did not 
apply to outpatient services provided by hospitals.
      Beginning in 1999, there were two beneficiary limits. The 
first was a $1,500 per beneficiary annual cap for all 
outpatient physical therapy services and speech language 
pathology services. The second was a $1,500 per beneficiary 
annual cap for all outpatient occupational therapy services. 
Beginning in 2002, the amount would increase by the Medicare 
economic index (MEI) rounded to the nearest multiple of $10.
      The Balanced Budget Refinement Act of 1999 (BBRA) 
suspended application of the limits for 2000 and 2001. The 
Medicare, Medicaid, and SCHIP Benefits Improvement and 
Protection Act of 2000 (BIPA) extended the suspension through 
2002. Implementation of the provision was delayed until 
September 2003. The caps were implemented from September 1, 
2003 through December 7, 2003. MMA reinstated the moratorium 
from December 8, 2003 through December 31, 2005. The caps are 
slated to go into effect beginning January 1, 2006. In the 
November 2005 final physician fee schedule regulation for 2006 
CMS announced that the caps would be $1,740 in 2006.
Senate Bill
      The Senate bill would extend the moratorium for an 
additional year, through 2006.
House Bill
      No provision.
Conference Agreement
      The conference agreement would not extend the therapy cap 
moratorium. However, the Secretary would be required to 
implement an exceptions process for expenses incurred in 2006. 
Under the process, a Part B enrollee, or a person acting on 
behalf of the enrollee, may request an exception from the 
physical therapy/speech language pathology and occupational 
therapy caps. The individual may obtain such exception if the 
provision of services is determined medically necessary. If the 
Secretary does not make a decision on a request within 10 
business days of receipt, the Secretary is deemed to have found 
the services medically necessary. The provision may be 
implemented by program instruction or otherwise. The agreement 
specifies that there can be no administrative or judicial 
review of the exceptions process (including establishment of 
the process).
      The agreement requires the Secretary, by July 1, 2006, to 
implement clinically appropriate coding edits for physical 
therapy services, occupational therapy services, and speech 
language pathology services. The edits are to identify and 
eliminate improper payments. The edits are to include edits of 
clinically illogical combinations of procedure codes and other 
edits to control inappropriate billings.

                        CHAPTER 2--MISCELLANEOUS

Accelerated Implementation of Income-Related Reduction in Part B 
        Premium Subsidy (Section 5111 of the Conference Agreement, no 
        provision in the Senate Bill, no provision in the House Bill)
Current Law
      The MMA increased the Part B premiums for higher income 
enrollees beginning in 2007. In 2007, individuals whose 
modified adjusted gross income (AGI) exceeds $80,000 and 
couples whose modified AGI exceeds $160,000 will be subject to 
higher premium amounts. The increase will be phased-in over 
five years. During the first year, higher income enrollees will 
pay premiums ranging from 27 percent to 36 percent of the value 
of Part B. When fully phased-in, higher income individuals will 
pay premiums ranging from 35 percent to 80 percent of the value 
of Part B.
Senate Bill
      No provision.
House Bill
      No provision.
Conference Agreement
      The agreement accelerates the phase-in period from five 
years to three years, with the provision fully effective in 
2009. In 2007, higher income enrollees will pay total premiums 
ranging from 28 percent to 43 percent of the total value of 
Part B. In 2008, enrollees will pay total premiums ranging from 
32 percent to 62 percent of the total value of Part B. When 
fully phased-in in 2009, higher income individuals will pay 
total premiums ranging from 35 percent to 80 percent of the 
total value of Part B.
Medicare Coverage of Ultrasound Screening for Abdominal Aortic 
        Aneurysms (Section 5112 of the Conference Agreement, Section 
        6117 of the Senate Bill and no provision in the House Bill)
Current Law
      Medicare provides coverage for services which are 
reasonable and necessary for the diagnosis or treatment of 
illness or injury or to improve the functioning of a malformed 
body member. In addition, Medicare covers certain preventive 
services specified in law.
Senate Bill
      The Senate bill would authorize Medicare coverage of 
ultrasound screening for abdominal aortic aneurysms for 
individuals who: (1) received referrals for such screenings as 
a result of an initial preventive physical exam performed for 
new Medicare enrollees; (2) who had not previously had such a 
test covered by Medicare; and (3) who had a family history of 
abdominal aortic aneurysms or who manifested risk factors 
included in a beneficiary category (not related to age) 
identified by the United States Preventive Services Task Force.
      An ultrasound screening for abdominal aortic aneurysms 
would be defined as a procedure using sound waves provided for 
the early detection of abdominal aortic aneurysms. The 
Secretary could specify other procedures using alternative 
technologies which were of commensurate accuracy and cost. The 
term would include the physician's interpretation of the 
results of the procedure. Ultrasound screening for abdominal 
aortic aneurysms would be included in the package of services 
(including related education, counseling and referral) provided 
in the initial preventive service exam offered to new Medicare 
enrollees.
      Payment for services would be made under the physician 
fee schedule. The provision would specify that payment would 
not be made for screenings performed more frequently than 
specified above. The Part B deductible would not apply to these 
services.
      The Secretary would be required to establish quality 
assurance standards, in consultation with national medical, 
vascular technologist and sonographer societies, with respect 
to individuals (other than physicians) performing ultrasound 
screening for abdominal aortic aneurysms and diagnostic 
laboratories. Such standards would specify that the individual 
or laboratory was certified by the appropriate state licensing 
or certifying agency or (in the case of a state which did not 
license or certify such individuals or laboratories) by a 
national accreditation agency recognized by the Secretary. 
Medicare payment would not be made where individuals or 
laboratories performing the screening did not meet the quality 
assurance standards.
      The bill would require the Secretary (after consultation 
with national medical, vascular technologist and sonographer 
societies) to conduct a national education and information 
campaign to promote awareness among health care practitioners 
and the general public with respect to the importance of early 
detection and treatment of abdominal aortic aneurysms. The 
section would authorize the appropriation of such funds as may 
be necessary, beginning in FY 2006 and each fiscal year 
thereafter. The Secretary could use such amounts to make grants 
to national medical, vascular technologist and sonographer 
societies to enable them to educate practitioners and providers 
about matters relating to such aneurysms. Such grants would be 
made in accordance with procedures and criteria specified by 
the Secretary.
      The amendments would apply to ultrasound screenings for 
abdominal aortic aneurysms performed on or after January 1, 
2007.
