[DOCID: f:hr362.109]
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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 and reported the required data for the two previous
years. Also, an MA plan would be required to provide the
Secretary with an attestation that the value-based payment
program including payment adjustments made by reason of Section
6110(d)(2)(A) had no effect on the integrity and actuarial
soundness of the plan's bid.
The Secretary would ensure that the total of value-based
payments is equal to the amount made available for those
payments. Payments for a particular year would be required to
be made not later than March 1 of the subsequent year, in a
manner determined by the Secretary.
By March 1, 2009, the Secretary would provide each MA
organization with an estimate of how plan payments would have
been affected if the value-based payment system had been in
effect in 2008.
The amount available for value-based payments would be
equal to the amount of the reduction in expenditures under the
Federal Hospital Insurance Trust Fund and the Federal
Supplementary Medical Insurance Trust Fund as a result of
amendments to fund the value-based payment system, as estimated
by the Secretary. Payments to MA organizations would be drawn
from the two trust funds in proportion to the relative weight
that part A and part B benefits represent of the total
actuarial value of Medicare benefits.
House Bill
No provision.
Conference Agreement
No provision.
Home Health Agency Value-based Purchasing Program
Current Law
No provision.
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.
House Bill
No provision.
Conference Agreement
No provision.
Subsection (b).--Hospitals
(1) Voluntary submission of hospital quality data
Current Law
Each year, Medicare's operating payments to acute general
hospitals are increased or updated by a factor that is
determined, in part, by the projected annual change in the
hospital market basket (MB). Congress establishes the update
for Medicare's inpatient prospective payment system (IPPS) for
operating costs, often several years in advance. An IPPS
hospital will receive an operating update of the MB from FY2005
through FY2007 if it submits data on the 10 quality indicators
established by the Secretary as of November 1, 2003. The
Secretary will specify the form, manner, and time of the data
submission. A hospital that does not submit data to the
Secretary will receive an update of the MB minus 0.4 percentage
points for the fiscal year in question. The Secretary will not
take into account this reduction when computing the applicable
percentage increase in subsequent years. For FY2008 and
subsequent fiscal years, hospitals will receive an update of
the MB.
Senate Bill
In FY2007 and subsequent years, an IPPS hospital that
does not submit the required quality data would receive an
update of the MB minus two percentage points. This reduction
would only apply to the fiscal year in question. In FY2007 and
subsequently, an IPPS hospital 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 hospitals with an opportunity
to review the data before it is released to the public.
House Bill
No provision.
Conference Agreement
No provision.
(2) Reduction in outlier payments in order to fund program
Current Law
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.
Senate Bill
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 will 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.
House Bill
No provision.
Conference Agreement
No provision.
(3) Value-based purchasing demonstration program for
critical access hospitals
Current Law
No provision.
Senate Bill
The Secretary, within six months from enactment, would be
required to establish a two-year value-based payment
demonstration program at six representative CAHs, using such
funds as are necessary from the Part A trust fund. The
Secretary would be required to report to Congress with
recommendations within six months of completing the
demonstration.
House Bill
No provision.
Conference Agreement
No provision.
Subsection (d)--Plans
(1) Submission of quality data
Current Law
Each Medicare Advantage (MA) organization has an ongoing
quality improvement program. MA private fee-for-service plans,
MSA plans and Medicare cost reimbursement plans are exempt from
this requirement. Each MA organization collects, analyzes and
reports health outcomes and quality data. The quality
improvement program for local preferred provider organizations
only applies to providers that have contracts with the
organization. The Secretary can collect only the types of data
that were collected by the Secretary as of November 1, 2003.
The Secretary can collect other types of data only after
consulting with MA organizations and private accrediting
bodies, and submitting a report to Congress.
Senate Bill
Beginning on or after January 1, 2006, the Secretary
would also collect data necessary for the plan value-based
purchasing program (Section 1860E-4). The Secretary would
establish requirements for MA private fee-for-service plans and
cost reimbursement plans with respect to the collection,
analysis and reporting of data on health outcomes and quality.
The Secretary would establish procedures for making health
outcomes and quality data available to the public in a clear
and understandable form. Prior to the data being made public,
the Secretary would ensure that an MA organization has the
opportunity to review the data for the plans it offers. The
Secretary may change the type of data collected for the value-
based purchasing program after complying with requirements for
the development, update and implementation of the program.
The Secretary would take into account the data reporting
requirements that plans must comply with under other federal
and state programs and in the commercial market when
establishing a time frame for data reporting requirements under
the new program.
House Bill
No provision.
Conference Agreement
No provision.
(2) Reduction in payments to organizations in order to fund
program
Current Law
No provision.
Senate Bill
For those providers included in the value-based program,
including reasonable cost contracts, the monthly payment to
plans would be reduced by 1 percent in 2009, 1.25 percent in
2010, 1.5 percent in 2011, 1.75 percent in 2012, and 2.0
percent for 2013 and each subsequent year. These reductions
would not have any effect on determining whether the risk
adjusted benchmark exceeds a plan's risk adjusted bid, or the
amount of the difference.
House Bill
No provision.
Conference Agreement
No provision.
(3) Requirements for reporting on use of value-based
payments
Current Law
No provision.
Senate Bill
Beginning on or after January 1, 2011, MA plans would
submit information describing how the organization will use any
value-based payments received under the program. This
information would be submitted by plans at the same time they
submit plan bids. Beginning in 2010, not later than July 1 of
each year, any reasonable cost reimbursement contract that
received a value-based payment would submit a report to the
Secretary describing how the organization will use the value-
based payment.
House Bill
No provision.
Conference Agreement
No provision.
Subsection (f) Home Health Agencies
Value-based purchasing program for home health agencies
Current Law
No provision.
Senate Bill
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
See Section 5201 of the Conference Agreement.
Subsection (g) Skilled Nursing Facilities
(1) Requirement for skilled nursing facilities to report
functional capacity of medicare residents upon
admission and discharge
Current Law
Medicare law requires nursing homes to conduct a
comprehensive, accurate, standardized, reproducible assessment
of each resident's functional capacity. Under the law, this
assessment must describe the resident's capability of
performing daily life functions and significant impairments in
functional capacity and be based on a uniform minimum data set
specified by the Secretary, or specified by the state with the
Secretary's approval. If specified by a state, it must be
consistent with the minimum data set of core elements, common
definitions, and utilization guidelines.
As a result, the Minimum Data Set (MDS), designed by the
Secretary, consists of a core set of screening, clinical and
functional status elements, including common definitions and
coding categories which form the foundation of the
comprehensive assessment for all residents of long-term care
facilities certified to participate in Medicare or Medicaid.
The items in the MDS standardize communication about resident
problems and conditions within facilities, between facilities,
and between facilities and outside agencies. MDS is designed to
facilitate and standardize resident assessments, which are
structured, problem-oriented frameworks for organizing MDS
information, and examining additional clinically relevant
information about an individual. These resident assessments
help identify social, medical and psychological problems and
form the basis for individualized care planning. MDS is also
used as a data collection tool to classify Medicare and
Medicaid residents into the Resource Utilization Groups (RUG-
III). The RUG-III Classification system is used in the PPS for
nursing facilities, hospital swing bed programs, and in many
State Medicaid case mix payment systems to group residents into
similar resource usage categories for the purposes of
reimbursement.
In general, MDS resident assessments are conducted on the
5th, 14th, 30th, 60th, and 90th days of post-hospital SNF care.
SNFS also conduct other assessments that may be needed to
account for changes in patient care needs.
Senate Bill
This provision would amend section 1819(b) of the Social
Security Act by adding a requirement that on or after October
1, 2006, a SNF would be required to submit a report to the
Secretary on the functional capacity of each resident who is
entitled to SNF benefits at the time of his or her admission
and discharge. This report would be required to be submitted
within 10 days of the admission or discharge as the case may
be.
House Bill
No provision.
Conference Agreement
No provision.
(2) Voluntary submission of skilled nursing facility data
Current Law
As described above, the MDS submitted to CMS by states is
intended to provide information on the quality of care provided
to residents in SNFs. In recent years, CMS has attempted to
make available additional quality measures. CMS posts data on
nursing home's care records from complaint surveys, staffing
levels, and number and types of residents, facility ownership
and 15 quality measure scores on a website entitled Nursing
Home Compare. This site is available to the public and is
intended to assist individuals in choosing a Medicare- and
Medicaid-certified nursing home by state, county, city, zip
code, or by facility name. Additional research into the
development of quality measures, staffing, and best practices
is currently underway through CMS contracts with Quality
Improvement Organizations (QIOs).
Senate Bill
This provision would also require SNFs to submit quality
data for the measurement of health outcomes and other indices
of quality to the Secretary for FY 2009 and each subsequent
fiscal year. Data required would be determined by the Secretary
after conducting a study in consultation with certain
nationally recognized quality measurement entities,
researchers, health care provider organizations, and other
appropriate groups and consult with, and take into account,
recommendations of, the entity that the Secretary has an
arrangement with based on criteria specified in section 6110(e)
of this bill. The Secretary would also be required to consult
with entities that have joined together to develop strategies
for quality measurement and reporting, including the
feasibility of collecting and reporting meaningful data on
quality measures and that involve representatives of health
care providers, health plans, consumers, employers, purchasers,
quality experts, government agencies, and other individuals and
groups that are interested in quality of care.
For FY 2009 and each subsequent year, SNF market basket
percentage changes would be reduced by two percentage points
for SNFs that do not submit this data. Such reductions would
apply only with respect to the fiscal year involved and the
Secretary would be prohibited from taking into account a
reduction in the Federal per diem rate.
The Secretary would be required to establish procedures
for making this data available to the public in a clear and
understandable form. Such procedures would be required to
ensure that a facility has the opportunity to review the data
that is be made public with respect to the facility prior to
such data being made public.
House Bill
No provision.
Conference Agreement
No provision.
Title VI--Medicaid and SCHIP
Subtitle A--Medicaid
Chapter 1--Payment for Prescription Drugs
Federal Upper Payment Limit for Multiple Source Drugs and Other Drug
Payment Provisions (Section 6001 of the Conference Agreement,
Section 6001 of the Senate Bill, and Section 3101 of the House
Bill)
a. Modification of federal upper payment limit for multiple
source drugs; definition of multiple source drugs
Current Law
States set the amounts to pay pharmacies for outpatient
prescription drugs provided to Medicaid enrollees. States pay
those amount to pharmacies and then seek reimbursement of the
federal share of those payments. Federal reimbursements to
states for state spending for certain outpatient prescription
drugs are subject to ceilings called federal upper limits
(FULs). The FUL applies, in the aggregate, to payments for
multiple source drugs--those that have at least three
therapeutically equivalent drug versions. The Centers for
Medicare and Medicaid Services (CMS) calculates the FUL to be
equal to 150 percent of the published price for the least
costly therapeutic equivalent. The published prices that CMS
uses as a basis for calculating the FULs are the lowest of the
average wholesale prices (AWP) for each group of drug
equivalents. Brand name drugs are subject to an upper limit
equal to the amount that pharmacists must pay to acquire the
drug (the acquisition cost) as estimated by the states.
Pharmaceutical manufacturers whose drugs are available to
Medicaid beneficiaries must provide state Medicaid programs
with rebates. Rebates are calculated based on the average
manufacturer's price (AMP) of each product, and for certain
other products, the best price at which the manufacturers sell
the drug. The AMP is defined as the average price paid to a
manufacturer by wholesalers for drugs distributed to retail
pharmacies. Certain federal drug purchases as well as several
other specific kinds of sales are exempt from the AMP and from
the best price calculation. Sales at prices that are
``nominal'' in amount are excluded from the computation of best
price. CMS defines nominal prices to be those that are below 10
percent of the AMP.
Senate Bill
The Senate bill would specify that FULs for multiple
source drugs provided in pharmacies that are not critical
access pharmacies would be calculated to be equal to 115
percent of the weighted AMP for those drugs. The FULs for
multiple source drugs provided in critical access pharmacies
would be calculated to be equal to the lesser of 140 percent of
the AMP or the wholesale acquisition cost (WAC) for the drug.
The bill would establish FULs for single source drugs. For
those single source drugs provided in pharmacies that are not
critical access pharmacies, the FUL would be calculated to be
equal to 105 percent of the AMP. FULs for those single source
drugs provided in critical access retail pharmacies would be
calculated to be equal to the lesser of 108 percent of the AMP
or the WAC for the drug.
Exceptions to the FUL would be for drugs sold during an
initial sales period in which data on sales for the drug are
not sufficiently available from the manufacturer to compute the
AMP or the weighted AMP, and for drugs for which alternatives
would not be as effective. For drugs sold during an initial
sales period, the Senate bill would establish a transitional
upper payment limit to apply only during such period. For a
period not to exceed 2 calendar quarters, the upper limit for
single source drugs would be calculated to be equal to the
wholesale acquisition cost (WAC) for the drug. The bill would
define WAC--the definition would be identical to the current
law Medicare definition. For first non-innovator multiple
source drugs, the upper limit during the transition period
would be equal to the AMP for the single source drug rated as
therapeutically equivalent minus 10 percent. For subsequent
non-innovator multiple source drugs, if the Secretary has
sufficient data to determine AMP, the FUL during the transition
period would be equal to the weighted AMP for the
therapeutically equivalent and bioequivalent form of the drug.
If the Secretary does not have sufficient data, the FUL would
be the AMP for the single source drug that is therapeutically
equivalent and bioequivalent minus 10 percent.
In the case of an innovator multiple source drug that a
prescribing health care provider determines is necessary for
treatment of a condition and that a non-innovator multiple
source drug would not be as effective for the individual or
would have adverse effects for the individual or both, and for
which the provider obtains prior authorization in accordance
with the states' program, the upper payment limit for the
innovator multiple source drug shall be equal to 105 percent of
the AMP for such drug.
The Secretary would be required to update FULs on a
quarterly basis, taking into account the most recent data
collected for the purposes of determining such limits and the
FDA's most recent publication of ``Approved Drug Products with
Therapeutic Equivalence Evaluations.''
The Senate FUL provisions would become effective on the
later of January 1, 2007 or the date that is 6 months after the
close of the first regular session of the State legislature
that begins after the date of enactment.
The Senate bill would establish interim FULs to apply
during calendar year 2006, before the new FULs become
effective. During the period January 1, 2006 through the
effective date of the FUL provisions, the Secretary would apply
the FUL as under current law and regulations except that
instead of limiting federal matching to 150 percent of AWP, it
would be limited to 125 percent of AWP. In the case of covered
outpatient drugs that are marketed as of July 1, 2005 and are
subject to FULs under current law, the Secretary would be
required to use the AWPs, direct prices, and WACs as of that
date to calculate the applicable FUL. New drugs first marketed
between July 1, 2005 and January 1, 2007 would be subject to
this interim FUL calculation.
House Bill
The House bill would specify that the FUL for the
ingredient cost of a multiple source drug would be equal to 120
percent of the volume weighted average RAMP for that drug. The
bill would establish upper limits for single source drugs as
well. The FUL for the ingredient cost of a single source drug
would be equal to the 106 percent of the RAMP for that drug. A
drug product that is a single source drug and that becomes a
multiple source drug would continue to be treated as a single
source drug, with respect to the applicable FUL, until the
Secretary determines that there is sufficient data to compile
the volume weighted average RAMP.
The House bill would provide the Secretary with an option
to develop an alternative methodology setting the FUL based on
the most recently reported retail survey price instead of a
percentage of RAMP or the volume weighted average RAMP. The
House bill would allow the Secretary to use this methodology,
in 2007, for a limited number of covered outpatient drugs,
including both single source and multiple source drugs selected
to be representative of the classes of drugs dispensed under
Medicaid.
The House bill provides exceptions to the FULs for drugs
sold during an initial sales period and for drugs dispensed by
specialty pharmacies. For those drugs sold during an initial
sales period for which data for computation of the RAMP may not
be available, the House bill includes a provision similar to
the Senate provision, except it would apply only to single
source drugs sold during the initial sales period and the
provision does not include any specification forfirst innovator
multiple source drugs. The bill includes a definition of WAC, to be
used during the initial sales period, that is identical to the
definition of WAC in the Senate bill. The House bill would also allow a
state to elect not to apply the new FUL to covered outpatient drugs
dispensed by specialty pharmacies, such as those that dispense only
immunosuppressive drugs, as defined by the Secretary, or drugs
administered by a physician in a physician's office.
The House bill would require the Secretary to update the
FULs at least on a quarterly basis. Otherwise, the provision
regarding FUL updates is identical to the Senate provision.
The effective date for the House FUL provisions would be
on the later of January 1, 2007 or the date that is 6 months
after the close of the first regular session of the state
legislature that begins after the date of enactment of this
Act.
The House bill would provide the Secretary with the
authority to delay the implementation of the new FUL limits for
a period of not more than 1 year, if the Comptrol1er General
finds that the estimated average payment amount to pharmacies
for covered outpatient drugs under the new FULs are below the
average prices paid by pharmacies for acquiring such drugs. If
the Secretary delays the implementation of the FULs then the
Secretary would be required to transmit to Congress, prior to
the termination of the period of delay, a report containing
specific recommendations for legislation to establish a more
equitable payment system.
The House bill would clarify that the FULs would not
affect maximum allowable cost limits as established by states
and rebates would continue to be paid without regard to whether
or not states' payments are subject to such a limit. In
addition, it would prohibit administrative and judicial reviews
of the Secretary's determinations of FULs, RAMPs, volume
weighted average RAMPs including the:
<bullet> assignment of National Drug Codes to billing and
payment classes;
<bullet> Secretary's disclosure to states of AMP, RAMP,
volume weighted average RAMP, and retail survey prices;
<bullet> determinations by the Secretary of covered
outpatient drugs dispensed by specialty pharmacies or
administered in physicians' offices;
<bullet> contracting and calculations under these
provisions; and
<bullet> methods of allocating rebates, chargebacks, or
other price concessions if specified by the Secretary.
The House bill would require the Comptroller General of
the U.S. to provide a report to Congress no later than nine
months after the date of enactment on the appropriateness of
payment levels to pharmacies for dispensing fees under the
Medicaid program and on whether the estimated average payment
amounts to pharmacies for covered outpatient drugs under the
new FUL method are below the average prices paid by pharmacies
for acquiring such drugs. The bill would also require the
Inspector General of HHS to provide a report to Congress, no
later than two years after the date of enactment, on the
appropriateness of using RAMP and retail survey prices rather
than the AMP or other price measures, as the basis for
establishing a FUL for reimbursement of outpatient drugs under
Medicaid.
Conference Agreement
The conference agreement applies FULs to multiple source
drugs for which the FDA has rated 2 or more products to be
therapeutically and pharmaceutically equivalent. For those
drugs, the FUL would be equal to 250 percent of the average
manufacturer price computed without regard to prompt pay
discounts for the lowest cost drug. Effective January 1, 2007.
The agreement modifies the definition of multiple source
drug so that a drug qualifies as a multiple source drug if
there is at least one other drug sold and marketed during the
period that is rated as therapeutically equivalent and
bioequivalent to it.
b. Disclosure of price information to states and the public
Current Law
AMP and best price data are required to be reported by
manufacturers to CMS no later than 30 days after the date of
entering into a rebate agreement and then no later than 30 days
after the last day of each rebate period. Those prices are
required to be kept confidential except for the purpose of
carrying out the requirements of Medicaid rebates, or to permit
the Comptroller General and the Director of the Congressional
Budget Office to review the information.
Senate Bill
The Senate bill would modify the confidentiality
requirements to allow states access to reported price
information and would require the Secretary to make available
to states, beginning with the first quarter of FY2006, the most
recently reported AMP and weighted AMPs. The Secretary would be
required to devise and implement a means of electronic
distribution for these prices to state Medicaid agencies.
House Bill
The House bill would modify the confidentiality
requirements to allow states access to reported price
information. In addition, the bill would require the Secretary
to devise and implement a means for electronic distribution to
state Medicaid agencies, of retail survey prices.
Conference Agreement
The conference agreement would increase the required
reporting of AMP and best prices. AMP would be reported and
calculated on a monthly basis. In addition, the agreement
allows states to have access to reported AMP data for multiple
source drugs for the purpose of carrying out the Medicaid
programs and would require the Secretary to disclose such
information through a website accessible to the public. In
addition, the provision requires the Secretary to provide AMPs
to States on a monthly basis and to update information posted
to the website on at least a quarterly basis.
c. Definition of average manufacturer price
Current Law
The AMP is defined as the average price paid to a
manufacturer by wholesalers for drugs distributed to retail
pharmacies. CMS instructs manufacturers to exclude certain
federal drug purchases as well as free goods from the
computation of AMP. Sales at nominal prices are excluded from
the best price computation. Manufacturers are required to
report, for each rebate period, the AMP for all Medicaid
covered outpatient drug products and the best price for single
source and innovator multiple source drugs to CMS.
Senate Bill
The Senate bill would modify the definition of AMP and
require the modified AMP to be used to calculate the FUL for
single source drugs in addition to rebates, as under current
law. The provision would specify that sales exempted from
inclusion in the determination of best price, nominal price
sales (except for those contingent on purchase requirements or
agreements), and bona fide service fees would be exempted from
the computation of the AMP. Computationof AMP would include
cash and volume discounts; nominal price sales contingent on a purchase
agreement or requirement; free goods; chargebacks or rebates to a
pharmacy (excluding mail order, nursing home pharmacies and pharmacy
benefit managers), or any other direct or indirect discounts; and any
other price concessions which may be based on recommendations of the
Inspector General of HHS. Bona fide user fees would be defined as
expenses for a service actually performed by an entity for a
manufacturer that would have generally been paid for by the
manufacturer at the same rate had these services been performed by
another entity.
The Senate bill would define the weighted AMP, to be used
in calculating the FUL for multiple source drugs, with respect
to the rebate period, as the volume-weighted average of
manufacturers' reported prices for all drug products that are
therapeutically equivalent and bioequivalent. It would be
computed by summing, for all therapeutic equivalents and
bioequivalent forms of the drug, the products of the AMP and
the number of units sold. The sum of those amounts would be
divided by the sum of all units sold for all NDCs assigned to
such products. In cases in which there is a lag in the
reporting of information on rebates and chargebacks so that
adequate data are not available on a timely basis to update the
weighted AMP for a multiple source drug, the manufacturer of
such drug would apply a methodology based on a 12-month rolling
average to estimate costs attributable to rebates and
chargebacks for such drugs. For years after 2006, the Secretary
would be required to establish a uniform methodology to
estimate and apply such costs.
The Senate bill would modify the existing price reporting
requirements so that manufacturers would be required to report
the modified AMP and the weighted AMP to the Secretary of CMS
as well as information and data on any sales made during the
reporting period at a nominal price. The bill would provide the
Secretary with the authority to enter into contracts with
appropriate entities to determine AMP, prices, volume, and
other data necessary to calculate the FUL and payment limits
for covered drugs.
The Senate modifications to the definition of AMP would
become effective as if enacted on July 1, 2005 except for the
provisions related to the exclusion of nominal prices from AMP.
Those provisions would become effective on the later of the
expiration date of a contract in effect on the date of
enactment or October 1, 2006 and would apply to sales made and
rebate periods beginning on or after that date.
House Bill
The House bill would not change AMP. Instead it would
establish a measure of price referred to as RAMP for the
purpose of calculating the FUL for single source drugs. RAMP
would be defined as the average price paid to a manufacturer
for the drug in the U.S. in the quarter by wholesalers for
drugs distributed to retail pharmacies, excluding service fees.
For this purpose, retail pharmacies would be defined to exclude
mail-order only pharmacies and pharmacies at nursing facilities
and homes. Specified items to be excluded from RAMP are similar
to those to be excluded from AMP in the Senate bill except that
the House bill allows the Secretary to define nominal sales,
and free goods contingent on purchase requirements would not be
excluded from RAMP. In addition, service fees that represent
fair market value for a bonafide service provided by the entity
would be excluded from RAMP. Items to be included in RAMP are
also similar to those included in AMP in the Senate bill except
that RAMP includes free goods contingent upon a purchase
requirement; and does not provide for an exception for mail
order, nursing home pharmacies and pharmacy benefit managers.
