Deficit Reduction Act (DRA), P.L. 109-171,

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.