House Bill
      No provision.
Conference Agreement
      The conference agreement includes the Senate bill with 
modifications. The agreement does not specify that beneficiary 
categories recommended for screening cannot include categories 
related to age. The agreement does not provide for the 
development of quality assurance standards. Further, it does 
not include the national education and information campaign.
Improving Patient Access to, and Utilization of, Colorectal Cancer 
        Screening Under Medicare (Section 5113 of the Conference 
        Agreement, Section 6118 of the Senate Bill and no provision in 
        the House Bill)
Current Law
      Medicare covers certain cancer screening tests, subject 
to coverage limitations based on the type of test and the 
individual's level of risk. Covered tests are fecal occult 
blood test, flexible sigmoidoscopy, screening colonoscopy, and 
barium enema. Payments for services are made under the 
physician fee schedule which assigns relative values to 
services based on physician work, practice expense costs, and 
malpractice costs. The relative values are then adjusted for 
geographic variations in costs. These adjusted relative values 
are converted into dollar payment amounts by a conversion 
factor.
      The Secretary is required to review and adjust relative 
values for specific services periodically, and has established 
a process for this review and adjustment.
Senate Bill
      The Senate bill would require the Secretary to establish 
minimum payment amounts for CPT codes 45378 (diagnostic 
colonoscopy), 45380 (colonoscopy and biopsy), and 45385 (lesion 
removal, colonoscopy) and HCPCS codes G0105 (colorectal screen, 
high risk individual) and G0121 (colon cancer screen, not high 
risk individual) for items and services furnished after January 
1, 2007. The amounts would reflect a 5 percent increase above 
the relative value units in effect as the non-facility rates 
for such codes on December 31, 2006; the revised payment levels 
would apply to items and services furnished in non-facility 
settings. Similarly, the provision would require the Secretary 
to establish minimum payment amounts for the same CPT and HCPCS 
codes for items and services furnished after January 1, 2007 
which would reflect a 5 percent increase above the relative 
value units in effect as the facility rates for such codes on 
December 31, 2006; the revised payment levels would apply to 
items and services furnished in facility settings. The payment 
amounts would be adjusted annually in accordance with the 
payment update rules under the fee schedule. The Secretary 
would not take into account the revised payment amounts in 
determining the amount of payment under the prospective payment 
system for covered hospital outpatient department services.
      The bill would also authorize Medicare coverage for an 
office visit or consultation prior to a screening colonoscopy 
or in connection with a beneficiary's decision to obtain such a 
screening. The visit or consultation would be for the purpose 
of beneficiary education, assuring selection of the proper 
screening test, and securing information relating to the 
procedure and sedation of the beneficiary. The visit or 
consultation would be covered regardless of whether the 
screening was medically indicated for the beneficiary. Payments 
would equal 80 percent of the lesser of the actual charge or 
the amount established under the physician fee schedule. 
Payment amounts established under the fee schedule would be 
consistent with those established for CPT codes 99203 (office/
outpatient visit, new patient) and 99243 (office consultation). 
The provision would apply to services furnished on or after 
January 1, 2007.
      The Part B deductible would not apply to colorectal 
cancer screening tests, effective January 1, 2007.
House Bill
      No provision.
Conference Agreement
      The conference agreement only includes the Senate 
provision waiving the Part B deductible.
Delivery of Services at Federally Qualified Health Centers (Section 
        5114 of the Conference Agreement, Section 6115 of the Senate 
        Bill, and no provision in the House Bill)
Current Law
      The Omnibus Budget Reconciliation Act (OBRA) of 1989 
amended the Social Security Act (SSA) to create a new category 
of facility under Medicare and Medicaid known as a federally 
qualified health center (FQHC). An FQHC is required to provide 
certain primary care services by physicians and appropriate 
mid-level practitioners as well as other preventive health 
services including those required under certain sections of the 
Public Health Service (PHS) Act (specifically Sections 329, 
330, and 340 of the PHS).
      Prior to the enactment of MMA, FQHC services were covered 
by a skilled nursing facility's (SNF) consolidated billing 
requirement. FQHC services were bundled into the SNF 
comprehensive per diem payment for the covered stay and not 
separately billable. MMA specified that a SNF Part A resident 
who receives FQHC services from a physician or appropriate 
practitioner would be excluded from SNF consolidated billing 
and be paid separately.
Senate Bill
      The provision would add diabetes self-management training 
and nutrition therapy benefits, as covered under Medicare, as 
additional services that may be covered under the all-inclusive 
per visit payment rate for FQHCs. It would allow FQHCs to 
receive payments for services provided through a health care 
professional who contracts with the center and would remove 
restrictions on receipt of homeless grants.
House Bill
      No provision.
Conference Agreement
      The conference agreement adopts the Senate provision.
Waiver of Part B Late Enrollment Penalty for Certain International 
        Volunteers (Section 5115 of the Conference Agreement, Section 
        6114 of the Senate Bill and no provision in the House Bill)
Current Law
      Medicare Part B is a voluntary program. Individuals 
generally enroll in Part B when they turn 65. Individuals who 
delay enrollment in the program after their initial enrollment 
period are subject to a premium penalty. This penalty is a 
surcharge equal to 10 percent of the premium amount for each 12 
months of delayed enrollment. There is no upper limit on the 
amount of the surcharge that may apply. Further, the penalty 
continues to apply for the entire time the individual is 
enrolled in Part B. The law establishes certain exceptions to 
the delayed enrollment penalty. One exception applies to the 
``working aged.'' Delayed enrollment is also permitted for 
certain disabled persons who have group health insurance 
coverage based on their own or a family member's current 
employment with a large group health plan.
      Individuals who are permitted to delay enrollment have 
their own special enrollment periods. A special enrollment 
period begins when current employment ends or when coverage 
under the plan ends. The special enrollment period ends eight 
months later. Individuals who fail to enroll in this period are 
considered to have delayed enrollment and could become subject 
to the penalty.
Senate Bill
      The Senate bill would permit certain individuals to delay 
enrollment in Part B without a delayed enrollment penalty. 
Those individuals who volunteer outside of the United States 
for at least 12 months through a program sponsored by a tax-
exempt organization defined under section 501(c)(3) of the 
Internal Revenue Code would be permitted to delay enrollment 
under Medicare Part B. They would have a 6 month special Part B 
enrollment period beginning on the first day of the month the 
individual was no longer in the program. Coverage would begin 
the month after the individual enrolled. This section would 
apply to months and special enrollment periods beginning 
January 2007.