The volume weighted average RAMP would be defined, for
all drug products in the same multiple source drug billing and
payment code (or other methodology as specified by the
Secretary), as the volume weighted average of the reported
RAMPs. It would be computed by summing the products of the
RAMPs for all product with an NDC code and multiplying by the
total number of units of the drug product sold. Those amounts
would be summed together and divided by the total number of
units sold for all NDC codes assigned to such products.
The House bill would establish reporting requirements of
drug manufacturers. Manufacturers would be required, beginning
after July 1, 2006, to submit the RAMP, the total number of
units required to compute the volume weighted average RAMP, the
WAC for drugs sold during an initial sales period, and
information on nominal price sales. The reporting would be by
National Drug Code (NDC). In addition, the bill would provide
the Secretary with the authority to enter into contracts with
appropriate entities to determine RAMPs and other data
necessary to calculate the FULs and payment limits and would
modify the confidentiality provisions allowing states access to
reported price information.
Conference Agreement
The conference agreement amends the definition of AMP to
exclude customary prompt pay discounts extended to wholesalers
from those amounts. In addition, the agreement modifies the
price reporting requirements so that manufacturers would be
required to submit, not later than 30 days after the last day
of each rebate period, the customary prompt pay discounts
extended to wholesalers in addition to the AMP and best price
reporting required under current law.
The conference agreement requires the Inspector General
of the Department of Health and Human Services (HHS) to, no
later than June 1, 2006, review the requirements for, and the
manner in which AMP is determined and to submit to the
Secretary and Congress any recommendations for changes as
determined to be appropriate.
The agreement also requires the Secretary of HHS to
promulgate a regulation clarifying the requirements for and the
manner in which AMPs are to be determined, taking into
consideration the recommendations of the Inspector General.
d. Exclusion of sales at a nominal price from determination
of best price
Current Law
In addition to the AMP, pharmaceutical manufacturers are
required to report to the Secretary of HHS the ``best price''
at which the manufacturer sells each of its drug products to
certain purchasers for the purpose of calculating the rebate
amounts. Prices that are nominal in amount are excluded from
best price reporting. Nominal prices are defined by CMS to be
those that are below 10 percent of the average manufacturer's
price.
Senate Bill
The Senate bill would exclude, for the purposes of
computing the AMP, sales by a manufacturer of covered
outpatient drugs that are single source, innovator multiple
source drugs, or are authorized generics that are made
available at nominal prices to the following listed entities:
(a) entities eligible for discounted prescription drug prices
under Section 340(B) of the Public Health Service Act; (b)
intermediate care facilities for the mentally retarded, (c)
stateowned or operated nursing facilities, (d) any other
facility or entity that the Secretary determines is a safety
net provider to which sales of such drugs at nominal prices
would be appropriate based on the type of facility, the
services it provides, the patients served and the number of
other such facilities eligible for nominal pricing in the area.
The nominal price limitations would not apply to nominal drug
purchases pursuant to a master agreement for procurement of
drugs on the Federal Supply Schedule. In addition, the bill
would modify manufacturers' price reporting requirements to
include, for calendar quarters beginning on or after January 1,
2006 information on sales made at a nominal price.
House Bill
The House bill would exclude, for the purpose of
computing the RAMP, sales as the Secretary identifies, that are
nominal in amount. In addition, the bill would modify
manufacturers' price reporting requirements to include, for
calendar quarters beginning on or after July 1, 2006
information on sales made at a nominal price.
Conference Agreement
The conference agreement modifies the manufacturer price
reporting requirements so that for calendar quarters beginning
on or after January 1, 2007, manufacturers would be required to
report information on sales of Medicaid covered drugs that are
made at a nominal price.
In addition, the agreement defines the sales are to be
considered nominal for the purpose of reporting nominal price
sales and for computing and reporting the best price. (The
agreement does not amend the AMP vis-a-vis nominal prices.)
Nominal sales are those made by a manufacturer of covered drugs
at nominal prices to (a) entities eligible for discounted
prescription drug prices under Section 340(B) of the Public
Health Service Act; (b) intermediate care facilities for the
mentally retarded, (c) state-owned or operated nursing
facilities, (d) any other facility or entity that the Secretary
determines is a safety net provider to which sales of such
drugs at nominal prices would be appropriate based on the type
of facility, the services it provides, the patients served and
the number of other such facilities eligible for nominal
pricing in the area. The nominal price limitations do not apply
to nominal drug purchases pursuant to a master agreement for
procurement of drugs on the Federal Supply Schedule.
e. Retail survey prices; state payment and utilization
rates; and performance rankings
Current Law
No provision.
Senate Bill
No provision.
House Bill
The House bill would allow the Secretary to contract with
a vendor to obtain retail survey prices for Medicaid covered
outpatient drugs that represent a nationwide average of
pharmacy sales costs for such drugs, net of all discounts and
rebates. Such a contract would be awarded for a term of 2
years.
The Secretary would be required to competitively bid for
an outside vendor with a demonstrated history in surveying and
determining on a representative nationwide basis, retail prices
for ingredient costs of prescription drugs; working with retail
pharmacies, commercial payers, and states in obtaining and
disseminating price information; and collecting and reporting
price information on at least a monthly basis. The contract
would include the terms and conditions specified by the
Secretary and would include a requirement that the vendor
monitor the marketplace and report to the Secretary each time
there is a new covered outpatient drug available nationwide;
update the Secretary no less often than monthly on the retail
survey prices for multiple source drugs and on the computed
upper payment limit for those drugs; to independently confirm
retail survey prices. Information on the retail survey prices
obtained through this process, including information on single
source drugs would be required to be provided to states on an
ongoing and timely basis.
Conference Agreement
The conference agreement includes a provision similar to
the House provision. The agreement allows the Secretary to
contract for services for the determination of retail survey
prices for covered outpatient drugs that represent a nationwide
average of consumer purchase prices for such drugs. The
conference agreement adds a provision allowing such a contract
to include notification of the Secretary when a drug product
that is therapeutically and pharmaceutically equivalent and
bioequivalent becomes generally available. The vendor must
update the Secretary no less often than monthly on the retail
survey prices for covered outpatient drugs. The contract shall
be effective for a term of two years. If the Secretary were to
be notified that such a product has become generally available,
the Secretary would be required to make a determination within
7 days as to whether the drug meets the definition of a
multiple source drug subject to the application of the FUL. The
agreement allows the Secretary to waive those provisions the
Secretary determines are appropriate to waive, of the Federal
Acquisition Regulation, for the efficient implementation of the
contract.
The agreement does not require the contractor to
independently confirm retail survey prices, as in the House
bill, and does not require the Secretary to provide for
electronic distribution to states. On the other hand, the
Secretary would be required to devise and implement a means for
providing access to each state Medicaid agency of collected
price information and to provide information on retail survey
prices, including information on single source drugs, to states
at least monthly.
The agreement requires an annual report from each state
agency. States are required to provide to the Secretary, the
payment rates for all covered drugs, dispensing fees and
utilization of innovator multiple source drugs under the state
Medicaid plan. The Secretary is required to compare, on an
annual basis, for the 50 most widely prescribed drugs, the
national retail sales price data for each state. In addition,
the Secretary is required to submit full information regarding
the annual rankings to Congress. The provision becomes
effective on January 1, 2007.
(f) Miscellaneous amendments
Current Law
States are required to have in place a program of
prospective drug review wherein before each prescription is
filled, the use of the prescription is screened for potential
drug therapy problems. The requirement includes language
clarifying that nothing in the provision is intended to require
a pharmacist to provide this consultation when a beneficiary
refuses such a consultation.
Senate Bill
No provision.
House Bill
No provision.
Conference Agreement
The conference agreement clarifies that the requirement
to provide prospective drug reviews is not intended to require
verifications that consultations were offered or refused.
Effective on the date of enactment.
(g) Effective date
Current Law
No provision.
Senate Bill
No provision.
House Bill
No provision.
Conference Agreement
Unless otherwise specified, the provisions in Section
6001 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.
Collection and Submission of Utilization Data for Certain Physician
Administered Drugs (Section 6002 of the Conference Agreement,
Section 6004 of the Senate Bill, and Section 3102 of the House
Bill)
Current Law
Manufacturers are required to provide rebates to states
for all outpatient prescription drugs with some exceptions.
Outpatient prescription drugs provided through managed care
organizations are explicitly exempted from the rebate
requirement. In addition, outpatient drugs dispensed by a
hospital and billed at no more than the hospital's purchasing
costs are exempt from the rebate requirement. Certain drugs
administered by physicians in their offices or in another
outpatient setting, such as chemotherapy, have often been
excluded from the drug rebate program although there is no
specific statutory exclusion. This is because providers use
Healthcare Common Procedure Coding System (HCPCS) J-codes to
bill the Medicaid program for injectible prescription drugs,
including cancer drugs. The HCPCS J-codes do not, however,
provide States with the specific manufacturer information
necessary to enable them to seek rebates. The NDC number is
necessary for the state to bill manufacturers for rebates. CMS
has requested that states identify Medicaid drugs, specifically
those using HCPCS J-codes, by their NDC codes so that rebates
can be collected for these drugs (Letter to State Medicaid
Director, SMDL #03-002, dated March 14, 2003). CMS has
concluded that because of this coding, many state Medicaid
programs have not collected rebates on these drugs, resulting
in millions of dollars in uncollected rebates.
Senate Bill
As a condition of receiving Medicaid payment, states
would be required to submit, to the Secretary of HHS,
utilization data and coding information for physician
administered outpatient drugs. The Secretary would determine
the drugs for which such reporting information would be
required. The reporting would include J-codes and National Drug
Code numbers. The purpose of the reporting would be to allow
the Secretary to secure rebates for such drugs.
Effective upon enactment.
House Bill
As a condition of receiving Medicaid payment, and in
order to secure rebates for physician administered drugs states
would be required to submit:
--No later than January 1, 2006, utilization data and
coding information for single source drugs or biologicals that
are physician administered outpatient drugs. The Secretary
would determine the drugs for which such reporting information
would be required.
--No later than January 1, 2007, utilization data and
coding information by NDC (unless the Secretary identifies an
alternative coding system) for multiple source drugs.
--No later than January 1, 2008, utilization and coding
information for those drugs on the list of 20 high volume
physician administered drugs.
--No later than January 1, 2007, the Secretary would be
required to publish a list of the 20 physician administered
multiple source drugs that have the highest volume of physician
administered dispensing under Medicaid. The Secretary would be
able to modify such list from year.
The Secretary would be permitted to delay the application
of the reporting requirements in the case of a State to prevent
hardship to States that require additional time to implement
such a reporting system.
Conference Agreement
The agreement includes a provision similar to the House
provision. For drugs administered on or after January 1, 2006,
states are required to provide for the collection and
submission of utilization and coding information for each
Medicaid single source drug that is physician administered. For
drugs administered on or after January 1, 2008, states are
required to provide for the collection and submission of
utilization and coding information for each Medicaid multiple
source drug that is physician administered. Submissions from
states will be based on National Drug Codes unless the
Secretary specified an alternative coding system. All other
provisions are identical to the House bill.
Improved Regulation of Drugs Sold Under a New Drug Application Approved
Under Section 505(c) of the Federal Food, Drug, and Cosmetic
Act (Section 6003 of the Conference Agreement, Section 6003 of
the Senate Bill, and Section 3103 of the House Bill)
Current Law
Prescription drug manufacturers participating in the
Medicaid program are required to report, to the Secretary of
HHS, the AMP for each pharmaceutical product offered under
Medicaid and, for each brand name drug product, the best price
available to any wholesaler, retailer, provider, health
maintenance organization (HMO), nonprofit entity, or
governmental entity. The term `best price' is defined in the
Medicaid statute but only with respect to single source and
innovator multiple source drugs since the best price is part of
the rebate computation for only those drugs. These reported
prices are used to calculate rebates--which are generally
calculated separately for brand name drug products and for
generics.
Sometimes manufacturers produce both a brand name version
of a prescription drug and also sell or license a second
manufacturer (or a subsidiary) to produce some of the same
product to be sold or re-labeled as a generic. These generics,
called ``authorized generics,'' are subject to a separate
rebate calculation. Rebates for brand name products, take into
account the best price reported for each drug. Such price often
does not include the price of the product sold as the
authorized generic.
Current law defines best price with respect only to a
single source drug or innovator multiple source drug, as the
lowest price available from the manufacturer during the rebate
period to any wholesaler, retailer, provider, HMO, nonprofit
entity, or governmental entity within the U.S. excluding prices
charged to specified governmental purchasers. The AMP is
defined as the average price paid to a manufacturer by
wholesalers for drugs distributed to retail pharmacies. Certain
federal drug purchases as well as several other specific kinds
of sales are exempt from the AMP and from the best price
calculation.
Senate Bill
The Senate bill would modify the existing drug price
reporting requirements to include, for single source drugs,
innovator multiple source drugs, authorized generic drugs, and
any other drugs sold under a new drug application approved
(under Section 505c of the Federal Food, Drug and Cosmetic Act,
FFDCA) by FDA, both the average manufacturer's price and the
manufacturer's best price for such drugs. An authorized generic
drug would be defined as a listed drug that has been approved
by the FDA under Section 505( c) of such Act and is marketed,
sold or distributed directly or indirectly to retail class of
trade under a different labeling, packaging (other than
repackaging the listed drug for use in institutions), product
code, labeler code, trade name, or trade mark than the listed
drug.
The definition of best price would be modified so that,
in the case of a manufacturer that approves, allows or
otherwise permits an authorized generic or any other drug to be
sold under an NDA, it is inclusive of the lowest price such
drug is sold to any wholesaler, retailer, provider, HMO,
nonprofit or governmental entity. The definition of AMP would
be modified to include, in the case of a manufacturer that
approves, allows, or otherwise permits an authorized generic or
any other drug of the manufacturer to be sold under an NDA to
be inclusive of the average price paid for such drugs. The
provision would become effective on January 1, 2006.
House Bill
The provision would modify the existing drug price
reporting requirements for pharmaceutical manufacturers. No
later than 30 days after the last day of each rebate period,
manufacturers would be required to report,
<bullet> for each covered outpatient drug, including
those sold under a new drug application approved by the FDA,
the average manufacturer's price for such drugs; and,
<bullet> for single source drugs, innovator multiple
source drugs, and any other drug sold under a new drug
application approved by the FDA, the manufacturers best price
for such drugs during the applicable rebate period.
Not later than 30 days after the date of entering into a
drug rebate agreement, manufacturers would be required to
report on the average manufacturer price for each of the
manufacturer's covered outpatient drugs, including those sold
under a new drug application approved by the FDA.
The definition of best price would be changed to apply,
not only to each single source drug and innovator multiple
source drug, but also to drugs sold under a new drug
application (NDA) approved by (under Section 505c of FFDCA)
FDA. In addition, the definition would be modified so that the
best price, in the case of a manufacturer that approves, allows
or otherwise permits an authorized. generic or any other drug
of the manufacturer to be sold under an NDA, is inclusive of
the lowest price such authorized generic or other drug is sold
to any wholesaler, retailer, provider, HMO, nonprofit or
governmental entity except for those entities excluded under
current law. The provision would modify the current law
definition of AMP to include, in the case of a manufacturer
that approves, allows, or otherwise permits a drug of the
manufacturer to be sold under an NDA to be inclusive of the
average manufacturer price paid for such drugs. The provision
would become effective on January 1, 2006.
Conference Agreement
The agreement includes a provision similar to the Senate
provision. The provision is different from the Senate provision
in that it does not refer to the affected drugs as ``authorized
generics''. Instead, the agreement uses the phrase ``any drug
of the manufacturer sold under a new drug application approved
under section ``505(c) of the Federal Food, Drug, and Cosmetic
Act'' to include authorized generics. The conference agreement
does not include a definition of ``authorized generics.'' In
addition, the definition of best price would be modified so
that it is inclusive, 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 FFDCA, of the lowest price for an
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 U.S. The effective date would be
January 1, 2007.
Children's Hospital Participation in Drug Discount Program (Section
6004 of the Conference Agreement, no provision of the Senate
Bill, and Section 3104 of the House Bill)
Current Law
Section 340(B) of the Public Health Service Act allows
certain health care providers, including community health
centers and disproportionate share hospitals, access to
prescription drug prices that are similar to the prices paid by
Medicaid agencies after being reduced by manufacturer rebates.
Senate Bill
No provision.
House Bill
The House bill would include a provision adding
Children's Hospitals to the list of providers that may have
access to 340(B) discounted prices. The provision would become
effective for drugs purchased on or after the date of
enactment.
Conference Agreement
The conference agreement includes the House provision.
Dispensing Fees (No provision in the Conference Agreement, Section 6001
of the Senate Bill, and Section 3101 of the House Bill)
Current Law
States are allowed to pay pharmacies reasonable
dispensing fees.
Senate Bill
The Senate bill would require states to establish
dispensing fees that are (a) greater for noninnovator multiple
source drugs than those for innovator multiple source drugs
that are therapeutically equivalent and bioequivalent; and (b)
that take into account requirements established by the
Secretary to include reasonable costs associated with a
pharmacist's time checking an individual's coverage or
performing quality assurance; measuring or mixing of adrug;
filing the container; providing the completed prescription; delivery;
special packaging; physical overhead and salaries of pharmacists and
other pharmacy workers; geographic factors that impact costs; patient
counseling; and drugs requiring specialty pharmacy management services.
The Senate bill would require, no later than 15 months
after the date of enactment, with quarterly updates thereafter,
the Secretary to establish of list of covered outpatient drugs
requiring specialty pharmacy care management services. The list
would include only those drugs for which the Secretary
determines that access to the drug would be seriously impaired
without the provision of such care management services.
Specialty pharmacy care management services would be defined as
those services provided in connection with the dispensing of a
covered drug that requires:
<bullet> significant caregiver contact, education about
the disease state, prevention, treatment, drug indications,
benefits, risks, complications, pharmacy counseling and
explanation;
<bullet> patient compliance services including
coordination of provider visits with drug delivery, compliance
with dosing regimen, mailing or telephone call reminders,
compiling compliance data, assistance providers with compliance
programs;
<bullet> tracking services, referral processes, screening
referrals, and tracking patient weight for dosage.
In addition, the Senate bill would require states to
consider, in establishing dispensing fees, the costs associated
with operating a critical access retail pharmacy.
House Bill
The House bill would require states to pay a dispensing
fee for each covered outpatient drug. States would be allowed
to vary dispensing fees to take into account the special
circumstances of pharmacies serving rural and underserved areas
and sole community pharmacies. Dispensing fees for drugs
defined as multiple source drugs under the FUL policy would be
required to be no less than $8 per prescription unit. The
Secretary would be required to define what constitutes a
prescription unit for this purpose.
Conference Agreement
No provision.
Increase in rebates for covered outpatient drugs (No provisions of the
Conference Agreement, Sections 6001, 6002 and 6039D of the
Senate Bill, and no provisions of the House Bill)
Current Law
Basic Medicaid rebates for single source and innovator
multiple source drugs are equal to the greater of 15.1 percent
of the AMP or the difference between the reported AMP and best
price for each drug. In addition, if the prices of single
source or innovator multiple source drugs rise faster than
inflation, additional rebates are due. Rebates for all other
multiple source drugs is equal to 11 percent of the AMP.
Senate Bill
The Senate bill would modify the formulas for
prescription drug rebates under the Medicaid program. Beginning
on January 1, 2006, rebates for single source and innovator
multiple source drugs would be equal to the greater of 18.1
percent of the AMP or the difference between the reported AMP
and the best price for each drug. (Sections 6002(a)(3) and
6001(b)(2).)
Rebates for single source and innovator multiple source
drugs equal to 17.8 percent of the AMP or the difference
between the reported AMP and the best price for each drug.
(Section 6039D.)
Rebates for all other drugs would be equal to 17 percent.
Changes to the rebate formula would begin on January 1, 2006.
House Bill
No provision.
Conference Agreement
No provision.
Extension of rebates to Medicaid MCOs (No provisions of the Conference
Agreement, Sections 6001 and 6038 of the Senate Bill, and no
provisions of the House Bill)
Current Law
Rebates are not required for drugs dispensed by Medicaid
managed care organizations (MCO) when the drugs are paid as
part of the MCO capitation rate, to drugs provided in
hospitals, and sometimes in physicians', or dentists' offices.
Senate Bill
Section 6001(a)(5) of the Senate bill would establish
rebates for drugs dispensed by Medicaid MCOs. States would have
the option of collecting rebates directly from manufacturers or
allowing the MCO to collect the rebates in exchange for a
reduction in the prepaid payment made to the entity for
Medicaid enrollees. The provision would become effective on the
date of enactment and would apply to Medicaid rebate agreements
entered into or renewed on or after that date.
Section 6038 would establish rebates for drugs dispensed
by Medicaid MCOs except for those drugs purchased at discounted
prices under the Public Health Service Act Sec. 340B drug
discount program.
House Bill
No provision.
Conference Agreement
No provision.
Improving Patient Outcomes (No provision of the Conference Agreement,
no provision of the Senate Bill, and Section 3105 of the House
Bill)
Current Law
States may establish a prior authorization program as
long as the system provides a response for a request for
approval within 24 hours, and as long as the program allows for
a dispensing of at least a 72 hour supply of a covered drug in
an emergency situation. Other restrictions may be imposed if
they are necessary to discourage waste, fraud or abuse.
Senate Bill
No provision.
House Bill
The provision would limit the ability of states to place
atypical antipsychotic or antidepressant single source drugs on
prior authorization lists imposing other restrictions unless a
drug use review board has determined that doing so is not
likely to harm patients or increase overall medical costs. It
also would require states to pay for a 30 day supply of such
drugs in cases where a request for authorization is not
responded to within 24 hours after the prescription is
transmitted. The provision would be effective on January 1,
2007.
Conference Agreement
No provision.
Chapter 2--Long-Term Care Under Medicaid
SUBCHAPTER A--REFORM OF ASSET TRANSFER RULES; LENGTHENING LOOK-BACK
PERIOD; CHANGE IN BEGINNING DATE FOR PERIOD OF INELIGIBILITY
Lengthening Look-back Period for all Disposals to 5 years (Section
6011(a) of the Conference Agreement, no provision in the Senate
Bill, and Section 3111(a) of the House Bill)
Current Law
Current law requires states to impose penalties on
individuals who transfer assets (all income and resources of
the individual and of the individual's spouse) for less than
fair market value (an estimate of the value of an asset if sold
at the prevailing price at the time it was actually
transferred). Specifically, the rules require states to delay
Medicaid eligibility for certain Medicaid long-term care
services for individuals applying for care in a nursing home,
and, at state option, for certain people receiving care in
community-based settings, who have transferred assets for less
than fair market value on or after a ``look-back date.'' The
``look-back date'' is 36 months prior to application for
Medicaid for income and most assets disposed of by the
individual, and 60 months in the case of certain trusts.
Ineligibility for Medicaid coverage is limited to only
certain long-term care services, not all services covered under
the program. The services for which the penalty applies include
nursing facility care; services provided in any institution in
which the level of care is equivalent to those provided by a
nursing facility; Section 1915(c) home and community-based
waiver services; home health services; and personal care
furnished in a home or other locations. States may choose to
apply this ineligibility period to other state plan long-term
care services. (They also currently apply to home and community
care for functionally disabled elderly individuals under
section 1929 of the Act. This is an optional coverage group
which operates only in Texas.) In general, states do not extend
the penalty to Medicaid's acute care services.
Senate Bill
No provision.
House Bill
The House bill would amend section 1917(c)(1)(B)(i) of
the Social Security Act to lengthen the look-back date to 5
years, or 60 months, for all income and assets disposed of by
the individual after this Act's date of enactment. For income
and assets disposed of prior to the enactment date, the look
back periods of 36 months for income and assets and 60 months
for certain trusts would apply. The House bill would become
effective on the date of the enactment of this Act.
Conference Agreement
The conference agreement includes the House provision.
Change in Beginning Date for Period of Ineligibility (Section 6011(b)
of the Conference Agreement, no provision in the Senate Bill,
and Section 3111(b) of the House Bill)
Current Law
The period of ineligibility, or penalty period, begins on
the first day of the first month during or after which assets
have been improperly transferred and which does not occur in
any other period of ineligibility. There is no limit to the
length of the penalty period. Some penalties imposed on
applicants who made improper transfers within the look-back
period and prior to the date of Medicaid application may expire
before the date of Medicaid application. For example, an
improper transfer of $100,000 made 2 years prior to Medicaid
application could result in a 20-month penalty period ($100,000
divided by the private rate for a nursing home state in a state
of $5,000). Since the individual applies to Medicaid two years,
or 24 months, after having made the transfer, the penalty has
already expired before the individual applies to Medicaid.
However, if the transfer of $100,000 is made one year prior to
Medicaid application, the penalty of 20 months would not have
expired before the applicant needed Medicaid coverage, but
rather would continue for eight months after Medicaid
application.
Senate Bill
No provision.
House Bill
The House bill would amend section 1917(c)(1)(D) of the
Social Security Act by changing the start date of the
ineligibility period for all transfers made on or after the
date of the enactment, to the first day of a month during or
before which assets have been transferred for less than fair
market value, or the date on which the individual is eligible
for Medicaid and is receiving certain long-term care services,
whichever is later and which does not occur during any period
of ineligibility as a result of an asset transfer policy. For
transfers made prior to this Act's enactment, current law
applies.
Conference Agreement
The conference agreement includes the House provision but
specifies that the start date begins on 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 Medicaid and would otherwise be
receiving institutional level care 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 period of ineligibility as a result of an asset
transfer policy.
Effective Date (Sections 6011(c) of the Conference Agreement, no
provision in the Senate Bill, and Section 3111(c) of the House
Bill)
Current Law
Currently effective.
Senate Bill
No provision.
House Bill
The amendments made by this section would apply to
transfers made on or after the date of enactment.
Conference Agreement
The conference agreement includes the House provision.
Availability of Hardship Waivers (Sections 6011(d) and (e) of the
Conference Agreement, Section 6011(f) of the Senate Bill, and
Sections 3111(d) and (e) of the House Bill)
Current Law
To protect beneficiaries from unintended consequences of
the asset transfer penalties, current law requires states to
establish procedures for not imposing penalties on persons who,
according to criteria established by the Secretary, can show
that a penalty would impose an undue hardship. CMS guidance
specifies that undue hardship can occur when application of the
penalty would deprive the individual of medical care so that
his or her health or life would be endangered, or when it would
deprive the individual of food, clothing, shelter, or other
necessities of life. The guidance explains that undue hardship
does not exist when application of the penalty would merely
cause the individual inconvenience or when it might restrict
his or her lifestyle but would not put him or her at risk of
serious deprivation.
CMS guidance requires that state procedures, at a
minimum, provide for and discuss: (1) a notice to recipients
that an undue hardship exception exists; (2) a timely process
for determining whether an undue hardship waiver win be
granted; and (3) a process under which an adverse determination
can be appealed.
Senate Bill
The Senate bill would amend Section 1917(c) of the Social
Security Act by adding a requirement that states establish
undue hardship procedures (in accordance with standards
specified by the Secretary) that would provide for: (1) a
notice that an undue hardship exception exists before the
imposition of a penalty period to an applicant for Medicaid who
would be subject to such a penalty; (2) a timely process before
the imposition of a penalty determining whether an undue
hardship waiver will be granted for the individual; (3) a
process under which an adverse determination can be appealed;
and (4) an application of criteria that specifies that undue
hardship exists when application of the ineligibility period or
counting of trusts would deprive the individual of medical care
so that the individual's health or life would be endangered or
when it would deprive the individual of food, clothing,
shelter, or other necessities of life.
House Bill
The House bill would amend section 1917(c)(2)(D) of the
Social Security Act to specify the criteria by which an
application for an undue hardship waiver would be approved.
Approval would be subject to a finding that the application of
an ineligibility period would deprive the individual of medical
care such that the individual's health or life would be
endangered, or that the individual would be deprived of food,
clothing, shelter, or other necessities of life. States would
also be required to provide 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.
This provision would also amend section 1917(c)(2) of the
Social Security Act to permit facilities in which
institutionalized individuals reside to file undue hardship
waiver applications on behalf of the individual, with the
institutionalized individual's consent or the consent of his or
her guardian. If the application for undue hardship of nursing
facility residents meets criteria specified by the Secretary,
the state would have the option of providing payments for
nursing facility services to hold the bed for these individuals
at a facility while an application is pending. Such payments
could not be made for longer than 30 days.
Conference Agreement
The conference agreement includes the House provision.
Disclosure and Treatment of Annuities and of Large Transactions
(Section 6012 of the Conference Agreement, Section 6011(d) of
the Senate Bill, and Section 3112 of the House Bill)
Current Law
Current law provides that the term ``trust,'' for
purposes of asset transfers and the look-back period, includes
annuities only to the extent that the Secretary of DHHS defines
them as such. CMS guidance (Transmittal Letter 64) asks states
to determine the ultimate purpose of an annuity in order to
distinguish those that are validly purchased as part of a
retirement plan from those that abusively shelter assets. To be
deemed valid in this respect, the life of the annuity must
coincide with the average number of years of life expectancy
for the individual (according to tables in the transmittal). If
the individual is not reasonably expected to live longer than
the guarantee period of the annuity, the individual will not
receive fair market value for the annuity based on the
projected return; in this case, the annuity is not
``actuarially sound'' and a transfer of assets for less than
fair market value has taken place. The State Medicaid Manual
provides life expectancy tables to be used by states for
determining whether an annuity is actuarially sound.
States and courts interpret this guidance differently. In
Mertz v. Houston, 155 F. Supp.2d 415 (E.D. Pa. 2001), for
example, the court held that if an annuity was actuarially
sound then the intent of the transfer was not relevant under
federal law. In a recent case in Ohio, a state court ruled that
it was proper to look at the intent of asset transfers, even if
the annuity was actuarially sound. (Bateson v. Ohio Dept. of
Job and Family (Ohio Ct. Appl., 12th, No. CA2003-09-093, Nov.
22, 2004).
Medicaid Estate Recovery. Current law requires states to
recover the private assets (e.g., countable and non-countable
assets) of the estates of deceased beneficiaries who have
received certain long-term care services. Recovery of Medicaid
payments may be made only after the death of the individual's
surviving spouse, and only when there is no surviving child
under age 21 and no surviving child who is blind or has a
disability; Estate recovery is limited to the amounts paid by
Medicaid for services received by the individual and is limited
to only certain assets that remain in the estate of the
beneficiary upon his or her death. As a result, estate recovery
is generally applied to a beneficiary's home, if available, and
certain other assets within a beneficiary's estate.
For purposes of these recovery requirements, estates are
defined as all real and personal property and other assets in
an estate as defined in state probate law. At the option of the
state, recoverable assets also may include any other real and
personal property and other assets in which the person has
legal title or interest at the time of death, including assets
conveyed to a survivor, heir, or through assignment through
joint tenancy, tenancy in common, survivorship, life estate,
living trust, or other arrangement. Thus assets such as living
trusts, life insurancepolicies, certain annuities, which may
pass to heirs outside of probate, would be subject to Medicaid recovery
only if a state expanded its definition of ``estate.''
Senate Bill
The Senate bill would amend section 1917(c)(1) of the
Social Security Act to include, in the definition of assets
subject to transfer penalties, an annuity purchased by or on
behalf of an annuitant who has applied for Medicaid-covered
nursing facility or other long-term care services. Annuities
that would not be subject to asset transfer penalties would
include an annuity as defined in section 408(b) or (q) of the
Internal Revenue Code (IRC), or purchased with proceeds from:
(1) an account or trust described in section 408(a)(c)(p) of
the IRC; (2) a simplified employee pension as defined in
section 408(k) of the IRC; or (3) a Roth IRA defined in section
408A of the IRC. Annuities would also be excluded from
penalties if they are irrevocable and non-assignable,
actuarially sound (as determined by actuarial publications of
the Office of the Chief Actuary of the Social Security
Administration), and provide for payments in equal amounts
during the term of the annuity, with no deferral and no balloon
payments.
The Senate bill would amend section 1917(c)(1) of the
Social Security Act by adding that the purchase of an annuity
shall be treated as the disposal of an asset for less than fair
market value unless the state is named as the remainder
beneficiary in the first position for at least the total amount
of Medicaid expenditures paid on behalf of the annuitant or is
named as such a beneficiary in the second position after the
community spouse and such spouse does not dispose of any such
remainder for less than fair market value.
The Senate bill would amend Section 1917(b)(4) of the
Social Security Act to include an annuity in the definition of
estate that is subject to estate recovery unless the annuity
was purchased from a financial institution or other business
that sells annuities in the state as part of its regular
business.
House Bill
The House bill would amend section 1917 of the Social
Security Act by adding a new subsection that would require
individuals, at the initial application or recertification for
certain Medicaid long-term care services, to disclose to the
state the following:
(A) A description of any interest the individual has in
an annuity (or similar financial instrument which provides for
the conversion of a countable asset to a noncountable asset, as
specified by the Secretary), regardless of whether the annuity
is irrevocable or is treated as an asset;
Applications or recertification forms shall include a
statement that designates the state as the remainder
beneficiary under such an annuity or similar financial
instrument, subject to the following provisions:
(A) For institutionalized individuals who receive certain
Medicaid-covered long-term care services, the state would
become the remainder beneficiary in the first position of an
annuity (in which he or she has an interest) for the total
amount paid by Medicaid on behalf of the individual; the state
becomes the remainder beneficiary in the second position when
there is a spouse, minor, or disabled child as a named
beneficiary.
(B) In the case of disclosure concerning an annuity, the
state would notify the annuity's issuer of the state's right as
a preferred remainder beneficiary in the annuity for Medicaid
services furnished to the individual. This provision would not
prevent the issuer from notifying persons with any other
remainder of the state's interest in the remainder.
(C) The state may require an issuer to notify when there
is a change in the amount of income or principal being
withdrawn from the amount being withdrawn at the time of the
most recent disclosure, as specified above. A state would take
such information into account when determining the amount of
the state's obligations for Medicaid or the individual's
eligibility. Such a change in amount would be deemed as a
transfer of an asset for less than fair market value unless the
individual demonstrates, to the state's satisfaction, that the
asset transfer was for fair market value.
The Secretary may provide guidance to states on
categories of arm's length transactions (such as the purchase
of a commercial annuity) that could be generally treated as an
asset transfer for fair market value.
The House bill would not prevent a state from denying
Medicaid eligibility for an individual based on the income or
resources derived from an annuity.
The House bill would apply to transactions (including the
purchase of an annuity) occurring on or after the date of the
enactment.
Conference Agreement
The conference agreement requires individuals, upon
Medicaid application and recertification of eligibility, to
disclose to the state, a description of any interest the
individual or community spouse has in an annuity (or similar
financial instrument, as specified by the Secretary),
regardless of whether the annuity is irrevocable or is treated
as an asset. Such application or recertification form includes
a statement naming the state as the remainder beneficiary. In
the case of disclosure concerning an annuity, the state
notifies the annuity's issuer of the state's right as a
preferred remainder beneficiary for Medicaid assistance
furnished to the individual. Issuers may notify persons with
any other remainder interest of the state's remainder interest.
States may require an issuer to notify the state when
there is a change in the amount of income or principal
withdrawn from the amount withdrawn at the point of Medicaid
application or recertification. States take this information
into account when determining the amount of the state's
financial share of costs or in the individual's eligibility for
Medicaid.
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. States may deny
eligibility for medical assistance for an individual based on
the income or resources derived from an annuity.
The conference agreement amends section 1917(c)(1) of the
Social Security Act by adding that the purchase of an annuity
shall be treated as the disposal of an asset for less than fair
market value unless the state is named as the remainder
beneficiary in the first position for at least the total amount
of Medicaid expenditures paid on behalf of the annuitant or 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.
The conference agreement amends section 1917(c)(1) of the
Social Security Act to include, in the definition of assets
subject to transfer penalties, an annuity purchased by or on
behalf of an annuitant who has applied for a Medicaid-covered
nursing facility or other long-term care services. Annuities
that would not be subject to asset transfer penalties would
include an annuity as defined in subsection (b) and (q) of
section 408 of the Internal Revenue Code (IRC), or purchased
with proceeds from: (1) an account or trust described in
subsections (a), (c), and (p) of section 408 of the IRC; (2) a
simplified employee pension as defined in section 408(k) of the
IRC; or (3) a Roth IRA defined in section 408A of the IRC.
Annuities would also be excluded from penalties if they are
irrevocable and non-assignable, actuarially sound (as
determined byactuarial publications of the Office of the Chief
Actuary of the Social Security Administration), and provide for
payments in equal amounts during the term of the annuity, with no
deferral and no balloon payments.
The amendments apply to transactions, including the
purchase of annuity, occurring on or after the date of this
Act's enactment.
Application of Income-First Rule in Applying Community Spouse's Income
Before Assets in Providing Support of Community Spouse (Section
6013 of the Conference Agreement, no provision in the Senate
Bill, and Section 3113 of the House Bill)
Current Law
Current law includes provisions intended to prevent
impoverishment of a spouse whose husband or wife seeks Medicaid
coverage for long-term care services. These provisions were
added by the Medicare Catastrophic Coverage Act (MCCA) of 1988
to address the situation that would otherwise leave the spouse
not receiving Medicaid (community spouse) with little or no
income or assets when the other spouse is institutionalized or,
at state option, receives Medicaid's home- and community-based
services. Before MCCA, states could consider all of the assets
of the community spouse, as well as the spouse needing Medicaid
coverage, to be available to pay for care for the spouse
needing Medicaid coverage. These rules created hardships for
the spouse living in the community who was forced to spend down
virtually all of the couple's assets to Medicaid eligibility
levels so that the other spouse could qualify for coverage.
MCCA established new rules for the treatment of income and
assets of married couples, allowing the community spouse to
retain higher amounts of income and assets (on top of non-
countable assets such as a house, car, etc.) than allowed under
general Medicaid rules.
Regarding income, current law exempts all of the
community spouse's income (e.g., pension or Social Security)
from being considered available to the other spouse for
purposes of Medicaid eligibility. For community spouses with
more limited income, section 1924(d) of the Social Security Act
provides for the establishment of a minimum monthly maintenance
needs allowance for each community spouse to try to ensure that
the community spouse has sufficient income to meet his or her
basic monthly needs. (The community spouse's minimum monthly
maintenance needs allowance is set at a level that is higher
than the official federal poverty level.) Once income is
attributed to each of the spouses according to their ownership
interest, the community spouse's monthly income is compared
against the minimum monthly maintenance needs allowance. If the
community spouse's monthly income amount is less than the
minimum monthly maintenance needs allowance, the
institutionalized spouse may choose to transfer an amount of
his or her income or assets to make up for the shortfall (i.e.
the difference between the community spouse's monthly income
and the state-specified minimum monthly maintenance needs
allowance). This transfer allows more income to be available to
the community spouse, while Medicaid pays a larger share of the
institutionalized spouse's care costs. Within federal limits,
states set the maximum monthly income level that community
spouses may retain. Federal requirements specify that this
amount may be no greater than $2,377.50 per month, and no less
than $1,561.25 per month in 2005.
Regarding assets, federal law allows states to select the
amount of assets a community spouse may be allowed to retain.
This amount is referred to as the community spouse resource
allowance (CSRA). Federal requirements specify that this amount
may be no greater than $95,100 and no less than $19,020 in
total countable assets in 2005. When determining eligibility,
all assets of the couple are combined, counted, and split in
half, regardless of ownership. If the community spouse's share
of the assets is less than the state-specified maximum, then
the Medicaid beneficiary must transfer his or her share of the
assets to the community spouse until the community spouse's
share reaches the maximum. All other non-exempt assets must be
depleted before the applicant can qualify for Medicaid.
States have some flexibility in the way they apply these
rules at the time in which a person applies through the fair
hearing process to raise his or her minimum maintenance needs
allowance. At this point, a state may decide to allocate more
income or resources from the institutionalized spouse to the
community spouse. In doing so, states have employed two
divergent methods. Under the method used by most states, known
as the ``income-first'' method, the state requires that the
institutionalized spouse's income is first allocated to the
community spouse to enable the community spouse sufficient
income to meet or, if approved by the state, exceed the minimum
monthly maintenance needs allowance; the remainder, if any, is
applied to the institutionalized spouse's cost of care. Under
this method, the assets of an institutionalized spouse (e.g. an
annuity or other income producing asset) cannot be transferred
to the community spouse to generate additional income for the
community spouse unless the income transferred by the
institutionalized spouse would not enable the community
spouse's total monthly income to reach the state-approved
monthly maintenance needs allowance. This method generally
requires a couple to deplete a larger share of their assets
than the resources-first method.
In contrast, under the other method, known as the
``resources-first'' method, the couple's resources can be
protected first for the benefit of the community spouse to the
extent necessary to ensure that the community spouse's total
income, including income generated by the CSRA, meets or, if
approved by the state, exceeds the community spouse's minimum
monthly maintenance needs allowance. Additional income from the
institutionalized spouse that may be, but has not been, made
available for the community spouse is used toward the cost of
care for the institutionalized spouse. This method generally
allows the community-spouse to retain a larger amount of assets
than the income-first method.
On September 7, 2001, the Secretary issued a proposed
rule (Federal Register Vol. 66, No. 174) that would have
codified state practices. The proposed rule would have allowed
states to choose between using either the income-first or
resources-first method when determining whether the community
spouse has sufficient income to meet the minimum monthly
maintenance needs allowance. Under the proposed rule, states
would not have been able to apply different rules to different
individuals, on a case-by-case basis. The Secretary has not
issued a final rule.
Senate Bill
No provision.
House Bill
The House bill would amend section 1924(d) of the Social
Security Act to require that any transfer or allocation made
from an institutionalized spouse to meet the need of a
community spouse for a community spouse's monthly income
allowance be first made from income of the institutionalized
spouse. Only when sufficient income is not available, could
resources of the institutionalized spouse be transferred or
allocated.
The House bill would apply to transfers and allocations
made on or after the date of this Act's enactment by
individuals who become institutionalized spouses on or after
such date.
Conference Agreement
The conference agreement amends section 1924(d), and
therein sections (c) and (e), of the Social Security Act to
require that states consider that all income of the
institutionalized spouse that could be made available to the
community spouse, in accordance with the calculation of the
post-eligibility allocation of income or additional income
allowance allocated at a fair hearing, has been made before
states allocate 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. These amendments apply to transfers and
allocations made on or after the date of this Act's enactment
by individuals who become institutionalized spouses on or after
such date.
Disqualification for Long-Term Care Assistance for Individuals with
Substantial Home Equity (Section 6014 of the Conference
Agreement, no provision in the Senate Bill, and Section 3114 of
the House Bill).
Current Law
Within federal law, states set asset standards that
applicants must meet to qualify for Medicaid coverage. Among
other things, these standards specify a limit on the amount of
countable assets a person may have to qualify, as well as
define which types of assets are counted and not counted. In
general, countable assets cannot exceed $2,000 for an
individual applicant. States generally follow SSI rules for
computing both countable and non-countable assets.
Under Medicaid and SSI rules, the value of an item may be
totally or partially excluded when calculating countable
resources. For example, the entire value of a car, regardless
of its worth, is excluded, but life insurance is counted to the
extent that the cash surrender value exceeds $1,500 (if the
total value of all life insurance policies on any person does
not exceed $1,500, no part of the cash surrender value of such
life insurance will be counted for eligibility purposes).
Current Medicaid and SSI asset counting practices
generally exclude the entire value of an applicant's home. A
home is defined as any property in which an individual (and
spouse, if any) has an ownership interest and which serves as
the individual's principal place of residence. This property
includes the shelter in which an individual resides, the land
on which the shelter is located and related outbuildings. If an
individual (and spouse, if any) moves out of his or her home
without the intent to return, the home becomes a countable
resource because it is no longer the individual's principal
place of residence. However, if an individual leaves his or her
home to live in an institution, the home is still considered to
be the individual's principal place of residence, irrespective
of the individual's intent to return, as long as a spouse or
dependent relative of the eligible individual continues to live
there. The individual's equity in the former home becomes a
countable resource effective with the first day of the month
following the month it is no longer his or her principal place
of residence.
Senate Bill
No provision.
House Bill
The House bill would amend section 1917 of the Social
Security Act to exclude from Medicaid eligibility for nursing
facility or other long-term care services, certain individuals
with an equity interest in their home of greater than $750,000.
(The Secretary would establish a process to waive application
of this provision for demonstrated cases of hardship.) This
amount would be increased, beginning in 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.
Individuals whose spouse, child under age 21, or child
who is blind or disabled (as defined by the section 1614 of the
Social Security Act) lawfully resides in the individual's home
would not be excluded from eligibility. This provision would
not prevent an individual from using a reverse mortgage or home
equity loan to reduce the individual's total equity interest in
the home.
The House bill would apply to individuals who are
determined eligible for Medicaid with respect to nursing
facility or other long-term care services based on an
application filed on or after January 1, 2006.
Conference Agreement
The Conference agreement amends section 1917 of the
Social Security Act to exclude from Medicaid eligibility for
nursing facility or other long-term care services, certain
individuals with an equity interest in their home of greater
than $500,000. A state may elect an amount that exceeds
$500,000, but does not exceed $750,000. These dollar amounts
are increased, beginning in 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.
Individuals whose spouse, child under age 21, or child
who is blind or disabled (as defined by the section 1614 of the
Social Security Act) lawfully resides in the individual's home
would not be excluded from eligibility. This provision would
not prevent an individual from using a reverse mortgage or home
equity loan to reduce the individual's total equity interest in
the home.
The House bill would apply to individuals who are
determined eligible for Medicaid with respect to nursing
facility or other long-term care services based on an
application filed on or after January 1, 2006.
Enforceability of Continuing Care Retirement Communities (CCRC) and
Life Care Community Admission Contracts (Section 6015 of the
Conference Agreement, no provision in the Senate Bill, and
Section 3115 of the House Bill)
Current Law
Continuing Care Retirement Communities (CCRCs) offer a
range of housing and health care services to serve older
persons as they age and as their health care needs change over
time. CCRCs generally offer independent living units, assisted
living, and nursing facility care for persons who can afford to
pay entrance fees and who often reside in such CCRCs throughout
their older years. The services generally offered include
meals, transportation, emergency response systems, and on-site
nursing and physician services. Many also offer home care, maid
services and laundry. CCRCs were developed, in large part, in
response to an interest among many elderly persons to age-in-
place. CCRCs can be either for-profit or not-for-profit CCRCs.
They are paid primarily with private funds, but a number also
accept Medicaid payment for nursing facility services. Although
the majority of CCRC residents do not meet the financial
criteria for Medicaid, some do. Under current law, section
1919(c)(5)(A)(i)(II) of the Social Security Act prohibits
Medicaid-certified nursing facility from requiring that
individuals provide them with oral or written assurance that
they are not eligible for, or will not apply for, Medicaid or
Medicare benefits.
Senate Bill
No provision.
House Bill
The House bill would amend section 1919(c)(5)(A)(i)(II)
of the Social Security Act to provide an exception for state-
licensed, registered, certified, or equivalent continuing care
retirement communities (CCRCs) or a life care community
(including nursing facility services provided as part of that
community) that are certified to accept Medicaid and/or
Medicare payment to allow them to require in their admissions
contracts that residents spend their resources (subject to
Medicaid's rules concerning the resources allowance for
community spouses, described above), declared for the purposes
of admission, on their care before they apply for Medicaid.
The House bill would also amend section 1917 of the
Social Security Act to consider certain entrance fees for CCRCs
or life care communities to be countable resources, and thus
available to the applicant, for purposes of the Medicaid
eligibility determination. For applicants with community
spouses, only that part of the entrance fee that is not
protected for by the community spouse's resource allowance
would be considered in the computation of the spousal share
available to Medicaid. Entrance fees that would be considered a
resource available to the individual would meet the following
criteria:
(A) the individual would have the ability to use the
entrance fee, or the contract provides that the entrance fee
could be used, to pay for care should other resources or income
of the individual be insufficient to pay for care;
(B) the individual would be eligible for a refund of any
remaining entrance fee when the individual dies or terminates
the CCRC or life care community contracts 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
Conference Agreement
The conference agreement includes the House provision
except that a CCRC or life care community cannot retain a
portion of an entrance fee, otherwise made available to spend
on care before applying for Medicaid, on account of a community
spouse's resource allowance.