House Bill
      No provision.
Conference Agreement
      The conference agreement includes the Senate bill with a 
modification. The provision applies to individuals who can 
demonstrate health insurance coverage while volunteering 
outside the United States..
Coverage of Marriage and Family Therapist Services and Mental Health 
        Counselor Services Under Part B of the Medicare Program (No 
        provision in the Conference Agreement, Section 6119 of the 
        Senate Bill and no provision in the House Bill)
Current Law
      Medicare provides coverage for mental health services, 
subject to certain limitations. Medicare Part B will make 
direct payments to physicians, psychologists, and clinical 
social workers for such services. Medicare does not make direct 
payments for services provided by marriage and family 
therapists and mental health counselors. Their services are 
generally paid as incident to a physician's professional 
services. They may also be included as part of covered facility 
services such as those provided by a skilled nursing facility.
Senate Bill
      The Senate bill would include ``marriage and family 
therapist services'' and ``mental health counselor services'' 
within the definition of ``medical and other health services'' 
covered under Medicare Part B. The term marriage and family 
therapist services would be defined as services performed by 
marriage and family therapists for the diagnosis and treatment 
of mental illnesses. Such services would be those which the 
individual was legally authorized to perform under state law 
(or the state regulatory mechanism provided by state law) of 
the state in which the services were performed. Such services 
would also have to be of the type which would otherwise be 
covered if furnished by a physician or as incident to a 
physician's professional services. Payment would only be made 
if no facility or other provider charged or was paid for such 
services.
      The term marriage and family therapist would be defined 
as an individual who: (1) possessed a master's or doctoral 
degree which qualified the individual for licensure or 
certification as a marriage and family therapist pursuant to 
state law; (2) performed at least 2 years of clinical 
supervised experience in marriage and family therapy after 
obtaining the degree; (3) was licensed or certified as a 
marriage and family therapist in the state if such state 
provided for licensure and certification of marriage and family 
therapists.
      The provision would define mental health counselor 
services as services performed by mental health counselors for 
the diagnosis and treatment of mental illnesses. Such services 
would be those which the individual was legally authorized to 
perform under state law (or the state regulatory mechanism 
provided by state law) of the state in which the services were 
performed. Such services would also have to be of the type 
which would otherwise be covered if furnished by a physician or 
as incident to a physician's professional services. Payment 
would only be made if no facility or other provider charged or 
was paid for such services.
      The term mental health counselor would be defined as an 
individual who: (1) possessed a master's or doctoral degree in 
mental health counseling or a related field; (2) performed at 
least 2 years of supervised mental health counselor practice 
after obtaining the degree; (3) was licensed or certified as a 
mental health counselor or professional counselor in the state 
if such state provided for licensure and certification of 
mental health counselors or professional counselors.
      Payment for covered services would be made under Medicare 
Part B. Payment would equal the lesser of 80 percent of the 
actual charge for the service or 75 percent of the amount paid 
to a psychologist for such services. All services provided by 
marriage and family therapists and mental health counselors 
would be paid on an assignment basis. Further, services 
provided by marriage and family therapists and mental health 
counselors would be added to the list of services excluded from 
payment as part of the skilled nursing facility prospective 
payment system.
      The bill would include services provided by marriage and 
family therapists and mental health counselors in the 
definition of covered rural health clinic services. It would 
modify the definition of the required interdisciplinary team 
for a hospice program to permit a marriage or family therapist 
to be on the team instead of a social worker.
      The provision would apply to services provided on or 
after January 1, 2007.
House Bill
      No provision.
Conference Agreement
      No provision.

            Subtitle C--Provisions Relating to Parts A and B

Home Health Payments. (Section 5201 of the Conference Agreement, 
        Section 6110 of the Senate Bill--with respect to quality of 
        home health services, and no provision in the House Bill)
Current Law
      The Medicare home health prospective payment system, 
which was implemented on October 1, 2000, provides a 
standardized payment for a 60-day episode of care furnished to 
a Medicare beneficiary. Medicare's payment is adjusted to 
reflect the type and intensity of care furnished and area wages 
as measured by the hospital wage index.
      Each year Medicare's payment to home health agencies is 
updated by the projected annual change in the home health 
market basket (HHMB), with specified reductions in some years. 
For the last three calendar quarters of 2004 through 2006, the 
home health update is the HHMB minus 0.8 percentage points. In 
2007 and subsequent years, the payment update for home health 
agencies is equal to the full HHMB.
      The Medicare Prescription Drug Improvement and 
Modernization act of 2003 provided for a one-year 5 percent 
additional payment for home health services furnished in rural 
areas. The temporary payment began for episodes and visits 
ending on or after April 1, 2004 and before April 1, 2005. It 
was made without regard to certain budget neutrality provisions 
and was not included in the base for determination of payment 
updates.
Senate Bill
      The Medicare statute would be amended by adding a new 
Section 1860E-6 which establishes the Home Health Agency Value-
Based Purchasing Program. In 2008 and in subsequent years, the 
Secretary would make value-based payments to those home health 
agencies that, based on data submitted under the quality 
measurement system, have either substantially improved quality 
of care over the prior year, or exceed a threshold established 
by the Secretary. A majority of the total amount available for 
value-based payments in any fiscal year would be paid to home 
health agencies that qualify for payments because they exceed a 
quality threshold. Starting in 2009 and in each subsequent 
year, the percentage of total value-based payments made to 
agencies that exceed the quality threshold would be greater 
than the percentage made in the previous year. To be eligible 
for a value-based payment, home health agencies would be 
required to submit the required quality data and attest that it 
is complete and accurate.
      The total amount of value-based payments made in a year 
would equal the total funds available for such payments. The 
Secretary would determine the most appropriate method for 
making payments. Payments for a year would be required to be 
made no later than December 31 of the subsequent year. By 
January 1, 2008, the Secretary would be required to provide 
each home health agency with a description of how its payments 
for 2007 would have been affected had the value-based 
purchasing system been in effect that year.
      Value-based payments would be made from Part A and Part B 
in the same proportion as payments for home health services are 
made.
      In 2007 and subsequent years, a home health agency that 
does not submit to the Secretary the required quality data 
would receive an update of the market basket minus two 
percentage points. This reduction would only apply to the 
fiscal year in question. For 2007 and subsequently, each home 
health agency would be required to submit data necessary for a 
value-based purchasing system in the form, manner, and time 
period specified by the Secretary. Procedures for making the 
data available to the public would be established.