Additional Reforms of Medicaid Asset Transfer Rules
Requirement to Impose Partial Months of Ineligibility (Section 6016(a)
of the Conference Agreement, Section 6011 (a) of the Senate
Bill, and no provision in the House Bill)
Current Law
Current law requires states to impose penalties on
individuals applying for Medicaid who transfer assets (all
income and resources of the individual and of the individual's
spouse) for less than fair market value (an estimate of the
value of an asset if sold at the prevailing price at the time
it was actually transferred). Specifically, the roles require
states to delay Medicaid eligibility for individuals receiving
care in a nursing home, and, at state option, certain people
receiving care in community-based settings, who have
transferred assets for less than fair market value on or after
a ``look-back date.'' The look-back date'' is 36 months prior
to application for Medicaid for income and most assets disposed
of by the individual, and 60 months in the case of certain
trusts.
The length of the delay is determined by dividing the
total cumulative uncompensated value of all assets transferred
by the individual (or individual's spouse) on or after the
look-back date by the average monthly cost to a private patient
of a nursing facility in the state (or, at the option of the
state, in the community in which the individual is
institutionalized) at the time of application. For example, a
transferred asset worth $60,000, divided by a $5,000 average
monthly private pay rate in a nursing home, results in a 12-
month period of ineligibility for Medicaid long-term care
services. The period of ineligibility begins the first day of
the first month during or after which assets have been
improperly transferred and which does not occur in any other
period of ineligibility. There is no limit to the length of the
penalty period.
When calculating the length of the penalty period when
assets are transferred for less than fair market value, current
law allows states to ``round down,'' or not include in the
ineligibility period the quotient amounts (resulting from the
division of the value of the transferred asset by the average
monthly private pay rate in a nursing home) that are less than
one month. For example, in a state with an average private stay
in a nursing home of $4,100, an ineligibility period for an
improper transfer of $53,000 could be 12.92 months (i.e.
$53,000/$4,100=12.92). Although some states would impose an
ineligibility period of 12 months and 28 days (of a 31 day
month), other states may round down the quotient to an
ineligibility period of 12 months only.
Senate Bill
The Senate bill would amend Section 1917(c)(1)(E) of the
Social Security Act by adding that a state shall not round
down, or otherwise disregard any fractional period of
ineligibility when determining the ineligibility period.
House Bill
No provision.
Conference Agreement
The conference agreement includes the Senate provision.
Authority for States to Accumulate Multiple Transfers into One Penalty
Period (Section 6016(b) of the Conference Agreement, Section
6011(b) of the Senate Bill, and no provision in the House Bill)
Current Law
Current law and additional CMS guidance provides that
when a number of assets are transferred for less than fair
market value on or after the look-back date during the same
month, the penalty period is calculated using the total
cumulative uncompensated value of all assets transferred during
that month by the individual (or individual's spouse) divided
by the average monthly cost to a private patient of a nursing
facility in the state (or, at the option of the state, in the
community in which the individual is institutionalized) at the
time of application. When a number of assets are transferred
during different months, then the rules vary based upon whether
the penalty periods overlap. If a penalty period for each
transfer overlaps with the beginning of a new penalty period,
then states may either add together the value of the
transferred assets and calculate a single penalty period or
impose each penalty period sequentially. If the penalty period
for each transfer does not overlap, then states must treat each
transfer as a separate event and impose each penalty period
starting on the first day of the month in which each transfer
was made.
Senate Bill
The Senate bill would amend Section 1917(c)(1) of the
Social Security Act by adding that for an individual or an
individual's spouse who disposes of multiple assets in more
than one month for less than fair market value on or after the
applicable look-back date, states may determine the penalty
period by treating the total, cumulative uncompensated value of
all assets transferred by the individual (or individual's
spouse) during all months as one transfer. States would be
allowed to begin such penalty periods on the earliest date
which would apply to such transfers.
House Bill
No provision.
Conference Agreement
The conference agreement includes the Senate provision
but refers to the disposal of multiple fractional transfers of
assets instead of multiple assets.
Inclusion of Transfer of Certain Notes and Loans Assets (Section
6016(c) of the Conference Agreement, Section 6011(c) of the
Senate Bill, and no provision in the House Bill)
Current Law
Under current law, states set standards, within federal
parameters, for the amount and type of assets that applicants
may have to qualify for Medicaid. In general, countable assets
cannot exceed $2,000 for an individual. However, not all assets
are counted for eligibility purposes. The standards states set
also include criteria for defining non-countable, or exempt,
assets. States generally follow rules for the Supplemental
Security Income (SSI) program for computing both countable and
non-countable assets.
Under state Medicaid and SSI rules, countable assets may
include, but are not limited to, funds in a savings or money
market account, stocks or other types of equities, accelerated
cash benefits from certain types of insurance policies, and
funds from certain types of trusts that can be obtained by the
individual, the individual's spouse, or anyone acting for the
individual or the individual's spouse, to pay for the
individual's medical or nursing facility care, even if the
funds or payments are not distributed. Under Medicaid and SSI
rules, non-countable assets include an individual's primary
place of residence, one automobile, household goods and
personal effects,\1\ property essential to income-producing
activity, up to $1,500 in burial funds, life insurance policies
whose total face value is not greater than $1,500, and
miscellaneous other items.
---------------------------------------------------------------------------
\1\Under former SSI rules, there were restrictions placed on the
value of the automobile and household goods and personal effects that
could be excluded from countable assets. As of March 9, 2005, one
automobile and all household goods and personal effects are excluded,
regardless of their value. 70 Federal Register 6340, no. 24, Feb. 7,
2005.
---------------------------------------------------------------------------
Other rules defining countable and non-countable assets
apply only in particular states. Their rules are generally
intended to restrict the use of certain financial instruments
(e.g. annuities, promissory notes, or trusts) to protect assets
so that applicants can qualify for Medicaid earlier than they
might otherwise.
Senate Bill
The Senate bill would amend Section 1917(c)(1) of the
Social Security Act to make additional assets subject to the
look-back period, and thus a penalty, if established or
transferred for less than fair market value. Such assets would
include funds used to purchase a promissory note, loan or
mortgage, unless the repayment terms are actuarially sound,
provide for payments to be made in equal amounts during the
term of the loan and with no deferral nor balloon payments, and
prohibit 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 these requirements, their value shall be the
outstanding balance due as of the date of the individual's
application for certain Medicaid long-term care services.
House Bill
No provision.
Conference Agreement
The conference agreement includes the Senate provision.
Inclusion of Transfers to Purchase Life Estates (Section 6016(d) of the
Conference Agreement, Section 6011(e) of the Senate Bill, and
no provision in the House Bill)
Current Law
Current law does not specify whether life estates should
be treated as countable or noncountable assets for purposes of
applying the Medicaid asset transfer rules. In CMS guidance,
however, the Secretary specifies that the establishment of a
life estate constitutes a transfer of assets. The guidance also
explains that a transfer for less than fair market value occurs
whenever the value of the transferred asset is greater than the
value of the rights conferred by the life estate. According to
CMS, a life estate is involved when an individual who owns
property transfers ownership to another individual while
retaining, for the rest of his or her life (or the life of
another person), certain rights to that property. General1y, a
life estate entitles the grantor to possess, use, and obtain
profits from the property as long as he or she lives, even
though actua1 ownership of the property has passed to another
individual.
Senate Bill
The Senate bill would amend Section 1917(c)(l) of the
Social Security Act to add a provision that would redefine the
term `assets,' with respect to the Medicaid asset transfer
rules, to include the purchase of a life estate interest in
another individual's home unless the purchaser resides in the
home for at least one year after the date of purchase.
House Bill
No provision.
Conference Agreement
The conference agreement includes the Senate provision.
Effective Date (Section 6016(e) of the Conference Agreement, Section
6011(g) of the Senate Bill, and no provision in the House Bill)
Current Law
No provision.
Senate Bill
This provision would apply to payment made under the
Medicaid program for calendar quarters beginning on or after
the date of this Act's enactment, without regard to whether or
not final regulations to carry out such amendments have been
promulgated by such date. Amendments made by this provision
would not apply to Medicaid assistance provided for services
before the date of enactment, with respect to assets disposed
of on or before the date of enactment, or with respect to
trusts established on or before the date of enactment.
In the case of a state that the Secretary of Health and
Human Services determines requires state legislation to meet
the additional requirements of this provision, the state
Medicaid plan would not be regarded as failing to comply with
the requirements 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. In the case of a state that has a two-
year legislative. session, each year of the session would be
considered to be a separate regular session of the state
legislature. This amendment applies to provision under section
6011 of the Senate bill.
House Bill
No provision.
Conference Agreement
The conference agreement includes the Senate provision
with respect to amendments made by section 6016.
Subchapter B--Expanded Access to Certain Benefits
Expansion of State Long-Term Care Partnership Program (Section 6021 of
the Conference Agreement, and Section 6012 of the Senate Bill,
and Section 3133 of the House Bill)
Current Law
Under Medicaid's long-term care (LTC) insurance
partnership program, certain persons who have exhausted (or
used at least some of) the benefits of a private long-term care
insurance policy may access Medicaid without meeting the same
means-testing requirements as other groups of Medicaid
eligibles. For these individuals, means-testing requirements
are relaxed at: (1) the time of application to Medicaid; and
(2) the time of the beneficiary's death when Medicaid estate
recovery is generally applied.
In general, states allow individuals to retain no more
than $2,000 in countable assets and exempt certain non-
countable assets such as an individual's primary place of
residence, one automobile, household goods and personal
effects. Under section 1902 of the Social Security Act, a state
may request the Secretary's permission to amend its Medicaid
state plans to allow certain applicants to retain greater
amounts of countable assets than other applicants and still
qualify for Medicaid. Specifically, states that obtain the
Secretary's approval may disregard some or all of the assets of
persons applying for Medicaid who have purchased long-term care
insurance policies.
Section 1917 of the Social Security Act (amended by the
Omnibus Budget Reconciliation Act of 1993, P.L. 103-66) allows
only those states with an approved state plan amendment as of
May 14, 1993 to exempt individuals from Medicaid estate
recovery who apply to Medicaid after exhausting their private
long-term care insurance benefits. By that date, five states
(California, Connecticut, Indiana, Iowa, and New York) had
received CMS approval. All of these states, except Iowa, have
implemented partnership programs.
The four partnership states with active programs have
different models for determining the amount of assets that an
eligible participant may protect. Connecticut and California
use a dollar-for-dollar model, in which the amount of the
assets protected is equivalent to the value of the benefit
package paid by the policy purchased (e.g., $100,000 of
nursing-home or assisted living benefits paid enables that
individual to retain up to $100,000 in assets and still qualify
for Medicaid coverage in that state). New York uses a total
asset protection model in which persons who purchase certain
state-approved policies may qualify for Medicaid without having
to meet any of Medicaid's asset criteria. Indiana uses a hybrid
model, offering both dollar-for-dollar and total asset
protection (Indiana switched from the dollar-for-dollar model
to the hybrid model in 1998).
Federal oversight of long-term care insurance is largely
limited to provisions established by the Health Insurance
Portability and Accountability Act of 1996 (HIPAA, P.L. 104-
191). HIPAA established new rules regarding the tax treatment
of LTC insurance and expenses, and defined the requirements for
a tax-qualified LTC insurance policy. LTC insurance products
are largely regulated by states. Every state and the District
of Columbia has some laws governing LTC insurance. Many of
these laws reflect guidance provided by the National
Association of Insurance Commissioners (NAIC), an organization
of state insurance regulators. This guidance, provided in the
form of a Model Act and Model Regulations for LTC insurance,
addresses a number of areas, including the following.
Model Regulations:
<bullet> Application forms and replacement coverage;
<bullet> Reporting requirements;
<bullet> Filing requirements for marketing;
<bullet> Standards for marketing;
<bullet> Appropriateness of recommended purchase;
<bullet> Standard format outline of coverage; and
<bullet> Requirements to deliver shopper's guide.
Model Act:
<bullet> Outline of coverage;
<bullet> Requirements for certificates under group plans;
<bullet> Policy summary;
<bullet> Accelerated death benefits; and
<bullet> Incontestability period.
HIPPA also includes requirements that tax-qualified
policies comply with consumer protections regarding the
delivery of policies, information on denials of claims, and
disclosure. While many state laws and regulations are based
largely on the NAIC standards, others have adopted only some of
these standards. As a result, there is significant variation in
regulatory practices across states.
National Clearinghouse for Long-Term Care. No provision
in current law requires the establishment of a long-term care
consumer clearinghouse.
In related activities, DHHS has funded some states to
establish state-based consumer-friendly access to information
about long-term care services. In FY2003 and FY2004, the
Centers for Medicare and Medicaid (CMS) and AoA awarded
approximately $19 million in grants to states for the purpose
of assisting their efforts to create a single, coordinated
system of information and access for all persons seeking long
term care to minimize confusion, enhance individual choice, and
support informed decision-making. In FY2005, $15 million was
awarded. A total of 43 states have received grants for this
purpose. Some of the common activities under this grants
program include information and referral, outreach, counseling
about public benefits and long-term care options, and case
management. States' methods for implementing the grant may
vary; some states have established an actual physical location,
and other states have established a statewide clearinghouse
through a toll-tree number or a web-based information site.
In addition, CMS has made available to the public, via
its website, a comparison of Medicare and Medicaid-certified
nursing homes and home health agencies. The information
provides detailed facility and agency information and
characteristics, and contains several measures of quality
(e.g., improvement in mobility). This website does not cover
assisted living facilities, group homes and other residential
facilities that are not nursing facilities; nor does it cover
non-medical, non-certified, home and community-based long-term
care services.
Senate Bill
The Senate bill would exempt an additional group of
persons with certain long-term care insurance plans from
Medicaid estate recovery. This group would include individuals
who received Medicaid under a Qualified State Long-Term Care
Insurance Partnership plan meeting requirements A through G
described below. The provision would also require that existing
LTC insurance partnership programs satisfy requirements B
through G below for LTC insurance policies sold on or after 2
years after enactment.
The Senate bill would define LTC insurance policies as
including, but not be limited to, certificates issued under
group insurance contracts [also would include individual and
other LTC insurance contracts]. The term ``Qualified State LTC
Insurance Partnership,'' would mean a state with an approved
Medicaid State plan amendment meeting the following
requirements:
(A) the disregard of any assets or resources in an amount
equal to the amount of payments made to, or on behalf of, an
individual who is a beneficiary under any LTC insurance policy
sold under such plan amendment;
(B) a state would treat benefits paid under any LTC
partnership insurance policy sold under another states'
Qualified LTC Insurance Partnership'' or a long-term care
insurance policy, the same as the state treats benefits paid
under such a policy under the state's plan amendment;
(C) any long-term care insurance policy sold would be
required to be a tax-qualified policy (Meeting specifications
defined in section 7702B(b) of the Internal Revenue Code of
1986) and meet the consumer protection requirements described
below;
(D) any policy would be required to provide for compound
annual inflation protection of at least 5 percent and asset
protection that does not exceed $250,000. This amount would be
increased, beginning with 2007, from year-to-year based on the
percentage increase in the medical care expenditure category of
the Consumer Price Index for Urban Consumers (United States
city average), published by the Bureau of Labor Statistics
rounded to the nearest $100;
(E) an insurer would be allowed to rescind a LTC
insurance policy in effect for at least 2 years or deny an
otherwise valid LTC insurance claim only upon a showing (1) of
misrepresentation that is material to the acceptance of
coverage; (2) pertains to the claim made; and (3) could not
have been known by the insurer at the time the policy was sold;
(F) any individual who sells these policies would be
required to receive training and demonstrate evidence of an
understanding of the policy and how it relates to other public
and private LTC coverage; and
(G) the issuer would be required to report, to the
Secretary required information, and to report to the state: (1)
the information or data reported to the Secretary, (2) the
information or data required under the minimum reporting
requirements developed under section 103(c)(1)(B) of the
Improving LTC Choices Act of 2005, and (3) such additional
information or data as the state may require. If a LTC
insurance policy is exchanged for another such policy, the
effective date of coverage under the first policy would
determine when coverage first becomes effective.
LTC insurance policies would be required to meet the
following requirements specified in the National Association of
Insurance Commissioner's (NAIC) Long-Term Care Insurance Model
Regulations and Long-Term Care Insurance Model Act (as adopted
as of October 2000). The requirements include the following
topics described below.
Model Regulations:
<bullet> Guaranteed renewal or noncancellability;
<bullet> Prohibitions on limitations and exclusions;
<bullet> Extension of benefits;
<bullet> Continuation or conversion of coverage;
<bullet> Discontinuance and replacement of policies;
<bullet> Unintentional lapse;
<bullet> Disclosure;
<bullet> Required disclosure of rating practices to
consumer;
<bullet> Prohibitions against post-claims underwriting;
<bullet> Minimum standards;
<bullet> Application forms and replacement coverage;
<bullet> Reporting requirements;
<bullet> Filing requirements for marketing;
<bullet> Standards for marketing, including inaccurate
completion of medical histories;
<bullet> Suitability;
<bullet> Prohibition against preexisting conditions and
probationary periods in replacement policies or certificates;
<bullet> Contingent nonforfeiture benefits if the
policyholder declines the offer of a nonforfeiture provision;
<bullet> Standard format outline of coverage; and
<bullet> Deliver shopper's guide.
Model Act:
<bullet> Preexisting conditions;
<bullet> Prior hospitalization;
<bullet> Contingent nonforfeiture benefits;
<bullet> Right of return;
<bullet> Outline of coverage;
<bullet> Requirements for certificates under group plans;
<bullet> Policy summary; and
<bullet> Monthly reports on accelerated death benefits.
These provisions of the Long-Term Care Insurance Model
Regulation and Long-Term Care Insurance Model Act would be
treated as including any other provision the Regulation or Act
necessary to implement the provision. The determination of
whether any requirement under the Model Act or Regulation have
been met would be made by the Secretary.
No later than one year after enactment, the Secretary, in
consultation with the NAIC, issuers of LTC insurance policies,
states with experience with LTC insurance partnership plans,
other states, and representatives of consumers of LTC insurance
policies would be required to develop uniform standards for:
<bullet> Reciprocity. These standards would ensure that
LTC insurance policies issued under the state LTC partnership
(described in this provision) would be portable to other states
with such-LTC insurance partnerships;
<bullet> Minimum reporting requirements. These standards
would be required to specify the data and information that each
issuer of LTC insurance policies under State LTC insurance
partnerships shall report to the state with which it has such a
partnership. The requirements developed would be required to
specify the type and format of the data and information to be
reported and the frequency with which such reports are to be
made. States would be permitted to require an issuer of LTC
insurance policy sold in the state (regardless of whether the
policy is issued under a State LTC insurance partnership) to
require the issuer to report information or data to the state
that is in addition to the information or data required under
these minimum reporting requirements;
<bullet> Suitability. These standards would be for
determining whether a long-term care insurance policy is
appropriate for the needs of an applicant (based on guidance of
the NAIC regarding suitability).
The Secretary, in consultation with those listed above,
would also be required to submit recommendations to Congress
with respect to the following:
<bullet> Incontestability. Recommendations regarding
whether the requirements relating to incontestability for LTC
insurance policies sold under a state partnership program
should be modified based on NAIC guidance;
<bullet> Nonforfeiture. Recommendations regarding whether
requirements relating to nonforfeiture for issuers of LTC
insurance policies under a state LTC insurance partnership
program should be modified to reflect changes in an insured's
financial circumstances;
<bullet> Independent certification for benefits
assessment. Recommendations regarding whether uniform standards
for requiring benefits assessment evaluations to be conducted
by independent entities should be established for issuers of
LTC insurance policies under such a state partnership program,
and if so, what such standards should be;
<bullet> Rating requirements. Recommendations regarding
whether uniform standards for the establishment of, and annual
increases in, premiums for LTC insurance policies sold under
such a state partnership program should be established and if
so, what such standards should be; and
<bullet> Dispute Resolution. Recommendations regarding
whether uniform standards are needed to ensure fair
adjudication of coverage disputes under LTC insurance policies
sold under such a state partnership program and the delivery of
the benefits promised under such policies.
The DHHS Secretary would be required to annually report
to Congress on the LTC insurance partnerships. Such reports
would be required to include analyses of the extent to which
such partnerships expand or limit access of individuals to LTC
and the impact of such partnerships on Federal and State
Medicaid expenditures and federal Medicare expenditures.
Effective Date. These amendments would become effective
on October 1, 2007 and apply to long-term care insurance
policies sold on or after that date.
House Bill
The House bill would amend section 1917(b)(1)(C)(ii) of
the Social Security Act to allow additional groups of
individuals in states with state plan amendments approved after
May 14, 1993 to be exempt from estate recovery requirements if
the amendment provides for a qualified state long-term care
insurance partnership program. The term ``Qualified State LTC
Insurance Partnership,'' would mean a Medicaid State plan
amendment that provides for the disregard of any assets or
resources in the amount equal to the amount of insurance
benefit made to or on behalf of an individual who is a
beneficiary under a long-term care policy (including a
certificate issued under a group insurance contract), 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. (In the case of a long-term care insurance policy
exchanged for another such policy, this requirement would apply
based on the coverage of the first such policy that was
exchanged);
(II) The policy is a qualified long-term care insurance
policy (meeting specifications defined in section 7702B(b) of
the Internal Revenue Code of 1986) issued on or after the first
day of the first calendar quarter in which the plan amendment
was submitted to the Secretary;
(III) If the policy does not provide some level of
inflation protection, the insured was offered, before the
policy was sold, a long-term care insurance policy that
provides some level of inflation protection;
(IV) The state Medicaid agency 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 or demonstrates evidence of an understanding
of such policies and how they relate to other public and
private coverage of long-term care;
(V) The issuer of the policy provides regular reports to
the Secretary that include, in accordance with the Secretary's
regulations (promulgated after consultation with the states),
notification regarding when all benefits provided under the
policy have been paid and the amount of such benefits paid,
when the policy otherwise terminates, and such other
information as the Secretary determines appropriate to the
administration of such partnerships;
(VI) 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.
The Secretary, as appropriate, would provide copies of
the state reports to the state involved and would promote the
education of consumers regarding qualified state long-term care
insurance partnerships. In addition, in consultation with other
appropriate Federal agencies, issuers of long-term care
insurance, and the National Association of Insurance
Commissioners, the Secretary would 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 State, the
Secretary, and other Federal agencies can access.
To permit portability in long-term care insurance
policies purchased under state long-term care insurance
partnerships, the Secretary may develop, in consultation with
the states and the National Association of Insurance
Commissioners, uniform standards for reciprocal recognition of
such policies among states with qualified state long-term care
insurance partnerships.
Effective Date. A state plan amendment that provides for
a qualified state long-term care insurance partnership would be
effective for long-term care insurance policies issued on or
after a date, specified in the amendment, that is not earlier
than the first day of the first calendar quarter in which the
plan amendment was submitted to the Secretary.
Conference Agreement
The conference agreement amends section 1917(b)(l)(C)(ii)
of the Social Security Act to: (1) require that existing
partnership programs not allow consumer protection standards,
as defined in a Medicaid state plan amendment, to be less
stringent (determined by the Secretary) than those applying
under the state plan amendment as of December 31, 2005; and (2)
allows certain individuals in states with state plan amendments
approved after May 14, 1993 to be exempt from estate recovery
requirements if the amendment provides for the disregard of any
assets or resources in the amount equal to the amount of
insurance benefits made to or on behalf of an individual who is
a beneficiary under a long-term care policy (including a
certificate issued under a group insurance contract), 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. In the case of a long-term care insurance policy
exchanged for another such policy, this requirement applies
based on the coverage of the first such policy that was
exchanged;
(II) The policy is a qualified long-term care insurance
policy (meeting specifications defined in section 7702B(b) of
the Internal Revenue Code of 1986) issued not earlier than the
effective date of the Medicaid state plan amendment;
(III) The policy meets the following requirements
specified in the National Association of Insurance
Commissioner's (NAIC) Long-Term Care Insurance Model
Regulations and Long-Term Care Insurance Model Act (as adopted
as of October 2000).