      To fund the program, spending under the trust funds for 
home health services would be reduced by a percent applied to 
the standard prospective payment amount made to all agencies 
that comply with the data submission requirements. The percent 
reduction would be 1 percent in 2008, 1.25 percent in 2009, 1.5 
percent in 2010, 1.75 percent in 2011, and 2 percent in 2012 
and subsequent years.
House Bill
      No provision.
Conference Agreement
      The conference agreement eliminates the update for home 
health payments in 2006. It also provides for a one-year 5 
percent additional payment for home health episodes or visits 
furnished in a rural area during calendar year 2006.
      The Conference agreement accepts the Senate language with 
respect to (1) the collection of health care quality data, as 
determined appropriate by the Secretary, (2) procedures for 
making the data available to the public, and (3) the reduction 
of payments to home health agencies that do not submit quality 
data in 2007 and beyond. The reduction in payments is equal to 
the market basket minus two percentage points. However the 
reduction will not be taken into account for calculation of the 
payment rate in subsequent years.
      The conference agreement directs the Medicare Payment 
Advisory Commission to submit a report to Congress no later 
than June 1, 2007 on a value-based purchasing program for home 
health services. The report is to include recommendations on 
the structure of the program, the determination of thresholds, 
the size of value-based payments, sources of funds, and the 
relationship of payments for improvements in health care 
quality.
Revision of Period for Providing Payment for Claims that are not 
        Submitted Electronically (Section 5202 of the Conference 
        Agreement, no provision in the Senate Bill, and no provision in 
        the House Bill)
Current Law
      Mandatory electronic claims submission went into effect 
on July 1, 2005 for all providers, with a few exceptions. The 
exceptions include: (1) small providers with fewer than 25 
full-time equivalent (FTEs) employees and physicians, 
practitioners, or suppliers with fewer than 10 FTEs, (2) 
dentists, and (3) other providers as specified by the Centers 
for Medicare and Medicaid Services (CMS). Medicare contractors 
must pay 95 percent of all ``clean'' paper claims within 27-30 
days of receipt.
Senate Bill
      No provision.
House Bill
      No provision.
Conference Agreement
      The Conference agreement directs Medicare contractors to 
delay the payment of claims that are not submitted 
electronically. The contractors are directed to pay 95 percent 
of all ``clean'' claims within 29-30 days of receipt for paper 
claims.
Timeframe for Part A and B Payments (Section 5203 of the Conference 
        Agreement, Section 6112(b) of the Senate Bill, and no provision 
        in the House Bill)
Current Law
      Medicare contractors accept, process and pay claims 
submitted by providers for Medicare-covered services. Medicare 
contractors must pay interest on claims that are not promptly 
paid. The contractors must pay 95 percent of all ``clean'' 
claims within 14-30 days of receipt for electronically 
submitted claims, or within 27-30 days of receipt for paper 
claims. If the payment is not made within that time, interest 
begins accruing on the day after the required payment date and 
ends on the date on which the payment is made. The interest 
rate is set at the higher of the ``private consumer rate,'' or 
the ``current value of the funds.''
Senate Bill
      The Senate bill would delay Medicare Part A and B 
payments by 9 days. Claims that would otherwise be paid on 
September 22, 2006, through September 30, 2006 would be paid on 
the first business day of October 2006. No interest or late 
penalty would be paid to an entity or individuals for any delay 
in a payment during the period.
House Bill
      No provision.
Conference Agreement
      The conference agreement accepts the Senate provision.
Medicare Integrity Program Funding (Section 5204 of the Conference 
        Agreement, no provision in the Senate Bill and no provision in 
        the House Bill)
Current Law
      As part of the Health Insurance Portability and 
Accountability Act of 1996 (HIPAA), Congress acted to increase 
and stabilize federal funding for anti-fraud activities. As 
required by Section 1817(k) of the Medicare law, an expenditure 
account was established within the Federal Hospital Insurance 
Trust Fund (the HCFAC account). Certain amounts were 
appropriated from the Trust Fund for specific activities, 
including the Medicare Integrity Program (MIP). These amounts 
have been established as not less than $710 million and not 
more than $720 million for FY2002 and subsequently.
Senate Bill
      No provision.
House Bill
      No provision.
Conference Agreement
      The conference agreement would increase MIP funding 
amounts by $100 million for FY2006.

               Subtitle D--Provisions Relating to Part C

Phase-out of risk adjustment budget neutrality in determining the 
        amount of payments to Medicare Advantage organizations. 
        (Section 5301 of the Conference Agreement, Section 6111 of the 
        Senate Bill, and no provision in the House Bill)
Current Law
      Medicare Advantage payment rates are risk adjusted to 
control for the variation in the cost of providing health care 
among beneficiaries. Rates are adjusted by demographic and 
health status indicators. In the report language to the 
Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 
1999, Congress urged the Secretary to implement a more 
clinically-based risk adjustment methodology without reducing 
overall payments to plans. To keep payments from being reduced 
overall, the Secretary applied a budget neutrality adjustment 
to the risk adjusted rates. However, the Secretary has proposed 
to phase-out the budget neutrality adjustment citing studies 
that show a difference in the reported health status of 
Medicare Advantage enrollees compared to the reported health 
status of beneficiaries in traditional Medicare.
Senate Bill
      Beginning in 2007, this section would specify an 
adjustment to the benchmarks to phase-out overall increases in 
MA rates that result from the budget neutral implementation of 
risk adjustment. In 2007, if the Secretary does not rebase 
rates to 100 percent of per capita fee-for-service costs, the 
MA benchmarks would be equal to the 2006 rates as announced by 
the Secretary on April 4, 2005, with four adjustments--(1) 
exclusion of any national adjustments for coding intensity, (2) 
exclusion of risk adjustment budget neutrality, (3) increase 
based on the national per capita MA growth percentage, and (4) 
omission of any adjustments to account for errors in previous 
years' projections of the national per capita MA growth 
percentage. If the Secretary does rebase the rates in 2007, the 
MA benchmark would be set at the greater of either the rate 
calculated above, or 100 percent of per capita fee-for-service 
spending in the area. After 2007, if the Secretary does not 
rebase rates, the MA benchmarks would be the previous year's 
benchmark increased by the national per capita MA growth 
percentage without adjusting for errors in the estimation of 
the growth percentage for a year before 2004. After 2007, if 
the Secretary rebases rates, the benchmark would be equal to 
the greater of either the rate calculated above, or 100 percent 
of per capita fee-for-service spending.