Model Regulations relating to:
<bullet> Guaranteed renewal or noncancellability
(including some sections of the Model Act);
<bullet> Prohibitions on limitations and exclusions;
<bullet> Extension of benefits;
<bullet> Continuation or conversion of coverage;
<bullet> Discontinuance and replacement of policies;
<bullet> Unintentional lapse;
<bullet> Disclosure;
<bullet> Required disclosure of rating practices to
consumer;
<bullet> Prohibitions against post-claims underwriting;
<bullet> Minimum standards;
<bullet> Application forms and replacement coverage;
<bullet> Reporting requirements;
<bullet> Filing requirements for marketing;
<bullet> Standards for marketing, including inaccurate
completion of medical histories;
<bullet> Prohibition against preexisting conditions and
probationary periods in replacement policies or certificates;
<bullet> Contingent nonforfeiture benefits if the
policyholder declines the offer of a nonforfeiture provision;
<bullet> Appropriateness of recommended purchase;
<bullet> Standard format outline of coverage; and
<bullet> Delivery of shopper's guide.
Model Act relating to:
<bullet> Preexisting conditions;
<bullet> Prior hospitalization;
<bullet> Contingent nonforfeiture benefits;
<bullet> Right of return;
<bullet> Outline of coverage;
<bullet> Requirements for certificates under group plans;
<bullet> Policy summary; and
<bullet> Monthly reports on accelerated death benefits.
These provisions of the Long-Term Care Insurance Model
Regulation and Long-Term Care Insurance Model Act are treated
as including any other provision of the Regulation or Act
necessary to implement the provision. Long-term care insurance
policies issued in a state shall be deemed as meeting the
requirements of the model regulation or the Model Act if the
state plan amendment provides that the State insurance
commissioner for the state certifies (in a manner satisfactory
to the Secretary) that the policy meets such requirements.
(IV) If at the date of purchase the purchaser is younger
than age 61, the policy must provide for compound inflation; if
the purchaser is at least age 61 but not older than age 76, the
policy must provide some level of inflation protection; and if
the purchaser is age 76 or older, the policy may, but is not
required to, provide some level of inflation protection.
(V) The state Medicaid agency 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 or 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 that include, in accordance with the Secretary's
regulations (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) notification
regarding when all benefits and their amounts under the policy
have been paid, when the policy otherwise terminates, and other
information that the Secretary determines is appropriate to the
administration of the partnership programs. These regulations
shall specify the data format and information to be reported,
and the frequency with which such reports are to be made. The
Secretary, as appropriate, provides copies of the reports to
the state involved;
(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 consultation with other appropriate Federal agencies,
issuers of long-term care insurance, and 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, the
Secretary develops 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 State, the Secretary, and
other Federal agencies can access.
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
listed above or substantially related those listed above, the
Secretary reviews these changes, determines whether
incorporating such changes into the corresponding provision
would improve qualified state long-term care insurance
partnerships, and, if so, incorporate the changes into the
provision.
States may require issuers of long-term care insurance
policies sold in that state (regardless of whether the policy
is issued under a qualified state long-term care insurance
partnership) to report additional information or data to the
state.
To permit portability in long-term care insurance
policies purchased under state long-term care insurance
partnerships, the Secretary develops no later than January 1,
2007, in consultation with the National Association of
Insurance Commissioners, states with experience with long-term
care insurance partnership plans, other state, 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 which have benefits paid under such
policies will be treated the same by all such states, and
states with such partnerships shall be subject to such
standards unless the state notifies the Secretary of the
State's election to be exempt from such standards.
The Secretary annually reports to Congress on the long-
term care insurance partnerships. Such reports would include
analyses of the extent to which partnership programs expand or
limit access of individuals to long-term care and the impact of
such partnerships on federal and state expenditures under
Medicare and Medicaid. Nothing in this provision shall require
the Secretary to conduct an independent review of each long-
term care insurance policy offered under or in connection with
a state partnership program.
A state plan amendment that provides for a qualified
state long-term care insurance partnership may provide that the
amendment be effective for long-term care insurance policies
issued on or after a date that is not earlier than the first
day of the first calendar quarter in which the plan amendment
was submitted to the Secretary.
With respect to policy exchanges, Conferees expect
existing policy holders will be able to exchange existing
policies for Partnership policies in accordance with policy
provisions and state law after a State's plan amendment is
effective.
National Clearinghouse for Long-Term Care. The Secretary
establishes a National Clearinghouse for Long-Term Care
Information (this may be done through a contract or interagency
agreement). The National Clearinghouse for Long-Term Care: (1)
educates consumers with respect to the availability and
limitations of Medicaid long-term care coverage, including
state Medicaid eligibility and estate recovery requirements;
(2) provides objective information to assist consumers with the
decision-making process for determining whether to purchase
long-term care insurance or to pursue other private market
alternatives for purchasing long-term care; (3) provide contact
information for additional objective sources on planning for
long-term care services needs; and (4) maintain a list of
states with state long-term care insurance partnerships.
In providing information to consumers on long-term care,
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.
Out of any funds in the Treasury not otherwise
appropriated, there is appropriated to carry out for the
National Clearinghouse for Long-Term Care $3 million for each
of fiscal years 2006 through 2010.
Expanded Access to Home and Community-based Services for the Elderly
and Disabled (Section 6022 of the Conference Agreement, no
provision in the Senate Bill, and Section 3131 of the House
Bill)
Current Law
Medicaid home and community-based service (HCBS) waivers
authorized by Section 1915(c) of the Social Security Act allow
states to provide home and community-based services to Medicaid
beneficiaries who would otherwise need the level of care
provided in a nursing facility, intermediate care facility for
persons with mental retardation (ICF-MR) or hospital. HCBS
waiver services can include case management, homemaker/home
health aide services, personal care, psychosocial
rehabilitation, home health, private duty nursing, adult day
care, habilitation, respite care, day treatment, and any other
service requested by the state and approved by the Secretary.
As part of the waiver, states may define the services that will
be offered, target a specific population (e.g., individuals
with developmental disabilities) or a specific geographic
region, and limit the number of waiver participants (resulting
in a waiting list for services in many states).
Approval for a HCBS waiver is contingent on a state
documenting the cost-neutrality of the waiver. Cost-neutrality
is met if, on average, the per person cost under the HCBS
waiver is no higher than the cost if the person were residing
in one of the three types of institutions identified in
Medicaid law, (hospital, nursing facility or ICF-MR). The state
determines which type of institution(s) it will use to make the
cost-neutrality calculation.
A HCBS waiver is generally approved for a 3- or 5-year
time period and is subject to additional oversight from the
Centers for Medicare and Medicaid Services (CMS). In July 2003,
there were 275 HCBS waivers nationwide in all states (except
Arizona which offers HCBS services under a Section 1115
waiver).
Senate Bill
No provision.
House Bill
The House bill would allow states to cover a broad range
of home and community-based services (HCBS) as an optional
benefit under the state Medicaid plan without requiring a
waiver. States would be able to define which HCBS services will
be covered and could include any service authorized by federal
law for existing HCBS waiver programs (as defined in Section
1915(c)(4)(B) of the Social Security Act). Similar to the
existing HCBS waiver program, paying for an individual's room
and board would not be permitted under this new benefit.
To qualify for this benefit the individual must meet the
following criteria: (1) Age 65 or older or disabled (as defined
under the Medicaid state plan) but who is not an individual
with a developmental disability, mental retardation or a
related condition; (2) have had a determination that, but for
the provision of such services, the individual would require
the level of care provided in a hospital or nursing facility
(the cost of which could be reimbursed under Medicaid); and (3)
meet the Medicaid eligibility standards in effect in the state
(which may include an approved Medicaid waiver) as of the date
of enactment of this provision.
A state would be able to cover this benefit under the
Medicaid state plan if certain conditions are met: (1) Any
state waiver or demonstration under Sections 1915 or 1115 of
the Social Security Act with respect to such services for
individuals described in this provision must have expired; and
(2) the state must monitor and report to the Secretary of the
Department of Health and Human Services (DHHS) on a quarterly
basis the enrollment and expenditures for services provided
under this option.
A state would not be required to comply with existing
Medicaid requirements regarding the statewide availability of
the service, the comparability of services, and the income and
resource rules applicable in the community. A state may also
limit the number of individuals who are eligible for services,
establish waiting lists for the receipt of these services, and
limit the amount, duration, and scope of services.
This section would be effective for home and community-
based services furnished on or after October 1, 2006.
Conference Agreement
The conference agreement establishes home and community-
based services as an optional Medicaid benefit that would not
require a waiver and that meets certain other requirements for
individuals whose income does not exceed 150 percent of the
federal poverty level. The scope of services may include any
services permitted under Section 1915(c)(4)(B) of the Social
Security Act which the Secretary has the authority to approve,
and would not include an individual's room and board. The state
may provide this option to individuals without determining that
but for the provision of such services, the person would
require the level of care provided in a hospital, nursing home,
or ICF-MR.
States are required to establish needs-based criteria for
determining an individual's eligibility for the HCBS option
established by this provision, and the specific HCBS the
individual will receive. The State must also establish needs-
based criteria for determining whether an individual requires
the level of care provided in a hospital, nursing home, ICF-MR,
or under a waiver of the state plan, that is more stringent
than the needs-based criteria for the HCBS option established
by this provision.
The state is also required to submit to the Secretary a
projection of the number of individuals to be served under the
option, and may limit the number of individuals who are
eligible for such services.
The needs-based criteria must be based on an assessment
of an individual's support needs and capabilities, and may take
into account the inability of the individual to perform two or
more activities of daily living (ADLs) as defined in the
Internal Revenue Service (IRS) code (i.e., bathing, dressing,
transferring, toileting, eating, and continence), or the need
for significant assistance to perform these activities, and
other risk factors determined to be appropriate by the state.
A state is allowed to modify the needs-based criteria
described above in the event that enrollment of individuals for
the HCBS option exceeds projected enrollment. The state is not
required to seek prior approval of the Secretary if the state
wishes to modify the needs-based criteria, but must give the
Secretary and the public at least 60 days notice of the
proposed modification. If a state modifies the needs-based
criteria, existing recipients of the HCBS optional state plan
services will continue to be eligible to receive those services
for at least 12 months beginning on the date the individual
first received medical assistance for HCBS services. After such
a modification, the state, at a minimum, must apply the level
of care determination for hospitals, nursing facilities, and
ICF-MRs that were in effect prior to the application of more
stringent criteria.
The state is required to use an independent evaluation
for determining an individual's eligibility for HCBS. The
independent evaluation must include an assessment of the needs
of the individual to: (1) determine a necessary level of
services and supports consistent with the individual's physical
and mental capacity; (2) prevent unnecessary or inappropriate
care, and (3) establish an individualized care plan for the
individual.
The assessment must include: (1) an objective evaluation
of an individual's inability or need for significant assistance
to perform two or more activities of daily living as defined in
the Internal Revenue Service code; (2) 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 HCBS; (3) where
appropriate, consultation with the individual's family, spouse,
guardian, or other responsible individual; (4) consultation
with all treating and consulting health and support
professionals caring for the individual; (5) an examination of
the individual's relevant history and 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. The assessment must also evaluate the ability
of the individual or individual's representative to self-direct
the purchase and control of HCBS if he/she elects this option,
and if such an option is covered by the state.
The independent evaluation is to establish a written
individualized plan of care. The plan must be developed in
consultation with the individual, the individual's treating
physician, health care or support professionals, or other
appropriate individuals, and the family caregiver or individual
representative if appropriate; (2) to take into account the
extent, and the need for, any family or other supports for the
individual; (3) to identify the HCBS services to be provided
(or purchase, if the individual elects to self-direct his/her
care); (4) to be reviewed at least annually or as needed when
there is a significant change in circumstances.
States may allow individual (or the individual's
representative) to elect to self-direct the purchase and
control of state plan HCBS. Under the self-directed option, the
individual's needs, preferences, and capabilities are assessed,
and based on the assessment, a service plan isdeveloped jointly
with the individual (or representative) that is approved by the state.
The service plan must include certain activities such as a person-
centered planning process and risk management techniques. States may
also include an individualized budget that identifies a dollar value
for the services and supports under the control and direction of the
individual or his or her representative. States are required to provide
information in the state plan amendment about how an individualized
budget is developed and implemented.
The state must ensure that the provision of home and
community-based services meets federal and state guidelines for
quality assurance. The state must establish standards for the
conduct of the independent evaluation to prevent conflicts of
interest, and must allow for at least annual redetermination of
eligibility and appeals using the process for appeals under the
State Plan.
States may elect to provide for a period of presumptive
eligibility (not to exceed 60 days) for individuals that the
state has reason to believe may be eligible for home and
community-based services. The covered activities include
carrying out the independent evaluation and assessment and, if
eligible, the specific services the individual will receive.
In covering this benefit, a state may elect not to comply
with existing Medicaid requirements related to statewideness
and the income and resource rules applicable in the community,
but only for purposes of providing home and community-based
services in accordance with this benefit. This option should
not be construed as applying to those receiving Medicaid in an
institution as a result of a determination that the individual
requires the level of care in a hospital, nursing facility or
ICF/MR.
Federal Medicaid funding will continue to be available
for individuals who are receiving Medicaid in an institution or
home and community-based setting (under a HCBS waiver program
or Section 1115 demonstration) as of the effective date of the
Medicaid state plan amendment, without regard to whether the
individuals satisfy the more stringent eligibility criteria
established under that paragraph until the individual is
discharged from the institution or waiver program, or no longer
requires such level of care.
The provision requires the Secretary acting through the
Director of the Agency for Healthcare Research and Quality, to
consult with consumers and 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 regarding HCBS offered under Medicaid.
The Secretary is required to use the indicators and
measures to assess HCBS and outcomes, particularly with respect
to a recipient's health and welfare, and the overall system for
RCBS under Medicaid. The Secretary is also required to make
best practices and comparative analyses of system features
available to the public.
This provision will be effective on January 1, 2007.
Optional Choice of Self-directed Personal Assistance Services (Cash and
Counseling) (Section 6023 of the Conference Agreement, and no
provision in the Senate Bill, and Section 3132 of the House
Bill)
Current Law
Under current law, state Medicaid programs offer several
types of long-term care services to individuals who, because of
disability or chronic illness, need assistance with activities
such as eating, bathing, and dressing. Medicaid programs have
the option of covering personal care services and may also
cover a broad set of other services through a home and
community-based services (HCBS) waiver authorized under Section
1915(c) of the Social Security Act. To qualify for a HCBS
waiver, the individual must require the level of care of a
hospital, nursing facility or intermediate care facility for
persons with mental retardation (ICF/MR).
Traditionally, Medicaid personal care and other related
services have been provided to individuals through local public
or private agencies. However, in the last decade, Medicaid
beneficiaries with disabilities or chronic conditions and
federal and state policymakers have been increasing the
discretion that beneficiaries have over key elements of the
service (e.g., what time a personal care worker comes to the
home to help the beneficiary, who provides the service, etc.)
These types of programs are broadly known as ``self-directed''
or ``consumer-directed'' programs. The specific elements that a
Medicaid beneficiary can control vary widely depending upon the
state and the type of service covered. Currently, Medicaid law
allows certain types of self directed programs to be
implemented through the normal Medicaid state plan and HCBS
waiver process. Other types of self-directed programs require a
research and demonstration waiver under Section 1115 of the
Social Security Act.
Under the Medicaid personal care benefit, the Centers for
Medicare and Medicaid Services (CMS) explicitly permits self-
direction of personal care services. The CMS State Medicaid
Manual specifies, ``Medicaid beneficiaries may hire their own
provider, train the provider according to their personal
preferences, supervise and direct the provision of the personal
care services and, if necessary, fire the provider.'' However,
the state Medicaid agency maintains responsibility for
monitoring service delivery and ensuring that qualified
providers are delivering the personal care services. The state
is not permitted to provide Medicaid funds directly to a
consumer to pay for the personal care services.
Generally, CMS policy has been that payments for personal
care (or similar) services delivered by legally responsible
individuals (e.g., the parent of a minor child or a spouse) are
not eligible for federal Medicaid matching funds. However, CMS
has recently amended its policy so that under a HCBS waiver
(though not the Medicaid personal care benefit), states have
the option of paying legally responsible relatives in
extraordinary circumstances when the provision of personal care
services is determined to be necessary to ensure the health and
welfare of the waiver participant and so long as the parent or
spouse meets the Medicaid provider requirements established by
the state.
Senate Bill
No provision.
House Bill
This proposal would aIlow a state to cover, under the
Medicaid program, payment for part or all of the cost of self-
directed personal assistance services (other than room and
board) based on a written plan of care to individuals for whom
there has been a determination that, but for the provision of
such services, the individuals would require and receive
personal care services under Medicaid state plan or home and
community-based services under a HCBS waiver. Self-directed
personal assistance services may not be provided 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.
The Secretary must not approve a state's self-directed
personal assistance services program unless the state assures
that the necessary safeguards have been taken to protect the
health and welfare of individuals receiving these services and
that financial accountability exists for funds expended for
these services.
The state must also evaluate the need for personal care
under the Medicaid state plan or personal services under a HCBS
waiver for individuals who (1) are entitled to Medicaid
personal care under the state plan or receive HCBS waiver
services; (2) may require self-directed personal assistance
services; and (3) may be eligible for self-directed personal
assistance services. If covered by the state and at the choice
of the individual, those who are likely to require personal
care or HCBS waiver services must be informed of the feasible
alternatives in the provision of Medicaid personal care
services or personal assistance services under a HCBS waiver.
The state must also provide a support system that ensures
participants in the 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.
The state will be required to submit an annual report to
the Secretary which includes the number of individuals served
and total expenditures on their behalf, in the aggregate. The
state must also provide an evaluation of overall impact on the
health and welfare of participants compared to non-participants
every three years.
A state may provide self-directed personal assistance
services under the state plan without regard to the Medicaid
requirements for statewideness (under Section 1902(a)(1) of the
Social Security Act), and may limit the population eligible to
receive these services and the number of persons served without
regard to Medicaid requirements regarding comparability
(Section 1902(a)(10)(B) of the Social Security Act).
Under this provision, the term ``self-directed personal
assistance services'' means personal care and related services,
or HCBS waiver services that are provided to an eligible
participant. Individuals participating in such services will be
permitted, within an approved self-directed services plan and
budget, to purchase personal assistance and related services,
and hire, fire, supervise, and manage the individuals providing
such services.
At the election of the state, a participant will be
allowed to (1) choose as a paid service provider, any
individual capable of providing the assigned tasks including
legally liable relatives, and (2) use the individualized 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.
An approved self-directed services plan and budget under
this provision must meet the following requirements: (1) The
participant (or his/her guardian or authorized representative
if appropriate) 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; (2) There is an assessment of
the needs, strengths, and preferences of the participants for
such service; (3) An individual's plan for self-directed
services and supports, which has been developed and approved by
the state, is based on a person-centered assessment process
that builds upon the participant's capacity to engage in
activities that promote community life; respects the
participant's preferences, choices and abilities; and involves
families, and professionals in the planning or delivery of
services or supports as desired or required by the participant.
The budget for self-directed services and supports must
be developed and approved by the state based on the assessment
and plan (described above), 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
In establishing and implementing the self-directed
services plan and budget, appropriate quality assurance and
risk management techniques must be used which recognize the
roles and sharing of responsibilities in obtaining services in
a self-directed manner and which assure the appropriateness of
the plan and the budget, based on the individual's resources
and capabilities.
A state may employ a financial management entity to make
payments to providers, track costs, and make reports under this
program. Payment for the activities of the financial management
entity will be reimbursed at the same rate as other Medicaid
administrative activities (generally federal Medicaid
administrative reimbursement is 50 percent, though certain
activities may be eligible for 75 percent reimbursement).
This provision win apply to apply to services furnished
on or after January 1, 2006.
Conference Agreement
The conference agreement follows the House provision
except that the effective date has been changed to January 1,
2007.
Authority to continue providing certain adult day health care services
or medical adult day care services (No provision in Conference
Agreement, Section 6039B of Senate Bill, and no provision in
the House Bill)
Current Law
Most states currently offer adult day care services to
Medicaid beneficiaries through either the rehabilitation or
clinic benefits of the Medicaid state plan (in about 8 states),
or through a home and community-based (HCBS) waiver under
Section 1915(c) of Medicaid law (in about 44 states through 102
separate HCBS programs).
Senate Bill
The Senate bill would prohibit the Secretary of HHS from
denying federal Medicaid funding or withdrawing federal
approval for adult day health care services or medical adult
day care services under the Medicaid state plan, as defined by
the state and approved by the Secretary on or before 1982.
House Bill
No provision.
Conference Agreement
No provision.
Chapter 3--Eliminating Fraud, Waste, and Abuse in Medicaid
Limitation on Use of Contingency Fee Arrangements (Section 6031 of the
Conference Agreement, Section 6022 of the Senate Bill, and no
provision in the House Bill)
Current Law
Federal law requires each state to designate a single
state agency to administer or supervise the administration of
its Medicaid program. This agency, which is usually part of a
welfare, health, or human resources umbrella agency, will often
contract with other public or private entities (e.g., other
state agencies or departments, consulting firms) to perform
various administrative functions. In some cases, contingency
fee arrangements are used to pay contractors based on Medicaid
dollars saved, recovered, or otherwise obtained for the state
(e.g., a fee equal to 10 percent of third party liability
collections). The federal reimbursement rate for most Medicaid
administrative costs is 50 percent.
In determining the amount of administrative costs--
including contingency fees--that may be eligible for federal
reimbursement, states must comply with a number of federal
statutes and regulations. In general, federal Medicaid law
requires states to use methods of administration that are found
by the Secretary of HHS to be necessary for the proper and
efficient operation of their Medicaid programs. With regard to
contingency fee contracts, guidance issued by the Centers for
Medicare and Medicaid Services (CMS) to its regional offices in
2002 notes that in order to be eligible for federal
reimbursement, contingency fees must: (1) be based on Medicaid
cost avoidance savings or recoveries in which the federal
government shares, (2) be intended to produce Medicaid program
savings, not additional expenditures reported for federal
reimbursement, and (3) not be contingent upon recoveries from
the federal government. CMS guidance also notes that states may
not claim federal reimbursement for contingency fee payments
made to another government unit for Medicaid administrative
activities.
Additional federal guidance is contained in Office of
Management Budget (OMB) Circular A-87, which establishes
principles and standards for determining allowable costs for
states (and other governmental units) under federal grant
programs such as Medicaid. The circular specifies that the cost
of professional and consultant services are allowable when
reasonable in relation to the services rendered and when not
contingent upon recovery of the costs from the federal
government.
Senate Bill
Under the Senate bill, states would not be eligible for
federal reimbursement of amounts expended in connection with a
contract or agreement (other than a Medicaid managed care
contract) between the state Medicaid agency (or any state or
local agency that administers a portion of the Medicaid
program) and a consultant or other contractor if the terms of
compensation for the consultant or other contractor do not meet
standards established by the Inspector General (IG) of HHS.
Such standards would be designed by the IG to ensure
prudent purchasing and program integrity with respect to
federal funds. The IG would annually review the standards and
revise them as necessary to promptly address new compensation
arrangements that may present a risk to Medicaid program
integrity. The standards would be issued no later than six
months after enactment of the provision.
The provision would be effective January 1, 2007, except
that in the case of a state which the Secretary of HHS
determines that state legislation is required for compliance,
the state would not be regarded as failing to comply solely on
the basis of its failure to meet the 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 the bill.
House Bill
No provision.
Conference Agreement
The conference agreement follows the House bill.
Encouraging the Enactment of State False Claims Acts (Section 6032 of
the Conference Agreement, Section 6023 of the Senate Bill, and
no provision in the House Bill)
Current Law
Under the federal False Claims Act, anyone who knowingly
submits a false claim to the federal government is liable for
damages up to three times the amount of the government's
damages plus mandatory penalties of $5,500 to $11,000 for each
false claim submitted. Under qui tam (whistleblower) provisions
of the act, private citizens with knowledge of potential
violations (``relators'') may file suit on behalf of the
government and are entitled to receive a share of the proceeds
of the action or settlement of the claim (ranging from 15
percent to 30 percent, depending on whether or not the
government elects to participate in the case).
States may have a variety of laws in place to facilitate
prosecution of Medicaid fraud, and some have established their
own versions of a false claims act. With limited exceptions, a
state must repay the federal share (generally determined by the
federal medical assistance percentage, or FMAP) of any provider
overpayment within 60 days of discovering the overpayment,
regardless of whether or not the state has recovered the
overpayment.
Senate Bill
Under the Senate bill, if a state has in effect a law
relating to false or fraudulent claims that meets certain
requirements (described below), the federal medical assistance
percentage, with respect to any amounts recovered under a state
action brought under such a law, would be decreased by 10
percentage points.
The state law relating to false and fraudulent claims
must be determined by the Inspector General of HHS, in
consultation with the Attorney General, to: (1) establish
liability to the statefor false or fraudulent claims described
in the federal False Claims Act, with respect to Medicaid expenditures,
(2) contain provisions that are at least as effective in rewarding and
facilitating qui tam actions as those in the federal False Claims Act,
(3) contain a requirement for filing an action under seal for 60 days
with review by the state Attorney General, (4) contain a civil penalty
that is not less than the amount authorized by the federal False Claims
Act, (5) contain provisions that are designed to prevent a windfall
recovery for a qui tam relator that files a federal and state action
for the same false or fraudulent claim.
The provision would be effective January 1, 2007.
House Bill
No provision.
Conference Agreement
The conference agreement follows the Senate bill, but
excludes language regarding windfall recoveries for qui tam
relators.
Employee Education About False Claims Recovery (Section 6033 of the
Conference Agreement, Section 6024 of the Senate Bill, and no
provision in the House Bill).
Current Law
No provision.
Senate Bill
Under the Senate bill, a state would be required to
provide that any entity that receives annual Medicaid payments
of at least $1 million, as a condition of receiving such
payments, must: (1) establish written policies, procedures, and
protocols for training of all employees of the entity, and of
any contractor or agent of the entity, that includes a detailed
discussion of the federal False Claims Act, federal
administrative remedies for false claims and statements, 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, (2) include in such written materials detailed
provisions and training regarding the entity's policies and
procedures for detecting and preventing fraud, waste, and
abuse, (3) include in any employee handbook for the entity a
specific discussion of such laws, the rights of employees to be
protected as whistleblowers, and the entity's policies and
procedures for detecting and preventing fraud, waste, and
abuse, and (4) require mandatory training for all employees of
the entity and of any contractor or agent of the entity, at the
time of hiring, with respect to such laws and the entity's
policies and procedures for detecting fraud, waste, and abuse.
The provision would be effective January 1, 2007, except
that in the case of a state which the Secretary of HHS
determines that state legislation is required for compliance,
the state would not be regarded as failing to comply solely on
the basis of its failure to meet the 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 the bill.
House Bill
No provision.
Conference Agreement
The conference agreement follows the Senate bill, but
applies only to entities receiving annual Medicaid payments of
at least $5 million and does not require the establishment of
protocols and procedures for training of employees (i.e., only
written policies are required).
Prohibition on Restocking and Double Billing of Prescription Drugs
(Section 6034 of the Conference Agreement, and Section 6025 of
the Senate Bill, and no provision in the House Bill)
Current Law
No provision.
Senate Bill
The Senate bill would prohibit federal matching payments
for the ingredient cost of a covered outpatient drug for which
the pharmacy has already received payment (other than a
reasonable re-stocking fee). It would become effective on the
first day of the first fiscal quarter beginning after
enactment.
House Bill
No provision.
Conference Agreement
The conference agreement includes the Senate provision.
Medicaid Integrity Program (Section 6035 of the Conference Agreement,
Section 6026 of the Senate Bill, and no provision in the House
Bill)
Current Law
States and the federal government share in the
responsibility for safeguarding Medicaid program integrity.
States must comply with federal requirements designed to ensure
that Medicaid funds are properly spent (or recovered, when
necessary). The Centers for Medicare and Medicaid Services
(CMS) is the primary federal agency responsible for providing
oversight of states' activities and facilitating their program
integrity efforts. The HHS Office of Inspector General (OIG)
also plays a role in Medicaid fraud and abuse detection and
prevention effortsthrough its investigations, audits,
evaluations, issuances of program recommendations, and other
activities.
As part of its program integrity activities, CMS operates
a Medicare-Medicaid (MediMedi) data match project that analyzes
claims data from both programs together to detect aberrant
patterns that may not be evident when billings are viewed in
isolation (e.g., providers submitting claims to both programs
for procedures that add up to more than 24 hours of patient
care in a single day). The Medi-Medi project began with one
state in 2001, and was subsequently expanded to include eight
others. It is primarily supported by ``wedge'' funds from the
Health Care Fraud and Abuse Control (HCFAC) account within the
federal Hospital Insurance (Medicare Part A) trust fund. HCFAC
wedge funds are divided between the Department of Justice, the
HHS Office of Inspector General, CMS, and other HHS agencies.
The HCFAC account also funds the Medicare Integrity Program and
activities of the Federal Bureau of Investigation related to
health care fraud. Annual minimum and maximum HCFAC
appropriations are specified in statute.
Senate Bill
The Senate bill would establish a Medicaid Integrity
Program under title XIX. The Secretary of HHS would enter into
contracts with eligible entities to carry out the program's
activities, which would include: (1) review of the actions of
individuals or entities furnishing items or services for which
a Medicaid payment may be made, (2) audit of claims for payment
for items or services furnished or for administrative services
rendered, (3) identification and recovery of overpayments to
individuals or entities receiving federal funds under Medicaid,
(4) education of service providers, managed care entities,
beneficiaries, and other individuals with respect to payment
integrity and benefit quality assurance issues.
An entity would be eligible to enter into a contract to
carry out Medicaid Integrity Program activities if it meets
eligibility and contracting requirements similar to those under
the Medicare Integrity Program. Beginning in FY2006 and every
five years, the Secretary of HHS--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 HHS, and state officials with
responsibility for controlling provider fraud and abuse under
Medicaid--would establish a comprehensive plan for ensuring
Medicaid program integrity by combating fraud, waste, and
abuse.
Appropriations for the Medicaid Integrity Program would
total $50 million in FY2006, $49 million in each of FY2007 and
FY2008, $74 million in each of FY2009 and FY2010, and $75
million in FY2011 and each fiscal year thereafter. No later
than 180 days after the end of each fiscal year (beginning with
FY2006), the Secretary of HHS would submit a report to Congress
that identifies the use and effectiveness of the use of such
funds.
A Medicaid Chief Financial Officer (CFO) and Medicaid
Program Integrity Oversight Board would also be established
under title XIX. The Medicaid CFO would be appointed by and
would report directly to the Administrator of CMS. The duties
and authority of the Medicaid CFO would be comparable to those
of other CFOs with respect to the management and expenditure of
federal funds under federal health care programs. A Medicaid
Program Integrity Oversight Board would also be established by
the Secretary of HHS. The duties and authority of the board
would be comparable to those of the Medicare Contractor
Oversight Board, and would include responsibility for
identifying vulnerabilities and developing strategies for
minimizing integrity risks to state Medicaid programs.
States would be required to comply with any requirements
determined by the Secretary of HHS to be necessary for carrying
out the Medicaid Integrity Program, or the duties of the
Medicaid CFO and the Medicaid Program Integrity Oversight
Board.
In each of fiscal years 2006 through 2010, $25 million
would be appropriated for Medicaid activities of the HHS Office
of Inspector General (in addition to any other amounts
appropriated or made available for its Medicaid activities, to
remain available until expended). No later than 180 days after
the end of each fiscal year (beginning with FY2006), the
Inspector General of HHS would submit a report to Congress that
identifies the use and effectiveness of the use of such funds.
The Secretary of HHS would significantly increase the
number of full-time equivalent CMS employees whose duties
consist solely of ensuring the integrity of the Medicaid
program.
House Bill
No provision.
Conference Agreement
The conference agreement generally follows the Senate
bill, but excludes recovery of overpayments from the list of
Medicaid Integrity Program activities and does not establish a
Medicaid CFO or oversight board. It appropriates $5 million in
FY2006, $50 million in each of FY2007 and FY2008, and $75
million in each fiscal year thereafter for Medicaid Integrity
Program activities.
The conference agreement also establishes a national
expansion of the Medicare-Medicaid data match project (referred
to as the Medi-Medi Program) as a required activity of the
Medicare Integrity Program under Title XVIII of the Social
Security Act. The Secretary of HHS shall enter into contracts
with eligible entities to ensure that the Medi-Medi Program is
conducted for the purpose of: (1) identifying program
vulnerabilities in Medicare and Medicaid through the use of
computer algorithms to look for payment anomalies, (2) working
with states, the Attorney General, and the Inspector General of
HHS to coordinate appropriate actions to protect Medicare and
Medicaid expenditures, and (3) increasing the effectiveness and
efficiency of both programs through cost avoidance, savings,
and recoupment of fraudulent, wasteful, or abuse expenditures.
At least quarterly, 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
HHS, and the states.
In addition to HCFAC appropriations for the Medicare
Integrity Program (which have a statutory floor and ceiling),
the Medi-Medi Program would receive $12 million in FY2006, $24
million in FY2007, $36 million in FY2008, $48 million in
FY2009, and $60 million in FY2010 and each fiscal year
thereafter.
Enhancing Third Party Identification and Payment (Section 6036 of the
Conference Agreement, Section 6021 of the Senate Bill, and
Section 3144 of the House Bill)
Current Law
Third-party liability (TPL) refers to the legal
obligation of third parties--individuals, entities, or
programs--to pay all or part of the expenditures for medical
assistance furnished under a Medicaid state plan. In general,
federal law requires Medicaid to be the payor of last resort,
meaning that all other available third parties must meet their
legal obligation to pay claims before the Medicaid program pays
for the care of an individual. Examples of third parties which
may be liable to pay for services include employment-related
health insurance, court-ordered medical support (including
health insurance) from noncustodial parents, workers'
compensation, long-term care insurance, and other state and
federal programs (with certain exceptions, such as the Indian
Health Service).
States are required to take all reasonable measures to
ascertain the legal liability of third parties to pay for care
and services available under the state Medicaid plan. To this
end, they must: (1) collect health insurance information from
individuals at the time of initial application for Medicaid and
during any subsequent redeterminations of eligibility, (2)
match data provided by Medicaid applicants and recipients to
certain files maintained by government agencies (e.g., state
wage and income, Social Security Administration wage and
earnings, state workers' compensation, state motor vehicle
accident reports), (3) identify claims with diagnosis codes
that would indicate trauma-related injury for which a third
party may be liable for payment, and (4) follow up on TPL leads
identified through these information-gathering activities.
If the state has determined that probable third party
liability exists at the time a claim for reimbursement is
filed, it generally must reject the claim and return it to the
provider for a determination of the amount of third party
liability (referred to as ``cost avoidance''). If probable
liability has not been established or the third party is not
available to pay the individual's medical expenses, the state
must pay the claim and then attempt to recover the amount paid
(referred to as ``pay and chase''). States are generally
required to cost avoid claims unless they have an approved
waiver that allows them to use the pay and chase method.
As a condition of eligibility for Medicaid, individuals
are required to assign to the state Medicaid agency their
rights to medical support and payment for medical care from any
third party. This assignment of rights facilitates TPL recovery
by allowing the state to collect, on behalf of Medicaid
enrollees, amounts owed by third parties for claims paid by
Medicaid.
Senate Bill
The Senate bill would amend the list of third parties
named in Section 1902(a)(25) of the Social Security Act for
which states must take all reasonable measures to ascertain the
legal liability to include: (1) self-insured plans, (2)
pharmacy benefit managers, and (3) other parties that are
legally responsible (by statute, contract, or agreement) for
payment of a claim for a health care item or service. It would
also amend that section to include these entities in the list
of health insurers that states must prohibit from taking an
individual's Medicaid status into account when enrolling the
individual or making payments for benefits to or on behalf of
the individual.
In addition, it would require a state to provide
assurances satisfactory to the Secretary of HHS that it has
laws in effect requiring health insurers (including parties
that are legally responsible for payment of a claim for a
health care item or service), as a condition of doing business
in the state, to: (1) provide, upon request of the state,
eligibility and claims payment data with respect to individuals
who are eligible for or receiving Medicaid, (2) accept an
individual's or other entity's assignment of rights (i.e.,
rights to payment from the parties) to the state, (3) respond
to any inquiry from the state regarding a claim for payment for
any health care item or service submitted not later than three
years after the date such item or service was provided, and (4)
agree not to deny a claim submitted by the state solely on the
basis of the date of submission of the claim.
The provision would be effective January 1, 2006, except
that in the case of a state which the Secretary of HHS
determines that state legislation is required for compliance,
the state would not be regarded as failing to comply solely on
the basis of its failure to meet the 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 the bill.
House Bill
The House bill is similar to the Senate bill.
Conference Agreement
The conference agreement generally follows the Senate and
House bills, but substitutes the term ``managed care
organization'' for ``health maintenance organization'' in
Section 1902(a)(25) of the Social Security Act and specifies
that states must require parties legally responsible for
payment of a claim to provide, upon request of the state,
information to determine during what period an individual or
their spouses and 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 of HHS.
Chapter 4--Flexibility in Cost Sharing and Benefits
State Option for Alternative Medicaid Premiums and Cost Sharing
(Section 6041 of the Conference Agreement, no provision in the
Senate Bill, and Sections 3121 and 3126 of the House Bill)
Current Law
With some exceptions, premiums and enrollment fees are
generally prohibited under Medicaid. When applicab1e, nominal
amounts for such charges are between $1 and $19 depending on
family income. States are allowed to establish nominal service-
related cost-sharing requirements that are generally between
$0.50 and $3, depending on the cost of the service provided.
The regulations that specify nominal premium and service-
related cost-sharing amounts were published and amended in the
late 1970s and the early 1980s. These amounts are not adjusted
by any factor. Specific services and groups are exempted from
such cost-sharing. Waiver authority is required to change these
rules.
Under certain circumstances, families qualifying for
transitional Medicaid, pregnant women and infants with income
over 150 percent FPL, medically needy groups, and workers with
disabilities may be charged premiums for Medicaid coverage.
All service-related cost-sharing is prohibited for: (1)
children under 18 years of age; (2) pregnant women for any
services that relate to the pregnancy or to any other medical
condition which may complicate pregnancy; (3) services
furnished to individuals who are inpatients in ahospital, or
are residing in a long term care facility or in another medical
institution if the individual is required to spend most of their income
for medical care; (4) services furnished to individuals receiving
hospice care; (5) emergency services; and (6) family planning services
and supplies. For most other beneficiaries and services, states may
impose nominal service-related cost-sharing (described above). For
workers with disabilities, service-related cost-sharing may be required
that exceeds nominal amounts as long as they are set on a sliding scale
based on income.
Under the state Medicaid plan, providers must not deny
care or services to Medicaid beneficiaries due to the
individual's inability to pay a cost-sharing charge. However,
this requirement does not eliminate the beneficiary's liability
for payment of such charges. For certain groups of pregnant
women and infants for which monthly premiums may be charged,
states must not require prepayment and must not terminate
Medicaid eligibility for failure to pay such premiums until
such failure continues for at least 60 days. States may waive
those premiums when such payments would cause undue hardship.
States may offer Medicaid to certain uninsured women who
are under age 65, and are in need of treatment for breast or
cervical cancer based on screening services provided by an
early detection program run by the CDC. This group has access
to the same Medicaid services offered to the categorically
needy in a given state, and are subject to Medicaid's nominal
cost-sharing rules.
Senate Bill
No provision.
House Bill
The House Bill would allow states to impose premiums and
cost-sharing for any group of individuals for any type of
service, through Medicaid state plan amendments (rather than
waivers), subject to specific restrictions. Premiums and cost-
sharing imposed under this option would be allowed to vary
among classes or groups of individuals, or types of service,
including through the use of tiered cost-sharing for
prescription drugs. Generally, the total amount of annual cost-
sharing for all individuals in a family would be capped at 5
percent of family income for all families regardless of income.
Individuals in families with income below 100 percent FPL would
not be subject to premiums but could be subject to nominal
service-related cost-sharing. Individuals in families with
income exceeding 100 percent FPL may be subject to premiums and
higher than nominal cost-sharing amounts.
Premiums would not be permitted for: (1) mandatory groups
of children under 18, including individuals receiving adoption
or foster care assistance under Title IV-E regardless of age;
(2) pregnant women; (3) terminally ill persons receiving
Medicaid hospice care; (4) individuals in institutions who are
required to spend for costs of care all but a minimal amount of
their income for personal needs. States may exempt additional
groups from premiums. '
Service related cost-sharing would not be permitted for:
(1) services provided to mandatory groups of children under 18,
including individuals receiving adoption or foster care
assistance under Title IV-E regardless of age; (2) preventive
services provided to children under 18 regardless of family
income; (3) services provided to pregnant women that relate to
pregnancy or to other medical conditions that may complicate
pregnancy; (4) services provided to individuals receiving
Medicaid hospice services; (5) services provided to individuals
in institutions who are required to spend for costs of care all
but a minimal amount of their income for personal needs; (6)
emergency services; and (7) family planning services and
supplies. States may exempt additional individuals or services
from service-related cost-sharing.
In applying limits on cost-sharing amounts under this
option that states may impose on individuals under 100 percent
FPL, beginning with 2006, the Secretary would be required to
increase nominal amounts of service-related cost-sharing by the
annual percentage increase in the medical care component of the
consumer price index (CPI) for all urban consumers (U.S. city
average), as rounded up in an appropriate manner.
The bill further specifies that these provisions would
not prevent states from further limiting cost-sharing, affect
the authority of the Secretary to waive limits on premiums or
cost-sharing, nor affect waivers in effect before the date of
enactment.
The bill would allow states to condition the provision of
medical assistance on the payment of premiums, and to terminate
Medicaid eligibility on the basis of failure to pay a premium
if that failure continues for at least 60 days. States may
apply this provision to some or all groups of beneficiaries,
and may waive premium payments in cases where such payments
would be an undue hardship. In addition, the provision would
allow states to permit providers participating in Medicaid to
require a Medicaid beneficiary to pay authorized cost-sharing
as a condition for the provision of care or services. Providers
would also be allowed to reduce or waive cost-sharing amounts.
The Government Accountability Office (GAO) would be
required to conduct a study of the impact of premiums and cost-
sharing under Medicaid on access to and utilization of
services. The report would be required to be submitted to
Congress no later than January 1, 2008.
These provisions would apply to cost-sharing for items
and services furnished on or after January 1, 2006. The House
bill also specifies that none of the proposed cost-sharing (or
benefit) provisions described above would apply to women who
qualify for Medicaid under the breast and cervical cancer
eligibility group.
Conference Agreement
The conference agreement includes the House bill, with
modifications. It clarifies that rules with respect to optional
cost sharing for prescribed drugs (see below) are separate from
the rules for other optional cost sharing. Explicit cost
sharing limits for individuals in families with income under
100 percent FPL are dropped in the conference agreement. For
individuals in families with income between 100 and 150 percent
FPL: (1) no premiums may be imposed, (2) cost sharing for any
item or service cannot exceed 10 percent of the cost of the
item or service, and (3) the total aggregate amount of all
cost-sharing (including cost sharing for prescribed drugs and
emergency room copayments for non-emergency care; see below)
cannot exceed 5 percent of family income as applied on a
quarterly or monthly basis as specified by the state. For
individuals in families with income above 150 percent FPL: (1)
the total aggregate amount of all cost sharing (including cost
sharing for prescribed drugs and emergency room copayments for
non-emergency care) cannot exceed 5 percent of family income as
applied on a quarterly or monthly basis as specified by the
state, and (2) cost-sharing for any item or service cannot
exceed 20 percent of the cost of the item or service.
Two groups are added to the list of those exempt from
paying premiums and cost-sharing under the House bill. In the
conference agreement, these additional groups include (1)
children in foster care who receive aid and assistance under
Part B of Title IV (Child and Family Services) of the Social
Security Act; and (2) women who qualify for Medicaid under the
breast and cervical cancer eligibility group (a technical
change from the House bill).
In addition, the agreement clarifies that providers could
reduce or waive cost-sharing on a case-by-case basis.
Under the conference agreement, increases in the nominal
cost-sharing amounts follow the House bill (i.e., annual
adjustments using the medical CPI), but apply more broadly to
existing cost-sharing provisions in statute (Section 1916) as
well as to the new cost-sharing provisions in the House bill
specific to prescription drugs and non-emergency care provided
in an emergency room (described below).
Special Rules for Cost Sharing for Prescription Drugs (Section 6042 of
the Conference Agreement, no provision in the Senate Bill, and
Section 3122 of the House Bill)
Current Law
States are allowed to establish nominal service-related
cost-sharing requirements (defined in regulation) that are
generally between $0.50 and $3, depending on the cost of the
service provided. Specific services and groups are exempted
from such cost-sharing. Waiver authority is required to change
these rules. As with other Medicaid benefits, nominal cost-
sharing may be imposed on prescribed drugs, and states may vary
nominal cost-sharing amounts for preferred and non-preferred
drugs. States may also implement prior authorization for
prescribed drugs.
Senate Bill
No provision.
House Bill
The House bill would allow states to impose cost-sharing
amounts that exceed the proposed state option limits described
above for certain state-identified non-preferred drugs if the
cost sharing plan meets the following characteristics. Under
this option, states may impose higher cost-sharing amounts for
non-preferred drugs within a class; waive or reduce the cost-
sharing otherwise applicable for preferred drugs within such
class; and must not apply such cost-sharing for preferred drugs
to persons exempt from cost-sharing (identified above).
Cost-sharing for non-preferred drugs would be based on
multiples of the nominal amounts based on family income. For
persons with family income below 100 percent of FPL, nominal
cost sharing would apply. For those with family income at or
above 100 percent but below l50 percent of FPL, the multiple is
equal to two times the applicable nominal amount, and for those
with income equal to or exceeding 150 percent of FPL, the
multiple is equal to three times the applicable nominal amount.
For persons generally exempt from cost-sharing (identified
above), cost-sharing for non-preferred drugs may be applied.
Such cost-sharing may not exceed nominal amounts, and aggregate
caps on cost-sharing (in terms of nominal amounts and maximum
cost-sharing based on the specified percentage of family income
identified above) would still apply.
For Medicaid purposes, states would not be allowed to
treat a preferred drug under the TRICARE pharmacy benefit
program as a non-preferred drug, nor could states impose cost-
sharing that exceeds the standards under this program that are
in effect on the date of enactment for this provision.
In cases in which a prescribing physician determines that
the preferred drug would not be effective or would have adverse
health effects or both, the state may impose the cost-sharing
amount for preferred drugs on the prescribed non-preferred
product.
The House bill would not prevent states from excluding
specified drugs or classes of drugs from these special cost-
sharing rules.
States would be prohibited from implementing these
special cost-sharing rules for prescription drugs unless the
state has instituted a system for prior authorization and
related appeals processes for outpatient prescription drugs.
These provisions would become effective for cost-sharing
imposed for items and services furnished on or after October 1,
2006.
Conference Agreement
The conference agreement includes the House bill, with
modifications. Cost-sharing for non-preferred drugs may not
exceed: (1) nominal amounts for individuals in families with
income below or equal to 150 percent FPL, and (2) 20 percent of
the cost of the drug for individuals in families with income
above 150 percent FPL.
The conference agreement also drops both the TRICARE and
the prior authorization/appeals process provisions in the House
bill. It also changes the effective date of these provisions to
January 1, 2007.
Emergency Room Copayments for Non-Emergency Care (Section 6043 of the
Conference Agreement, no provision in the Senate Bill, and
Section 3123 of the House Bill)
Current Law
Waivers may be used to allow states to impose up to twice
the otherwise applicable nominal cost-sharing amounts for non-
emergency services provided in a hospital emergency room (ER).
States may impose these higher amounts if they have established
that Medicaid beneficiaries have available and accessible
alternative sources of non-emergency, outpatient services.
Senate Bill
No provision.
House Bill
The House bill would allow states, through a state plan
amendment, to impose increased cost-sharing on state-specified
groups for non-emergency services provided in an ER, when
certain conditions are met. First, alternative non-emergency
providers must be available and accessible to the person
seeking care. Second, after initial screening but before the
nonemergency care is provided at the ER, the beneficiary must
be told: (1) the hospital can require a higher copayment, (2)
the name and location of an alternative non-emergency provider
and that this provider and that a lower copayment may apply,
and (3) the hospital can provide a referral. When these
conditions are met, states could apply or waive cost-sharing
for services delivered by the alternate provider.
For persons with income below 100 percent FPL, cost-
sharing for non-emergency services in an ER could not exceed
twice the nominal amounts. Individuals exempt from premiums or
service-related cost-sharing under other provisions of this
bill may be subject to nominal copayments for non-emergency
services in an ER, only when no cost-sharing is imposed for
care in hospital outpatient departments or by other alternative
providers in the area served by the hospital ER. Aggregate caps
on cost-sharing established under this bill (described in Sec.