      The benchmarks described above would be free of the 
budget neutral risk adjustment. However, the benchmarks would 
be adjusted so that budget neutrality would be phased-out over 
4 years. The applicable phase-out factors would be equal to .55 
in 2007, .40 in 2008, .25 in 2009 and .05 in 2010. This means 
that in 2007, 55 percent of the payment to plans would be based 
on payment rates including the budget neutral risk adjustment, 
and 45 percent of the payment to plans would be based on a rate 
without the budget neutral adjustment. The budget neutrality 
factor is calculated through a formula that equals the 
Secretary's estimate of the total amount of payments that would 
have been made to plans under the demographic risk adjustment 
system, minus the Secretary's estimate of the payments that 
would have been made to plans under the health status risk 
adjustment system without the budget neutrality adjustment, 
divided by the Secretary's estimate of the total amount of 
payments that would be made under the health status risk 
adjustment system without the budget neutrality adjustment. 
When making this calculation, the Secretary would (a) use a 
complete set of the most recent and representative MA risk 
scores available, (b) adjust the risk scores to reflect changes 
in treatment and coding practices in fee-for-service, and (c) 
adjust the risk scores for differences in coding patterns under 
Medicare Part A and B compared to Medicare Part C, to the 
extent the Secretary has identified differences and (d) as 
necessary, adjust for late data submissions, lagged cohorts, 
and changes in MA enrollment. The Secretary could take into 
account estimated health risk of enrollees in preferred 
provider organizations (including MA regional plans) for the 
year. The Secretary would be required to conduct an analysis of 
differences in coding patterns between MA plans and providers 
under Parts A and B of Medicare using data starting in 2004, 
and incorporate, to the extent such differences are identified, 
the findings into calculations of MA benchmarks no later than 
2008. Adjustments would be terminated if the total amount of 
payments adjusted for health status exceeded payments adjusted 
for demographics.
      The Secretary could not make any adjustments to the 
budget neutrality factor, other than those specified above. The 
Secretary's authority to risk adjust MA benchmarks based on 100 
percent of per capita fee-for-service spending would not be 
limited by these changes.
      This section also refines adjustments for health status 
when plans are paid based on their bid amounts (rather than the 
benchmark). The Secretary would ensure that such risk 
adjustments reflect changes in the treatment and coding 
practices between Medicare Part A and Part B relative to 
Medicare Part C to the extent that the Secretary has identified 
differences.
House Bill
      No provision.
Conference Agreement
      The conference agreement accepts the Senate language in 
part, with modifications. The conference agreement codifies the 
phase-out of the budget neutrality factor over 2006 to 2010 and 
outlines the adjustments that can be made to that factor. Under 
the agreement, the Secretary must conduct an analysis to 
identify differences in coding patterns between Medicare 
Advantage plans and fee for service. To the extent that the 
Secretary identifies any differences, they are to be 
incorporated into calculations of the risk rates and the budget 
neutrality factor in 2008, 2009, and 2010. The conferees intend 
that any adjustments made for differences in coding patterns be 
made for differences resulting from inaccurate coding. The 
conference agreement makes no permanent change to Medicare 
Advantage payment calculations.
Rural Pace Provider Grant Program (Section 5302 in the Conference 
        Agreement, Section 6113 of the Senate Bill, and no provision in 
        the House Bill)
Current Law
      PACE is a program providing comprehensive Medicare and 
Medicaid services under a managed care arrangement to 
individuals over age 55 who are eligible for a nursing home 
level of care. PACE organizations, which are public or private 
non-profit entities, receive a fixed monthly Medicare and 
Medicaid payment to cover a comprehensive set of services for 
PACE participants. The PACE service package must include all 
Medicare and Medicaid covered services, and other services 
determined necessary by the multidisciplinary team for the care 
of the PACE participant.
Senate Bill
      This provision would create site development grants, 
provide technical assistance to established rural PACE 
providers, and establish a fund to reimburse rural PACE 
providers for certain outlier costs. A rural area would be a 
county that is not part of a Metropolitan Statistical Areas (as 
defined by the Office of Management and Budget) as established 
for Medicare IPPS payments to acute care hospitals. The 
Secretary would establish a procedure to award site development 
grants to be used for expenses incurred in relation to 
establishing or delivering services in rural areas. Up to 15 
qualified PACE providers that serve a rural area, in whole or 
in part can receive a grant not to exceed $750,000. The 
Secretary would be appropriated $7.5 million in FY2006 and 
FY2007 out of the Treasury for these development grants. The 
appropriated funds would remain available for expenditure until 
FY 2010. The Secretary would establish a technical assistance 
program to provide (1) outreach and education to specified 
entities interested in starting rural PACE programs, and (2) 
technical assistance necessary to support rural PACE pilot 
sites. The Secretary would establish an outlier fund for 
inpatient and related physician and ancillary costs incurred 
for an eligible participant within a given l2-month period. 
Outlier costs would be those costs for inpatient and related 
physician and ancillary services in excess of $50,000 incurred 
within a given 12-month period for an eligible participant who 
resides in a rural area. For the first 3 years of its 
operation, a rural PACE site would receive 80 percent of the 
outlier costs in excess of $50,000 for that period. Total 
outlier payments for an eligible participant could not exceed 
$100,000 for the 12-month period used to calculate the payment. 
No site may receive more than $500,000 in total outlier expense 
payments in a 12-month period. A rural PACE pilot site would be 
required to access and exhaust risk reserves held or arranged 
for the provider and any working capital established through a 
site development grant prior to receiving any payment from the 
outlier fund. The Secretary would be appropriated $10 million 
for FY2006 and FY2007 for the outlier fund. These outlier 
appropriations would remain available for expenditure through 
FY2010. The Secretary would be required to submit a report to 
Congress on the evaluation of the rural PACE pilot sites no 
later than 60 months from the date of enactment. Any amount 
paid under this authority would be in addition to Medicare PACE 
funds paid under Section 1894 of the Social Security Act or 
Medicaid PACE funds paid for under Section 1934 of the same 
act.
Conference Agreement
      The conference agreement adopts the Senate provision with 
certain exceptions. The Secretary is required to establish a 
process and criteria to award site development grants to 
qualified PACE providers that have been approved to serve a 
rural area. The Secretary is appropriated $7.5 million for 
FY2006 for the rural site development grants. These 
appropriated funds would remain available for expenditure 
through FY2008. The Secretary is appropriated $10 million for 
FY2006 for the outlier funds. These appropriated funds would 
remain available for expenditure through FY2010. Rural PACE 
pilot sites must apply to receive outlier funds and document 
their incurred costs for the outlier participant in a manner 
specified by the Secretary.
Elimination of Medicare Advantage Regional Plan Stabilization Fund (No 
        provision in Conference agreement, Section 6112(a) of the 
        Senate Bill, and no provision in the House Bill)
Current Law
      The Secretary must establish an MA Regional Plan 
Stabilization Fund to provide incentives for plan entry in each 
region and plan retention in certain MA regions with below 
average MA penetration. Initially, $10 billion will be 
available for expenditures from the Fund beginning on January 
1, 2007 and ending on December 31, 2013. Additional funds will 
be available in an amount equal to 12.5 percent of average per 
capita monthly savings from regional plans that bid below the 
benchmark.
Senate Bill
      The Senate bill would repeal the stabilization fund 
retrospectively as of the enactment of the Medicare 
Prescription Drug, Improvement, and Modernization Act of 2003.
House Bill
      No provision.
Conference Agreement
      No provision.
Establishment of Medicare Value-based Purchasing Programs. (No 
        provision in the Conference Agreement, Section 6110 of Senate 
        Bill and no provision in the House Bill)
Subsection (a) Establishment of Medicare Value-Based Purchasing 
        Programs Part E Value-Based Purchasing Programs--Quality 
        Measurement Systems for Value-Based Purchasing Programs. (No 
        provision in the Conference Agreement, Section 6110 of the 
        Senate Bill and no provision in the House Bill)
Current Law
      No provision.
Senate Bill
      Section 6110 would amend the Medicare statute by 
redesignating the existing Section 1860E as Section 1860F and 
by adding a new Section 1860E which requires the Secretary to 
establish value-based purchasing systems for different 
providers.
      Subsection (a) of Section 6110 would create Section 
1860E-1 in the Medicare statute and would require the Secretary 
to develop provider-specific quality measurement systems for 
making value-based payments to hospitals, physicians and 
practitioners, Medicare Advantage (MA) and Part D prescription 
drug plans, end stage renal disease providers and facilities, 
and home health agencies. Measures for each quality system 
would be required to (1) be evidence-based; (2) be easy to 
collect and report; (3) address process, structures, outcomes, 
beneficiary experience, efficiency, equity, and overuse and 
underuse of health care; and (4) include at least one measure 
of health information technology infrastructure during the 
first year of implementation. Additional measures would be 
added in subsequent years. Measures would include those that 
assess the quality of care furnished to older, frail 
individuals and those with multiple complex chronic conditions. 
By 2008, hospital quality systems would be required to include 
at least 5 measures that take into account the unique 
characteristics of small hospitals located in rural areas and 
frontier areas.
      Before a measure would be used to determine whether a 
provider receives a value-based payment, data on the measure 
must have been collected for at least a twelve month period. 
Each set of quality measures selected for specific categories 
of providers would be able to vary in their application to an 
individual or entity depending on the type, size, scope and 
volume of services provided by the individual or entity.
      The Secretary would be required to establish risk 
adjustment procedures to control for differences in 
beneficiaries' health status and characteristics and to assign 
weights to measures used by each quality system. If 
appropriate, measures of clinical effectiveness would be 
weighted more heavily than measures of beneficiary experience; 
and measures of risk adjusted outcomes would be weighted more 
heavily than measures of process. The Secretary would be 
required to update the quality measurement system, but not more 
often than every twelve months. The update would permit a 
comparison of data from one year to the next. The Secretary 
would be required to use the most recent quality data for a 
provider type. However, if the Secretary determines that there 
is insufficient data because of the low service volume, the 
Secretary would be able to aggregate data across more than one 
fiscal or calendar year.
      In developing and updating each quality measurement 
system, the Secretary would be required to consult with 
provider-based groups and clinical specialty societies. The 
Secretary would also take into account quality measures 
developed by nationally recognized entities, existing quality 
measurement systems, reports by MedPAC required by this Act, 
results of relevant demonstrations, and the report on Health 
Care Performance Measures being developed by the Institute of 
Medicine under section 238(b) of the MMA. In implementing each 
quality measurement system, the Secretarywould be required to 
consult with entities that have developed strategies for quality 
measurement and reporting as well as a wide range of stakeholders.
      By July 1, 2006, the Secretary would be required to have 
in place an arrangement with an entity that will provide the 
Secretary with advice and recommendations about the development 
and updating of the quality measurement systems established by 
this Act. This arrangement, with a private nonprofit entity, 
would meet a specific set of requirements. For FY2006 and 
FY2007, $3,000,000 is authorized for this purpose, with the 
amount in subsequent years increased by the Consumer Price 
Index for urban consumers.
House Bill
      No provision.
Conference Agreement
      No provision.
Physician and practitioner value-based purchasing program
Current Law
      No provision.
Senate Bill
      A new Section 1860E-3 would direct the Secretary to 
establish a program under which value-based payments are 
provided each year to physicians and practitioners that 
demonstrate the provision of high quality health care to 
individuals enrolled under part B. In addition, MedPAC would be 
required to conduct five studies evaluating the new program.
      The first study would examine how the Medicare value-
based purchasing programs under this section will affect 
Medicare beneficiaries, Medicare providers, and Medicare 
financing, including the impact of these programs on the access 
of such beneficiaries to items and services, the volume and 
utilization of such items and services, and low-volume 
providers. The initial report would be due to Congress and the 
Secretary no later than March 1, 2008, and a final report due 
no later than June 1, 2012.
      The second study would examine the advisability and 
feasibility of establishing a value-based purchasing program 
for critical access hospitals (CAHs). This report would be due 
to Congress and the Secretary no later than March 1, 2007.
      The third study would address the advisability and 
feasibility of including renal dialysis facilities in the 
value-based purchasing program described in this section or 
establishing a separate value-based purchasing program for 
renal dialysis facilities under this title. This report would 
be required to be submitted to Congress and the Secretary no 
later than June 1, 2007.