3121(a)) would still apply.
These provisions would have no impact on a hospital's
obligations with respect to screening and stabilizing emergency
medical conditions, nor would they modify the application of
the prudent-layperson standard with respect to payment or
coverage of emergency services by any managed care
organization. In addition, no hospital or physician that makes
a cost-sharing determination would be liable in any civil
action or proceeding, absent a finding by clear and convincing
evidence of gross negligence. Liabilities related to the
provision of care (or failure to do so) would not be affected
by these provisions.
``Non-emergency services'' would mean any care or
services furnished in an ER that the physician determines does
not constitute an appropriate medical screening examination or
stabilizing examination and treatment screening required for
hospitals under Medicare law (regarding examination and
treatment for emergency medical conditions and women in labor).
``Alternative non-emergency services provider'' would mean a
Medicaid-participating health care provider, such as a
physician's office, health care clinic, community health
center, hospital outpatient department, or similar health care
provider that provides clinically appropriate services for such
diagnosis or treatment of the condition within a clinically
appropriate time of the provision of such non-emergency
services.
The Secretary would be required to provide for payments
to states for the establishment of alternate non-emergency
providers, or networks of such providers. The House bill also
authorizes and appropriates $100 million for paying such
providers for the 4-year period beginning with 2006. The
Secretary would be required to give a preference to states that
establish or provide for alternate non-emergency services
providers (or networks) that serve rural or underserved areas
where beneficiaries may have limited access to primary care
providers, or in partnership with local community hospitals. To
access these funds, states would be required to file an
application meeting requirements set by the Secretary.
These amendments would apply to non-emergency services
furnished on or after the date of enactment of this Act.
Conference Agreement
The conference agreement includes the House bill, with
modifications. This provision allows states to permit a
hospital to impose cost sharing for non-emergency care
delivered in an ER under the same conditions identified in the
House bill. But the conditions defining the beneficiary
notification process are expanded to explicitly include a
medical screening examination for emergency medical conditions
as defined in Medicare law and a determination that such an
emergency does not exist, prior to the delivery of non-
emergency care in the ER. In addition, the hospital (not the
physician or hospital) is responsible for the notification
process.
The conference agreement clarifies that no hospital or
physician can be held liable in any civil action or proceeding
for the imposition of cost sharing under this new option,
absent a finding of gross negligence by the hospital or
physician. This provision does not affect liability with
respect to examination and treatment for emergency medical
conditions (including women in labor) as specified in Medicare
law or otherwise applicable under state law based on the
provision of (or failure to provide) care.
The conference agreement also slightly modifies the
definition of an alternative nonemergency services provider by
specifying that such providers be able to diagnose or treat a
condition contemporaneously with (rather than within a
clinically appropriate time of) the provision of similar non-
emergency services that would be provided in an ER.
The conference agreement also changes the effective date
of these provisions to January 1, 2007.
Use of Benchmark Packages (Section 6044 of the Conference Agreement, no
provision in the Senate Bill, and Section 3124 of the House
Bill)
Current Law
Categorically needy (CN) eligibility groups include
families with children, the elderly, certain persons with
disabilities, and certain other pregnant women and children who
meet applicable financial standards. Medically needy (MN)
groups include the same types of individuals, but different,
typically higher financial standards apply. Some benefits are
mandatory for the CN (e.g., inpatient and outpatient hospital
care, lab and x-ray services, physician services, nursing
facility care for persons age 21 and over). Other benefits are
optional for the CN (e.g., other practitioner services, routine
dental care, physical therapy). Benefits offered to CN groups
must be the same statewide, and in amount, duration and scope.
States may offer a more restrictive benefit package to the MN,
but must offer prenatal and delivery services, ambulatory
services for persons under 21 and those entitled to
institutional services, and home health services for those
entitled to nursing facility care. Benefits offered to MN
groups must be the same statewide, and in amount, duration and
scope. Changes in comparability or statewideness for benefits
for CN and MN groups require a waiver.
As described above, some benefits are mandatory for the
CN (e.g., inpatient and outpatient hospital care, lab and x-ray
services, physician services, FQHC services, nursing facility
care for persons age 21 and over). Other benefits are optional
for the CN (e.g., other practitioner services, routine dental
care, physical therapy). Benefits offered to CN groups must be
the same statewide, and in amount, duration and scope. States
may offer a more restrictive benefit package to the MN, but
must offer prenatal and delivery services, ambulatory services
for persons under 21 and those entitled to institutional
services, and home health services for those entitled to
nursing facility care. Benefits offered to MN groups must be
the same statewide, and in amount, duration and scope. Changes
in comparability or statewideness for benefits for CN and MN
groups require a waiver.
Under the Early and Periodic, Screening, Diagnostic and
Treatment (EPSDT) benefit, Medicaid children in CN groups are
guaranteed access to all federally coverable routine and
follow-up dental services necessary to treat a dental problem.
EPSDT may be offered to MN children.
Both the services provided by rural health clinics (RHCs)
and federally qualified health services (FQHCs) are required
benefits for CN groups under Medicaid. Among other mandatory
benefits for MN groups, states must offer ambulatory services
for persons under 21 and those entitled to institutional
services. Such ambulatory services may include RHC and FQHC
services at state option. In general, RHCs and FQHCs are paid
on a per visit basis, using a prospective payment system that
takes into account costs incurred and changes in the scope of
services provided. Per visit payment rates are also adjusted
annually by the Medicare Economic Index applicable to primary
care services.
Senate Bill
No provision.
House Bill
The House bill would give states the option to provide
Medicaid to state-specified groups through enrollment in
benchmark and benchmark-equivalent coverage (described below).
States could only apply this option to eligibility categories
established before the date of enactment of this provision.
States may choose to provide wrap-around and additional
benefits.
Enrollment in benchmark and benchmark-equivalent coverage
could be required for ``full benefit eligible individuals,''
including persons eligible for all services covered for the CN,
or any other category of eligibility for all covered services
as determined by the Secretary. Certain individuals would be
excluded from the definition of a full-benefit eligible,
including (1) the MN; (2) CN individuals in certain states who
are required to pay for medical expenses from their income
until their remaining net income meets SSI financial standards
in effect in 1972; and (3) other individuals who qualify for
Medicaid when costs incurred for medical expenses or other
remedial care are subtracted from income to meet financial
eligibility requirements (also known as spend-down
populations).
The House bill would require that specified groups be
exempted from this option, including: (1) mandatory pregnant
women and children; (2) dual eligibles (i.e., Medicaid
beneficiaries also entitled to benefits under Medicare); (3)
terminally ill persons receiving Medicaid hospice services; (4)
individuals in medical institutions who are required, as a
condition of receiving institutional care, to pay for costs of
medical care except for a minimal amount retained from their
income for personal needs; (5) individuals who are medically
frail or who have special medical needs, as identified in
accordance with regulations of the Secretary; and (6)
individuals who qualify for Medicaid long-term care services
(i.e., nursing facility services, a level of care in any
institution equivalent to nursing facility services, home and
community-based waiver services, home health services, home and
community-care for functionally disabled elderly individuals,
personal care, and other optional long-term care services
offered by the state).
Benchmark and benchmark-equivalent packages would be
nearly identical to those offered under SCHIP, with some
additions. Benchmark coverage would include: (1) the standard
Blue Cross/Blue Shield preferred provider plan under FEHBP; (2)
health coverage for state employees; and (3) health coverage
offered by the largest commercial HMO. Benchmark-equivalent
coverage would have the same actuarial value as one of the
benchmark plans. Such coverage would include: (1) inpatient and
outpatient hospital services, (2) physician services, (3) lab
and x-ray services, (4) well child care, including
immunizations, and (5) other appropriate preventive care
(designated by the Secretary). Such coverage must also include
at least 75 percent of the actuarial value of coverage under
the benchmark plan for: (1) prescribed drugs, (2) mental health
services, (3) vision care, and (4) hearing services.
Determination of actuarial value would follow generally
accepted actuarial principles and methodologies and would be
conducted by a member of the American Academy of Actuaries.
Both benchmark and benchmark-equivalent coverage would
include ``qualifying child benchmark dental coverage.'' A
qualifying child would include individuals under 18 with family
income below 133 percent FPL. Benchmark dental coverage would
be equivalent to or better than the dental plan that covers the
greatest number of individuals in the state who are not
eligible for Medicaid.
States could only enroll eligible beneficiaries in
benchmark and benchmark-equivalent coverage if such persons
have access to services provided by RHCs and FQHCs, and the
Medicaid prospective payment system for both types of providers
remains in effect.
These provisions would be effective upon the date of
enactment.
Conference Agreement
The conference agreement includes the House bill, with
modifications. For any child under age 19 in one of the major
mandatory and optional eligibility groups (defined in Section
1902(a)(10)(A)) under the state Medicaid plan, wrap-around
benefits to the benchmark or benchmark-equivalent coverage
consists of early and periodic screening, diagnostic and
treatment services as defined in current Medicaid law. The
agreement drops benchmark dental coverage and accompanying
provisions defining the children who would qualify for such
benchmark dental coverage.
Also, under the conference agreement, states may exercise
this option only for eligibility groups that were established
under the state plan before the date of enactment of this
option.
The conference agreement drops mandatory children under
18 (under Section 1902(a)(10)(A)(i)) from the list of groups
exempted from this option.
The conference agreement also expands the list of
specified groups that would be exempted from benchmark coverage
to include: (1) individuals who qualify for Medicaid under the
state plan on the basis of being blind or disabled regardless
of whether the individual is eligible for SSI on such basis,
including children with disabilities that meet SSI disability
standards who require institutional care, but for whom care is
delivered outside the institution, and the cost of that care
does not exceed the otherwise applicable institutional care
(also known as Katie Beckett or TEFRA children); (2) children
in foster care receiving child welfare services (under Part B
of Title IV) and children receiving foster care or adoption
assistance under Part E of Title IV without regard to age; (3)
individuals who qualify for Medicaid on the basis of receiving
assistance under TANF (as in effect on or after the welfare
reform effective date); (4) women in the breast and cervical
cancer eligibility group (a technical change from the House
bill); and (5) other ``limited services beneficiaries,''
including certain tuberculosis-infected individuals, and legal
and undocumented non-citizens who meet the financial and
categorical requirements for Medicaid eligibility without
regard to time in the U.S. and are eligible only for emergency
medical services.
The conference agreement also adds to the set of three
benchmark benefit packages, a fourth option called ``secretary
approved coverage'' which may include any other health benefits
coverage that the Secretary determines will provide appropriate
coverage for the population targeted to receive such coverage.
Finally, the conference agreement changes the effective
date of these provisions to January 1, 2007.
Chapter 5--State Financing Under Medicaid
Managed Care Organization Provider Tax (Section 6051 of the Conference
Agreement, and Section 6033 of the Senate Bill, and Section
3142 of the House Bill)
Current Law
States' ability to use provider-specific taxes to fund
Medicaid expenditures is limited. If a state establishes
provider-specific taxes to fund the state's share of program
costs, reimbursement of the federal share will not be available
unless the tax program meets the following three rules: the
taxes collected cannot exceed 25 percent of the state (or non-
federal) share of Medicaid expenditures; the state cannot
provide a guarantee to the providers that the taxes will be
returned to them; and the tax must be ``broad-based.'' A broad-
based tax is a tax that is uniformly applied to all providers
or services within the provider class. The federal statute
identifies each of the classes of providers or services for the
purpose of determining whether a tax is broad-based.
Medicaid managed care organizations (MCOs) are identified
as a separate class of providers for the purposes of
determining if a tax is broad-based. This class is unlike all
of the other classes of providers or services because it is
limited to only Medicaid providers. Other classes of providers
or services identified in statute, such as inpatient hospital
services, outpatient hospital services, physicians--are not
restricted to Medicaid providers or Medicaid services.
Senate Bill
The Senate bill would expand the Medicaid MCO provider
class to include all MCOs. To qualify for federal
reimbursement, a state's provider tax would need to apply to
both Medicaid and non-Medicaid MCOs. This would make the MCO
provider class more consistent with the other provider classes
for purposes of determining if a provider tax is broad-based.
The provision would become effective on January 1, 2006
except in states that have, as of December 31, 2005, a tax on
the Medicaid MCO class of providers as defined under current
law. The provision would not apply to those states.
House Bill
Similar to Senate provision except the provision would
become effective upon enactment except for in states with taxes
based on the current law Medicaid MCO provider class. For those
states, the prohibition would become effective on October 1,
2008 and the reduction in Medicaid reimbursement due to this
provision would be 50 percent for the fiscal year beginning on
that day.
Conference Agreement
The conference agreement expands the Medicaid MCO
provider class to include all MCOs. To qualify for federal
reimbursement, a state's provider tax would need to apply to
both Medicaid and non-Medicaid MCOs. The provision becomes
effective upon enactment except in states with taxes based on
the current law Medicaid MCO provider class as of December 8,
2005. In those states, the provision becomes effective on
October 1, 2009.
Reforms of Case Management and Targeted Case Management Services
(Section 6052 of the Conference Agreement, and Section 6031 of
the Senate Bill, and Section 3146 of the House Bill)
Current Law
Under current Medicaid law (Section 1915(g)(2) of the
Social Security Act), case management is defined as including
services to assist a Medicaid beneficiary in gaining access to
needed medical, social, educational and other services. Case
management services are an optional benefit under the Medicaid
state plan. The term ``targeted case management'' (TCM) refers
to situations in which these services are not provided
statewide to all Medicaid beneficiaries but rather are provided
only to specific classes of Medicaid eligible individuals as
defined by the state (e.g., those with chronic mental illness),
or persons who reside in a specific area.
Several states extend the Medicaid TCM benefit to
individuals who may also be receiving case management services
as a component of another state and/or federal program. For
example, a state may provide TCM services for Medicaid
beneficiaries in foster care--defined in the Medicaid state
plan as ``children in the state's custody and who are placed in
foster homes.'' As part of the foster care program, children
receive certain case management services regardless of whether
or not they are a Medicaid beneficiary.
In addition, the existing federal guidance is conflicting
with respect to the process states should follow to claim
Medicaid reimbursement for TCM services when another program
also covers case management services for the same beneficiary.
The State Medicaid Manual (Section 4302.2) states that claims
for targeted case management services must be fully documented
for aspecific Medicaid beneficiary in order to receive payment.
In addition, documentation that includes time studies and cost
allocation plans ``are not acceptable as a basis for Federal
participation in the costs of Medicaid services.'' Cost allocation
plans are a narrative description of the procedures that a state agency
uses in identifying, measuring, and allocating the state agency's
administrative costs incurred for supervising or operating programs.
Per federal regulations (45 CFR 95.505), the cost allocation plan does
not include payments for services and goods provided directly to
program recipients. However, a State Medicaid Director's (SMD) letter
dated January 19, 2001, which discusses targeted case management
services for children in foster care under the federal Title IV-E
program, requires states to ``properly allocate case management costs
between the two programs in accordance with OMB Circular A-87 under an
approved cost allocation program.'' Thus, this letter extended the
application of cost allocation plans to claim reimbursement for case
management services when a child is receiving these services under both
the Title IV-E (foster care) and Medicaid programs.
Senate Bill
This proposal would further define the Medicaid TCM
benefit under Section 1915(g)(2) of the Social Security Act,
and would codify the ability of states to use an approved cost
allocation plan (as outlined under OMB Circular A-87, or other
related or subsequent guidance) for determining the amount that
can be billed as Medicaid TCM services when case management is
also reimbursable by another federally-funded program.
Specifically, the proposal would clarify that the TCM
benefit includes the following: (1) assessment of an eligible
individual to determine service needs by taking a client
history, identifying an individual's needs and completing
related documentation, and if needed, gathering information
from other sources; (2) development of a specific care plan
based on the information collected through an assessment that
specifies the goals and actions to address the individual's
needs; (3) referral and related activities to help an
individual obtain needed services; and (4) monitoring and
follow-up activities including activities and contacts to
ensure the care plan is effectively implemented and adequately
addressing the individual's needs.
The proposal would also specify certain activities that
are not reimbursable as TCM services. First, the TCM benefit
would not include the direct delivery of an underlying medical,
educational, social or other services to which an eligible
individual has been referred. In addition, with respect to the
direct delivery of foster care services, the TCM benefit would
not cover: research gathering and completion of required foster
care documentation, assessing adoption placements, recruiting
or interviewing potential foster care parents, serving legal
papers, home investigations, providing transportation,
administering foster care subsidies, and making placement
arrangements.
In cases where a TCM provider contacts individuals who
are not Medicaid eligible or who are not part of the TCM target
population, the activity could be billed as TCM services if the
purpose of the contact is directly related to the management of
the eligible individual's care. If the contact is related to
the identification and management of the non-eligible or non-
targeted individual's needs and care, the activity may not be
billed as TCM services.
Finally, consistent with existing Medicaid law, this
proposal would also specify that federal Medicaid funding would
only be available for TCM 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.
This provision would take effect January 1, 2006.
House Bill
Same as Senate provision.
Conference Agreement
The conference agreement modifies the Senate and House
bills to differentiate between case management and targeted
case management services. It would define case management
services in federal law as services that will assist Medicaid-
eligible individuals in gaining access to needed medical,
social, educational, and other services including: (1)
assessment of an eligible individual to determine service needs
by taking a client history, identifying an individual's needs
and completing related documentation, and if needed, gathering
information from other sources; (2) development of a specific
care plan based on the information collected through an
assessment that specifies the goals and actions to address the
individual's needs; (3) referral and related activities to help
an individual obtain needed services; and (4) monitoring and
follow-up activities including activities and contacts to
ensure the care plan is effectively implemented and adequately
addressing the individual's needs.
The conference agreement also establishes those
activities that are not reimbursable as case management
services including the direct delivery of an underlying
medical, educational, social or other services to which an
eligible individual has been referred. With respect to the
direct delivery of foster care services, case management would
not include research gathering and completion of required
foster care documentation, assessing adoption placements,
recruiting or interviewing potential foster care parents,
serving legal papers, home investigations, providing
transportation, administering foster care subsidies, and making
placement arrangements.
The term ``targeted case management services'' is defined
as case management services that are provided to specific
classes of individuals or to individuals who reside in specific
areas.
In cases where a case management provider contacts
individuals who are not Medicaid eligible, or who are not part
of the TCM target population, the activity could be billed as
case management services if the purpose of the contact is
directly related to the management of the eligible individual's
care. If the contact is related to the identification and
management of the non-eligible or non-targeted individual's
needs and care, the activity may not be billed as case
management services.
Consistent with existing Medicaid law, this proposal
would also specify that federal Medicaid funding would only be
available for case management (or TCM) 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. If case management (or TCM) services are reimbursable
by another federally-funded program the state would be required
to allocate the costs of these services using OMB Circular A-87
(or any related or successor guidance or regulations).
Finally, the conference agreement established that (1)
nothing in the provision would affect 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 (the HIV Health Care Services Program) or the
Indian Health Service; and (2) the Secretary would be required
to promulgateregulations to carry out the changes made by this
provision. The effective date of this provision would be January 1,
2006.
Additional FMAP Adjustments (Section 6053 of the Conference Agreement,
Sections 6032 and 6037 of the Senate Bill, and Sections 3148
and 3205 of the House Bill)
Current Law
The federal medical assistance percentage (FMAP) is the
rate at which states are reimbursed for most Medicaid service
expenditures. It is based on a formula that provides higher
reimbursement to states with lower per capita incomes relative
to the national average (and vice versa); it has a statutory
minimum of 50 percent and maximum of 83 percent. An enhanced
FMAP is available for both services and administration under
the State Children's Health Insurance Program (SCHIP), subject
to the availability of funds from a state's SCHIP allotment. In
addition to Medicaid and SCHIP, the FMAP is used in determining
federal reimbursement for a number of other programs, including
foster care and adoption assistance under Title IV-E of the
Social Security Act.
When state FMAPs are calculated by HHS for an upcoming
fiscal year, the state and U.S. amounts used in the formula are
equal to the average of the three most recent calendar years of
data on per capita personal income available from the
Department of Commerce's Bureau of Economic Analysis (BEA). For
example, to calculate FMAPs for FY2006, HHS used per capita
personal income data for 2001, 2002, and 2003 that became
available from BEA in October 2004.
BEA revises its most recent estimates of state per capita
personal income on an annual basis to incorporate revised
Census Bureau population figures and newly available source
data. It also undertakes a comprehensive data revision--
reflecting methodological and other changes--every few years
that may result in upward and downward revisions to each of the
component parts of personal income, which include: wages and
salaries, supplements to wages and salaries (such as employer
contributions for employee pension and insurance funds),
proprietors' income, and dividends, interest, and rent.
As a result of these annual and comprehensive revisions,
it is often the case that the value of a state's per capita
personal income for a given year will change over time. For
example, the 2001 per capita personal income data published by
BEA in October 2003 (used in the calculation of FY2005 FMAPs)
differed from the 2001 per capita personal income published in
October 2004 (used in the calculation of FY2006 FMAPs).
P.L. 106-554 (Consolidated Appropriations Act, 2001),
provided that for fiscal years 2001 through 2005, the Medicaid
and SCHIP FMAPs for Alaska would be calculated using the
state's per capita income divided by 1.05. Dividing by 1.05
lowered the state's per capita income, thereby increasing its
FMAP.
Senate Bill
Under the Senate bill, FY2006 FMAPs for Medicaid and
SCHIP would be re-computed for all states so that no FY2006
FMAP would be less than the greater of: (1) a state's FY2005
FMAP minus 0.5 percentage points (0.1 in the case of Delaware
and Michigan, 0.3 in the case of Kentucky) or (2) the FY2006
FMAP that would have been determined for a state if per capita
incomes for 2001 and 2002 that were used to calculate the
state's FY2005 FMAP were used.
In a separate provision, if Alaska's calculated FY2006 or
FY2007 FMAP for Medicaid or SCHIP is less than its FY2005 FMAP,
the FY2005 FMAP would apply.
House Bill
Under the House bill, for purposes of computing Medicaid
FMAPs beginning with FY2006, employer contributions toward
pensions that exceed 50 percent of a state's total increase in
personal income for a period would be excluded from the per
capita income of a state, but not from U.S. per capita income.
In a separate provision, for purposes of computing
Medicaid and SCHIP FMAPs for any year after 2006 for a state
that the Secretary of HHS determines has a significant number
of individuals who were evacuated to and live in the state as a
result of Hurricane Katrina as of October 1, 2005, the
Secretary would disregard such evacuees and their incomes.
Conference Agreement
The conference agreement follows the Alaska provision in
the Senate bill and the Katrina provision in the House bill.
DSH Allotment for the District of Columbia (Section 6054 of the
Conference Agreement, and Section 6035 of the Senate Bill, and
no provision in the House Bill)
Current Law
States and the District of Columbia are required to
recognize, in establishing hospital payment rates, the
situation of hospitals that serve a disproportionate number of
Medicaid beneficiaries and other low-income patients with
special needs. Under broad federal guidelines, each state
determines which hospitals receive DSH payments and the payment
amounts to be made to each qualifying hospital. The federal
government shares in the cost of state DSH payments at the same
federal matching percentage as for most other Medicaid
services. Total federal reimbursement for each state's DSH
payments, however, are capped at a statewide ceiling, referred
to as the state's DSH allotment.
Senate Bill
The Senate bill would raise the allotments for the
District of Columbia for FY 2000, 2001, and 2002 from $32
million to $49 million. The higher allotments would be used to
calculate DSH allotments beginning with FY 2006 amounts. The
provision would take effect as if enacted on October 1, 2005
and would apply to expenditures made on or after that date.
House Bill
No provision.
Conference Agreement
The conference agreement includes a provision similar to
the Senate provision. The agreement clarifies that the
increased amounts calculated based on the modified allotments
for FY 2000, 2001, and 2002 only apply to DSH expenditures
applicable to fiscal year 2006 and subsequent fiscal years that
are paid on or after October 1, 2005.