      The fourth study would be a report on the implementation 
of an end-stage renal disease (ESRD) provider and facility 
value-based purchasing program. This report would take into 
account the results to date of the demonstration of bundled 
case-mix adjusted payment system for ESRD services under 
Section 623(e) of MMA and would include issues for the 
Secretary to consider in operating the ESRD provider and 
facility value-based purchasing program as well as 
recommendations on such issues. This report would be required 
to be submitted to Congress and the Secretary no later than 
June 1, 2008.
      The fifth study, due to Congress and the Secretary by 
June 1, 2007, would report on the advisability and feasibility 
of establishing a value-based purchasing program for skilled 
nursing facilities (SNFs).
      The value-based purchasing program would be established 
so that value-based payments will be made initially in 2009 and 
in each subsequent year. The definition of a physician would 
not be changed as a result of this section and would remain as 
given in current law (section 1861(r)). The term `practitioner' 
would mean: (i) a practitioner defined under current law; (ii) 
a physical therapist; (iii) an occupational therapist; and (iv) 
a qualified speech-language pathologist. The Secretary would be 
charged with establishing procedures for the identification of 
physicians and practitioners for payment purposes under this 
section, such as through physician or practitioner billing 
units or other units.
      The value-based payments would be based on either 
relative or absolute standards. The Secretary would be able to 
make a value-based payment to a physician or a practitioner if 
both the quality and efficiency of care to an individual 
enrolled under Part B has improved substantially or has 
exceeded an established threshold. In determining which 
physicians and practitioners would qualify for a value-based 
payment, the Secretary would be required to use both the 
quality measurement system developed for this section with 
respect to the quality of the care provided by the physician or 
practitioner and the comparative utilization system developed 
under this section with respect to the efficiency of such care.
      In determining the amount of award and the allocation of 
awards under the value-based purchasing program, the Secretary 
would determine both the amount of a value-based payment 
provided to a physician or a practitioner and the allocation of 
the total amount available for value-based payments for any 
year between payments with respect to physicians and 
practitioners that meet the quality threshold requirements 
described above.
      In determining the amount and allocation of the value-
based payments for physicians and practitioners who exceed the 
threshold that allows them to receive such payments, the 
Secretary would ensure that a majority of the total amount 
available for value-based payments for any year is provided to 
physicians and practitioners who meet the threshold for 
receiving such payments. Additionally, the percentage of value-
based payments would not be able to decrease. For every year 
beginning in 2010, the Secretary would be required to ensure 
that the percentage of the total amount available for value-
based payments for any year that is used to make payments to 
physicians and practitioners is greater than the previous 
year's percentage.
      In order for a physician or a practitioner to be eligible 
for a value-based payment for a year, the physician or 
practitioner would be required to submit quality data with 
respect to that year, and provide the Secretary (under 
procedures established by the Secretary) with an attestation 
that the data submitted is complete and accurate.
      The Secretary would be required to establish value-based 
payments such that the estimated total amount of the value-
based payments is equal to the total amount of available 
funding for value-based payments for the year. The payment of 
value-based payments would be based on such a method as the 
Secretary determines appropriate, andthe Secretary would ensure 
that value-based payments with respect to a year are made by not later 
than December 31 of the subsequent year.
      The Secretary, in consultation with relevant unnamed 
stakeholders, would develop a comparative utilization system 
for purposes of providing value-based payments. The resulting 
comparative utilization system would measure the efficiency of 
the care provided by a physician or practitioner. Under this 
comparative utilization system, the Secretary would select the 
measures of efficiency and review the most recent claims data 
with respect to services furnished or ordered by physicians and 
practitioners to determine utilization patterns and efficiency. 
The Secretary would establish risk adjustment procedures, as 
appropriate, to control for differences in beneficiary health 
status and beneficiary characteristics.
      Beginning in 2007, the Secretary would provide physicians 
and practitioners with annual reports on the utilization of 
items and services under this title based upon the review of 
claims data. The 2007 and 2008 reports would be confidential 
and not be made available to the public. Not later than March 
1, 2009, the Secretary would provide each physician and 
practitioner with a description of the Secretary's estimate of 
how payments to the physician or practitioner would have been 
affected with respect to items and services furnished in 2008 
if the value-based payment program had been in effect in 2008.
      Payments to physicians and practitioners under the value-
based payment program would be made from the Federal 
Supplementary Medical Insurance (Part B) Trust Fund. The total 
amount available for value-based payments with respect to a 
year would be equal to the amount of the reduction in 
expenditures under the Federal Supplementary Medical Insurance 
Trust Fund in the year as a result of the amendments made by 
Section 6110(c)(2) of the bill, as estimated by the Secretary.
House Bill
      No provision.
Conference Agreement
      No provision.
Subsection (c) physicians and practitioners
            (1) Voluntary submission of physician and practitioner 
                    quality data
Current Law
      No provision.
Senate Bill
      In 2007 and in subsequent years, physicians and providers 
who do not submit the required quality data would receive an 
update to the conversion factor minus two percentage points. 
This reduction would only apply to the fiscal year in question. 
In 2007 and subsequently, physicians and practitioners would be 
required to submit appropriate data necessary for a value-based 
purchasing system in the specified form, manner, and time of 
the data submission as determined by the Secretary. Procedures 
for making the data available to the public would be 
established. These procedures would be required to provide the 
physicians and practitioners with an opportunity to review the 
data before it is released to the public. The Secretary would 
be allowed to make exceptions to the requirement for making 
data available to the public and would take into account the 
size and specialty representation of the practice involved when 
providing such exceptions.
House Bill
      No provision.
Conference Agreement
      No provision.
            (2) Reduction in conversion factor for physicians and 
                    practitioners that submit quality data in order to 
                    fund program
Current Law
      Medicare payments under Part B are based on a fee 
schedule. The fee schedule reflects a set of weights that vary 
across the many procedures that encompass the range of 
activities and services that physicians and practitioners 
provide. These relative weights are converted to dollar amounts 
for payment under Medicare by applying a multiplicative 
conversion factor. The conversion factor is updated each year 
according to a formula that aims to place a restraint on 
overall increases in Medicare spending for Part B services.
Senate Bill
      To fund the value-based purchasing program for physicians 
and practitioners, the conversion factor would be reduced as 
follows: 1.0 percent in 2009, 1.25 percent in 2010, 1.5 percent 
in 2011, 1.75 percent in 2012, and 2.0 percent in 2013 and 
subsequent years.
House Bill
      No provision.
Conference Agreement
      No provision.
ESRD provider and facility value-based purchasing program
Current Law
      No provision.
Senate Bill
      Section 1680E-5. Beginning in 2007, the Secretary would 
establish a program under which value-based payments are 
provided each year to providers of services and renal dialysis 
facilities that provide services to ESRD individuals enrolled 
under part B and that demonstrate the provision of high quality 
health care. Facilities with at least 50 percent of their 
patients under the age of 18, as well as those providers and 
facilities currently participating in the bundled case-mix 
demonstration are excluded from this program.
      Value-based payments would be made to a provider or 
facility, if the Secretary determines that the quality of care 
in that year has substantially improved over the prior year or 
exceeds a threshold established by the Secretary, using the 
quality measurement system.
      The Secretary would determine the amount of a value-based 
payment and the allocation of the total amount available for 
all such payments, subject to certain requirements. The 
Secretary would ensure that the majority of the total amount 
available is awarded to those providers of services and renal 
dialysis facilities who provide high quality services. For 
2007, the entire amount would be available for those who meet 
the requirements. Beginning in 2009, the percentage of the 
total amount available would be provided to those who improved 
in meeting such requirements relative to the previous year.
      Beginning in 2007, each provider of services and renal 
dialysis facility would be required to submit data that the 
Secretary determines is appropriate for the measurement of 
health outcomes and other indices of quality, including data 
necessary for the operation of the program. A provider or 
facility would be required to submit this data, in order to be 
eligible for a value-based payment for a year. The Secretary 
would establish procedures for making submitted data available 
to the public in a clear and understandable form and would 
ensure that a provider or facility first has the opportunity to 
review the data. The provider or facility would be required to 
provide an attestation that the data is complete and accurate.
      The Secretary would establish payment amounts so that, as 
estimated by the Secretary, the total amount of value-based 
payments made in a year is equal to the total amount available. 
The payment of the awards would be based on a method as 
determined by the Secretary and must be paid no later than 
December 31 of the subsequent year. The amount available for 
value-based payments would be equal to the amount of the 
reduction in expenditures under the Federal Supplementary 
Medical Insurance (SMI) Trust Fund, as estimated by the 
Secretary. Payments to providers of services and renal dialysis 
facilities, under this section, would be made from the Federal 
SMI Trust Fund.
House Bill
      No provision.
Conference Agreement
      No provision.
Subsection (e) ESRD
            Providers and facilities
Current Law
      No provision.
Senate Bill
      No later than July 31, 2006, the Secretary would 
establish procedures for providers of services and renal 
dialysis facilities, who are paid based on the case-mix 
adjusted prospective payment system, to submit data that 
permits the measurement of health outcomes and other indices of 
quality.
      In the case of any payment for an item or service 
furnished on or after January 1, 2007, the case-mix adjusted 
prospective payment amount would be reduced by the applicable 
percent, but only for those providers of services or renal 
facilities included in the value-based program. The applicable 
percent would be 1 percent for 2007, 1.25 percent for 2008, 1.5 
percent for 2009, 1.75 percent for 2010, and 2 percent for each 
year thereafter.
      Beginning January 1, 2007, the Secretary would implement 
a value-based purchasing program for providers and facilities 
participating in the bundled case-mix demonstration (as 
established under Section 623 of the Medicare Prescription 
Drug, Improvement, and Modernization Act of 2003), in a manner 
similar to the value-based program established under Section 
1860E-5 of this bill, including the funding of the program.
House Bill
      No provision.
Conference Agreement
      No provision.
            PPS Hospital value-based purchasing program
Current Law
      No provision.
Senate Bill
      The Medicare statute would be amended by adding a new 
Section 1860E-2 which establishes the hospital value-based 
purchasing program for inpatient hospital services, starting 
FY2007. The program would make value-based payments to 
hospitals based on data reported under the quality measurement 
system established by the Secretary. Hospitals paid under 
Medicare's prospective payment system (PPS) that have 
substantially improved the quality of care over the prior year 
or exceeded an established quality threshold would receive a 
value-based payment as determined by the Secretary. A majority 
of the total amount available for value-based payments in any 
fiscal year would be paid to hospitals that are receiving such 
payments for exceeding a quality threshold. Starting in FY2008, 
the percentage of the total amount for value-based payments in 
any fiscal year that is paid to such hospitals would be greater 
than the equivalent percentage paid in the previous year. 
Hospitals would be required to comply with all the quality data 
reporting requirements and attest to the accuracy of the data 
in order to be eligible for a value-based payment. The total 
amount of value-based payments in a fiscal year would equal the 
total amount of available funding for such payments for that 
year. The payments would be based on the methods determined by 
the Secretary and would be made to hospitals no later than the 
close of the following fiscal year. No later than January 1, 
2007, the Secretary would provide each hospital with a 
description of how its payments for FY2006 would have been 
affected had the value-based payment program been in effect 
that fiscal year.
      Value-based payments in a fiscal year would be made from 
Medicare's Part A Trust fund and would equal specified 
reductions in those trust fund expenditures as established in 
Section 6110(b) of the bill.
House Bill
      No provision.
Conference Agreement
      See Section 5001 of the Conference Agreement.
Plan value-based purchasing program
Current Law
      No provision.
Senate Bill
      A new Section 1860E-4 would require the Secretary to 
establish a program to award value-based payments to Medicare 
Advantage (MA) organizations that provide high quality health 
care. Payments would start in 2009, and continue each year 
thereafter. The program would apply to both MA regional and 
local plans. It also would apply to reasonable cost contract 
plans, except for provisions that would require plans to submit 
data two years prior to the start of the program, and 
provisions relating to plan bids.
      The Secretary would make payments for each plan offered 
by an MA organization if the plan substantially improved over 
the prior year, or exceeded a minimum threshold. The Secretary 
would use measures of quality developed for the plan value-
based payments system (Section 1860E-1) and ensure that awards 
are based on data from a full 12 months when making a 
comparison against a threshold, and 24 months when measuring 
improvement over a prior year.
      The Secretary would determine the amount of the value-
based payments, but must ensure that the majority of funds go 
to plans that receive a payment because their health measures 
exceeded a threshold. In 2010 and each subsequent year, the 
percentage of the total amount available is greater than the 
percentage in a previous year.
      Value-based payments may only be used to invest in 
quality improvement programs or to enhance beneficiary 
benefits.
      To be eligible for value-based payments, an MA plan or 
reasonable cost contract would be required to have collected, 
analyzed an