Increase in Medicaid Payments to Insular Areas (Section 6055 of the
Conference Agreement, no provision in the Senate Bill, and
Section 3141 of the House Bill)
Current Law
In the 50 states and the District of Columbia, Medicaid
is an individual entitlement. There are no limits on the
federal payments for Medicaid as long as the state is able to
contribute its share of the matching funds. In contrast,
Medicaid programs in the territories are subject to spending
caps. For fiscal year 1999 and subsequent fiscal years, these
caps are increased by the percentage change in the medical care
component of the Consumer Price Index (CPI-U) for all Urban
Consumers (as published by the Bureau of Labor Statistics). The
federal Medicaid matching rate, which determines the share of
Medicaid expenditures paid for by the federal government, is
statutorily set at 50 percent of the territories. Therefore,
the federal government pays 50 percent of the cost of Medicaid
items and services in the territories up to the spending caps.
Senate Bill
No provision.
House Bill
For each of fiscal years 2006 and 2007, the House bill
would increase the total annual cap on federal funding for the
Medicaid programs in each of the Virgin Islands, Guam, the
Northern Marianas, and American Samoa. Puerto Rico would not
receive additional federal Medicaid funding from this
provision.
For the Virgin Islands and Guam, the FY2006 total annual
Medicaid caps would be increased by $2.5 million and the FY2007
caps would be increased by $5.0 million. For the Northern
Marianas, the FY2006 total annual Medicaid cap would be
increased by $1.0 million and the FY2007 cap would be increased
by $2.0 million. For American Samoa, the FY2006 total annual
Medicaid cap would be increased by $2.0 million and the FY2007
cap would be increased by $4.0 million. For fiscal year 2008
and subsequent fiscal years, the total annual cap on federal
funding for the Medicaid programs in each of the Virgin
Islands, Guam, the Northern Marianas, and American Samoa would
be calculated by increasing the FY2007 ceiling, as modified by
this provision, by the percentage change in the medical care
component of the Consumer Price Index (CPI-U) for all Urban
Consumers (as published by the Bureau of Labor Statistics).
Conference Agreement
The conference agreement follows the House bill.
Demonstration Project Regarding Medicaid Coverage of Low-income HIV-
infected individuals (no provision in the Conference Agreement,
Sec. 6039(c) of the Senate Bill, and no provision in the House
Bill)
Current Law
Section 1115 gives the Secretary of HHS authority to
modify virtually all aspects of the Medicaid (and SCHIP)
programs. Among other projects, the Secretary has used the
Section 1115 waiver authority to approve benefit-specific
demonstrations that provide targeted services to certain
individuals. For example, under existing Medicaid HIV/AIDS
Section 1115 demonstration waivers, the Secretary approved
programs that provide a limited set of Medicaid benefits (e.g.,
case management, and pharmacy services) to individuals with
HIV/AIDS who would not otherwise be eligible for Medicaid.
Approved Section 1115 waivers are deemed to be part of a
state's Medicaid (or SCHIP) state plan for purposes of federal
reimbursement. Project costs associated with waiver programs
granted under the Medicaid (or SCHIP) programs are subject to
that state's FMAP (or enhanced-FMAP). Unlike regular Medicaid
(or SCHIP), CMS waiver guidance specifies that costs associated
with waiver programs must be budget neutral (or allotment
neutral) to the federal government over the life of the waiver
program whereby the federal and state government negotiate a
spending cap beyond which the federal government has no fiscal
responsibility.
Senate Bill
The Senate Bill would require the Secretary of HHS to
allow states to seek approval for time limited (i.e., 5-year)
Section 1115 demonstration projects that provide full Medicaid
coverage to specified HIV-infected individuals. For fiscal
years 2006 through 2010, $450,000,000 in federal funds would be
appropriated for such demonstrations. From this amount, the
Secretary would allocate money to states and territories
(without regard to existing federal Medicaid spending caps
applicable in the territories) with approved HIV Section 1115
demonstrations based on the availability of such funds.
Allotment of funds among states (or territories) with approved
demonstrations would be based on an amount equal to the state's
SCHIP Enhanced Federal Medical Assistance Percentage (Enhanced-
FMAP) for quarterly expenditures associated with medical
assistance provided to individuals under the waiver up to the
specified cap. The Secretary would be required to submit a
program evaluation to Congress not later than December 31,
2010. This provision would be effective on January 1, 2006.
House Bill
No provision.
Conference Agreement
The conference agreement does not include the Senate
bill.
Inclusion of Podiatrists As Physicians (no provision in the Conference
Agreement, Section 6034 of the Senate Bill, and no provision in
the House Bill)
Current Law
Under Medicaid, services provided by podiatrists may be
covered under the optional ``other practitioners'' benefit
category. ``Physician services'' are a mandatory Medicaid
benefit.
Senate Bill
The Senate bill would treat podiatrists as physicians, as
is the case under Medicare. Thus, states would be required to
cover the medical services of podiatrists (i.e., doctors of
podiatric medicine) under Medicaid. This provision would apply
to all such services furnished on or after January 1, 2006.
House Bill
No provision.
Conference Agreement
The conference agreement does not include this provision.
Demonstration Project Regarding Medicaid Reimbursement for
Stabilization of Emergency Medicaid Conditions by Non-Publicly
Owned or Operated Institutions for Mental Diseases (no
provision in the Conference Agreement, Section 6036 of the
Senate Bill, and no provision in the House Bill)
Current Law
An IMD is defined as a hospital, nursing facility, or
other institution of more than 16 beds, that is primarily
engaged in providing diagnosis, treatment, or care of persons
with mental diseases, including medical attention, nursing
care, and related services. The 1950 amendments to the Social
Security Act established the prohibition of federal assistance
for IMD residents as well as for patients diagnosed with a
psychosis found in other medical institutions. When Medicaid
was established in 1965, the law included a state option to
allow Medicaid funding for inpatient psychiatric care rendered
in general hospitals as we1l as funding for specific services
provided to residents age 65 years and older in IMDs. The 1972
amendments allowed for optional coverage, under certain
circumstances, for IMD residents under age 21 or, in some
cases, under age 22. In general, reimbursement for services
obtained in IMDs by Medicaid beneficiaries ages 22 to 64 years
remains prohibited. The term ``State'' includes the District of
Columbia, Puerto Rico, the Virgin Islands, Guam, the Northern
Mariana Islands, and American Samoa.
Under Medicare, ``emergency medical condition'' means a
medical condition with acute symptoms of sufficient severity
such that the absence of immediate medical attention could
result in (1) placing the health of the individual in serious
jeopardy, (2) serious impairment to bodily functions, or (3)
serious dysfunction of any organ. Under Medicare, the term
``stabilize'' means medical treatment as may be necessary to
assure, within reasonable medical probability, that no material
deterioration of the condition is likely to result from or
occur during the transfer of the individual from a facility.
Senate Bill
The Senate bill would require the Secretary to establish
a 3-year demonstration project in eligible states to provide
Medicaid coverage for certain IMD services (not publicly-owned
or operated) for Medicaid eligible individuals who are between
the ages of 21 and 64, and who require IMD services to
stabilize an emergency medical condition. Upon approval of an
application, eligible states would include Arizona, Arkansas,
Louisiana, Maine, North Dakota, Wyoming, and four additional
states to be selected by the Secretary to provide geographic
diversity. The provision would appropriate $30 million for
FY2006 for the demonstration which would be available through
December 31, 2008. The Secretary would allocate funds to
eligible states based on their applications and the
availability of funds. Payments to states would be drawn from
these allocations, based on the federal matching rate (FMAP)
for benefits.
For purposes of the demonstration, the Secretary would be
required to waive current law limitations on payments for
services delivered to persons under 65 who are patients in an
IMD. The Secretary would have the option to also waive other
requirements in Sections XI and XIX, including requirements
relating to statewideness and comparability of benefits, only
to the extent necessary to carry out the demonstration project.
The terms ``emergency medical condition'' and ``stabilize,'' as
defined under Medicare, would apply to the demonstration
described in this provision.
The Senate bill would also require the Secretary to
submit annual reports to Congress on the progress of the
demonstration project. No later than March 31, 2009, the
Secretary would submit to Congress a final report describing
whether the demonstration: (1) resulted in increased access to
Medicaid inpatient mental health services, (2) produced a
significant reduction in the use of higher cost emergency room
services for Medicaid beneficiaries, (3) impacted the costs of
providing Medicaid inpatient psychiatric care, and (4) should
be continued after December 31, 2008, and expanded nationwide.
House Bill
No provision.
Conference Agreement
The conference agreement does not include this provision.
Chapter 6--Other Provisions
Subchapter A--Family Opportunity Act
Opportunity for Families of Disabled Children to Purchase Medicaid
Coverage for Such Children (Section 6062 of the Conference
Agreement, Section 6042 of the Senate Bill, and no provision in
the House Bill)
Current Law
For children with disabilities, there are a number of
potentially applicable Medicaid eligibility groups, some
mandatory but most optional. For some of these groups,
disability status or medical need is directly related to
Medicaid eligibility (e.g., children receiving SSI with family
income below 75 percent FPL). But there are other pathways
through which such children may qualify for Medicaid coverage
for which disability status and/or medical need are irrelevant
(e.g., children under age 6 with family income below 133
percent FPL). All of the Medicaid eligibility pathways for
children require income levels that are generally below 300
percent of the federal poverty level (FPL) with some state-
specific exceptions.
States may require Medicaid beneficiaries to apply for
coverage in certain employer-sponsored group health plans (in
which such persons are eligible) when it is cost-effective to
do so (defined below). This requirement may be imposed as a
condition of continuing Medicaid eligibility, except that
failure of a parent to enroll a child must not affect the
child's continuing eligibility for Medicaid. If all members of
the family are not eligible for Medicaid, and the group health
plan requires enrollment of the entire family, Medicaid will
pay associated premiums for full family coverage if doing so is
cost-effective. Medicaid will not pay deductibles, coinsurance
or other cost-sharing for family members ineligible for
Medicaid. Third party liability rules apply to coverage in a
group health plan; that is, such plans, not Medicaid, must pay
for all covered services under the plan. Cost-effectiveness
means that the reduction in Medicaid expenditures for Medicaid
beneficiaries enrolled in a group health plan is likely to be
greater than the additional costs for premiums and cost-sharing
required under the group health plan.
For certain eligibility categories, states may not impose
enrollment fees, premiums or similar charges. States are
specifically prohibited from requiring payment of deductions,
cost-sharing or similar charges for services furnished to
children under 18 (up to age 21; or reasonable subcategories,
at state option). Also, in certain circumstances, states may
impose monthly premiums for Medicaid. For example, states may
require certain workers with disabilities to pay premiums and
cost-sharing set on a sliding scale based on income. For one of
these groups, states may require those with income between 250
percent and 450 percent FPL to pay the full premium. But the
sum of such payments may not exceed 7.5 percent of income. For
other groups, states may not require prepayment of premiums and
may not terminate eligibility due to failure to pay premiums,
unless such failure continues for at least 60 days. States may
also waive premiums when such payments would cause undue
hardship.
Unless otherwise specified for a given coverage group,
Medicaid eligibility for children is limited to those in
families with income up to 133\1/3\ percent of the applicable
AFDC payment standard in place as of July 16, 1996. In
addition, targeted low-income children under SCHIP statute are
defined as those who would not qualify for Medicaid under the
state plan in effect on March 31, 1997. Payments for services
provided to children who receive Medicaid benefits through an
expansion of eligibility under SCHIP authority are reimbursed
by the federal government at the enhanced federal medical
assistance percentage (E-FMAP) rate, and funds based on this
rate are drawn from annual SCHIP allotments. The SCHIP E-FMAP
builds on the Medicaid FMAP. The FMAP formula is designed to
provide a higher federal matching rate for states with lower
average per capita income, compared to the national average.
Senate Bill
The Senate bill would create a new optional Medicaid
eligibility group for children with disabilities under age 19
who meet the severity of disability required under the
Supplemental Security Income (SSI) program with family income
that exceeds SSI financial standards but is below 300 percent
FPL. Medicaid coverage would be phased in by age group,
beginning with children through age 6 in the second through
fourth quarters of FY2008, then covering children through age
12 beginning in FY2009, and finally, covering children through
age 18 during FY2010 and thereafter.
The Senate bill would require states to require certain
parents of children eligible for Medicaid under the new
optional coverage group to enroll in family coverage through
employer-sponsored insurance (ESI) if certain conditions are
met. When the employer offers family coverage, the parent is
eligible for such coverage, and the employer contributes at
least 50 percent of the total cost of annual premiums for such
coverage, states must require participation in such coverage as
a condition of continuing Medicaid eligibility for the child.
Also, if such coverage is obtained, states must reduce premiums
by an amount that reasonably reflects the premium contribution
made by the parent for private coverage on behalf of a child
with a disability. States could pay any portion of required
premiums on behalf of eligible children under such plans.
Medicaid would be the secondary payer to these ESI plans.
Benefits offered by Medicaid but not offered by the ESI plans
would be covered under Medicaid.
States would be permitted, within certain limits, to
require families with children that qualify for Medicaid under
the new optional eligibility category to pay monthly premiums
on a sliding scale based on income, but only if specific caps
on aggregate payments for cost-sharing (premiums plus other
charges) for employer-sponsored family coverage are met. These
caps specify that cost-sharing would not exceed 5 percent of
income for families with income up to 200 percent FPL, and
would not exceed 7.5 percent of income for families with income
between 200 percent and 300 percent FPL. States could not
require prepayment of premiums, nor would states be allowed to
terminate eligibility of an enrolled child for failure to pay
premiums unless lack of payment continues for a minimum of 60
days beyond the due date. States could waive payment of
premiums when such payment would cause undue hardship.
The Senate bill would permit the income level for the new
optional coverage group (set at 300 percent FPL) to exceed the
otherwise applicable AFDC-related income standard for children
under Medicaid. This section also stipulates that children with
disabilities made eligible for Medicaid through the new
optional coverage group would not be considered to be targeted
low-income children as defined under SCHIP. Thus, the regular
Medicaid FMAP, rather than the higher SCHIP E-FMAP, would apply
for determining the federal share of Medicaid expenditures for
the new optional coverage group. In addition, federal payments
would be drawn from the open-ended Medicaid account and not the
capped SCHIP account.
These provisions would be effective for items and
services furnished on or after January 1, 2008.
House Bill
No provision.
Conference Agreement
The conference agreement includes the Senate bill, with
modifications. First, the agreement defines qualifying children
as those considered disabled under the SSI program without
regard to any income or asset eligibility requirements that
apply under SSI for children and whose family income does not
exceed 300 percent FPL. In addition, the agreement moves up the
start date by one year for phasing in Medicaid coverage for
this new group. That is, Medicaid coverage would be phased in,
beginning with children through age 6 in the second through
fourth quarters of FY2007 (rather than FY2008), then covering
children through age 12 beginning in FY2008 (rather than
FY2009), and finally, covering children through age 18
beginning in FY2009 (rather than FY2010) and thereafter.
As under the Senate bill, the conference agreement allows
states to impose income-related premiums under this option. But
the agreement changes the aggregate amount of cost sharing for
families based on income levels.
For children in families with income that does not exceed
200 percent FPL, the aggregate amount of premiums for Medicaid
coverage and any premium for employer-sponsored family coverage
(in order to cover the disabled child) plus other cost-sharing
cannot exceed 5 percent of family income. For children in
families with income between 200 percent FPL and 300 percent
FPL, the aggregate amount of premiums for Medicaid coverage and
any premium for employer-sponsored family coverage (in order to
cover the disabled child) plus other cost sharing cannot exceed
7.5 percent of family income.
Finally, the conference agreement changes the effective
date of these provisions to January 1, 2007.
Demonstration Projects Regarding Home and Community-based Alternative
to Psychiatric Residential Treatment Facilities for Children
(Section 6063 of the Conference Agreement, Section 6043 of the
Senate Bill, and no provision in the House Bill)
Current Law
Medicaid home and community-based service (HCBS) waivers
authorized by Section 1915(c) of the Social Security Act allows
states to provide a broad range of home and community-based
services to Medicaid beneficiaries who would otherwise need the
level of care provided in a hospital, nursing facility, or
intermediate care facility for individuals with mental
retardation (ICF-MR). Federal approval for these waivers is
contingent on the state's documentation of the waiver's cost-
neutrality. Cost-neutrality is met if, on average, the per
person cost with the HCBS waiver is no higher than the cost if
the person were residing in a hospital, nursing home, or ICF-
MR. The state determines which type of institution(s) it will
use to make the cost-neutrality calculation.
For children with psychiatric disabilities, many states
provide Medicaid funding for inpatient psychiatric residential
treatment facilities. However, because the waiver cost-
neutrality calculation does not allow a comparison of HCBS
waiver expenditures to expenditures in these psychiatric
residential treatment facilities, most states have had
difficulty covering HCBS waiver services for children with
psychiatric disabilities. Four states (Indiana, Kansas, New
York and Vermont) have been able to offer HCBS waiver services
for children with psychiatric disabilities by documenting the
cost-neutrality of the waiver compared to the state's hospital
expenditures. However given the cost-neutrality requirement,
those states that have limited the use of hospitals for
children with psychiatric disabilities may be unable to develop
HCBS waivers for this population.
Senate Bill
The Senate bill would authorize the Secretary to conduct
demonstration projects in up to 10 states during the period
from FY2007 through FY2011 to test the effectiveness of
improving or maintaining the child's functional level, and
cost-effectiveness of providing coverage of home and community-
based alternatives to psychiatric residential treatment, for
children enrolled in Medicaid. These demonstration projects
will develop home and community-based services as an
alternative to a psychiatric residential treatment facility.
However, these projects must also follow the requirements of
the HCBS waiver program. Specifically, demonstration
participants would be required to meet the level of care of a
psychiatric residential treatment facility, and the average,
per-person project expenditures may not exceed the average,
per-person cost of a psychiatric residential treatment
facility.
The demonstration states would be selected through a
competitive bidding process. At the end of the demonstration
period, the state may allow children enrolled in the
demonstration project to continue receiving the Medicaid home
and community-based waiver services provided under the
demonstration; however, no new children could be added to the
project.
As part of the demonstration, the following conditions
would apply: (1) projects must meet the same terms and
conditions that apply to all HCBS waivers; (2) the Secretary
must ensure that the projects are budget neutral; that is,
total Medicaid expenditures under the demonstration projects
will not be allowed to exceed the amount that the Secretary
estimates would have been paid in the absence of the
demonstration projects; and (3) applications for a
demonstration project must include an assurance to conduct an
interim and final evaluation by an independent third party and
any reports that the Secretary may require.
This proposal would appropriate $218 million for FY2007
through FY2011 for the state demonstration projects and the
federal evaluations and report. Total expenditures for state
demonstration projects would not be allowed to exceed $21
million in FY2007, $37 million in FY2008, $49 million in
FY2009, $53 million in FY2010, and $57 million in FY2011. Funds
not expended in a given fiscal year would continue to be
available in subsequent fiscal years. An additional $1 million
would be available to the Secretary to complete a required
interim and final evaluation of the project and report the
conclusions of the evaluations to the President and Congress
within 12 months of completing these evaluations.
House Bill
No provision.
Conference Agreement
The conference agreement follows the Senate provision.
Development and Support of Family-to-Family Health Information Centers
(Section 6064 of the Conference Agreement, Section 6044 of the
Senate Bill, and no provision in the House Bill)
Current Law
Family-to-family health centers provide information and
assistance to help families of children with special health
care needs navigate the system of care and make decisions about
the needs and available supports for their child. No provision
in current law specifically authorizes a dedicated amount of
funds for these family-to-family health information centers.
However, since 2002, the Department of Health and Human
Services (HHS) has awarded approximately $6.9 million to
develop these information centers in 36 states under various
program authorities including: (1) Special Projects of Regional
and National Significance Program (SPRANS) of the Maternal and
Child Services Block Grant (Title V of the Social Security Act)
operated by the Health Resources Services Administration
(HRSA); (2) the Real Choice Systems Change grant program
operated by the Centers for Medicare and Medicaid Services
(CMS); and (3) a one-year direct Congressional appropriation to
an organization in Iowa. Federal funding for these projects is
time-limited. Except for the one-year direct appropriation,
state projects have generally been funded for a three- or four-
year period. HRSA intends to fund additional family-to-family
health information centers awarding up to $2.4 million to six
projects for a four-year period starting in FY2006.
Senate Bill
The Senate bill would increase funding under the SPRANS
program of Title V of the Social Security Act for the
development and support of new family-to-family health
information centers (described below). This proposal would
appropriate an additional $3 million for FY2007, $4 million for
FY2008, and $5 million for FY2009 for this new purpose. For
each of fiscal years 2010 and 2011, the bill would authorize to
be appropriated to the Secretary $5 million for this purpose.
Funds would remain available until expended.
The family-to-family health information centers would:
(1) assist families of children with disabilities or special
health care needs to make informed choices about health care so
as to promote good treatment decisions, cost-effectiveness, and
improved health outcomes for such children; (2) provide
information regarding the health care needs of, and resources
available for children with disabilities or special health care
needs; (3) identify successful health delivery models; (4)
develop a model for collaboration between families of such
children and health professionals; (5) provide training and
guidance with regard to the care of such children; and (6)
conduct outreach activities to the families of such children,
health professionals, schools, and other appropriate entities
and individuals. The family-to-family health information center
would be staffed by families who have expertise in public and
private health care systems and by health professionals.
The Secretary would be required to develop family-to-
family health information centers in at least 25 states in
FY2007, 40 states in FY2008, and all states in FY2009.
House Bill
No provision.
Conference Agreement
The conference agreement follows the Senate provision.
Restoration of Medicaid Eligibility for Certain SSI Beneficiaries
(Section 6065 of the Conference Agreement, Section 6045 of the
Senate Bill, and no provision in the House Bill)
Current Law
SSI and Medicaid eligibility is effective on the later of
(1) the first day of the month following the date the
application is filed, or (2) the first day of the month
following the date that the individual is determined eligible.
Senate Bill
The Senate bill would extend Medicaid eligibility to
persons who are under age 21 and who are eligible for SSI,
effective on the later of: (1) the date the application was
filed, or (2) the date SSI eligibility was granted. This
provision would be effective one year after the date of
enactment.
House Bill
No provision.
Conference Agreement
The conference agreement includes the Senate bill
provision.
Subchapter B--Money Follows the Person Rebalancing Demonstration
Money Follows the Person Rebalancing Demonstration (Section 6071 of the
Conference Agreement, Section 6061 of the Senate Bill, and no
provision in the House Bill)
Current Law
Under Medicaid, states can offer a variety of home and
community-based services to Medicaid beneficiaries who need
long-term care. Some of these services may be offeredstatewide
as part of the Medicaid state plan (e.g., home health services and
personal care services). Other services may be offered through a home
and community-based services (HCBS) waiver under Section 1915(c) of the
Social Security Act. These waivers allow states to provide a broad
range of home and community-based services to individuals who would
otherwise require the level of care provided in certain types of
institutions (i.e., a hospital, nursing facility or intermediate care
facility for individuals with mental retardation (ICF-MR)). For
example, HCBS waiver services could include respite, personal care,
adult day care, or therapy. As part of the HCBS waiver, states have the
ability to define the specific services that will be offered, to target
a specific population (e.g., elderly individuals) and to limit the
number of individuals who can participate in the waiver.
Approval for an HCBS waiver is contingent on a state
documenting the cost-neutrality of the waiver. Cost-neutrality
is met if the average per person cost under the HCBS waiver is
no higher than the average per person cost of receiving care in
a hospital, nursing facility or ICF-MR. The state determines
which type of institution(s) it will use to make the cost-
neutrality calculation.
Under current law, Medicaid beneficiaries who are
residents of an institution (such as a nursing home) and who
would like to leave that institution would be entitled to
receive those Medicaid services covered by the Medicaid state
plan. However, individuals may not be able to access the
broader range of services under an HCBS waiver because many
states have waiting lists for the waiver.
Medicaid expenditures for services (including the
Medicaid state plan and HCBS waiver) are generally shared
between the federal and state governments. In FY2003 (the
latest expenditure data available), the federal government
covered 59 percent of the cost of services; states covered the
remaining 41 percent of expenditures. The specific federal
share of a state is based on the state's federal medical
assistance percentage (FMAP) rate which can range from 50
percent to 83 percent.
Senate Bill
The Senate provision would authorize the Secretary to
conduct a demonstration project in states to increase the use
of home and community-based care instead of institutions.
States awarded a demonstration would receive 90 percent of the
costs of home and community-based, long-term care services
(under a HCBS waiver and/or the state plan) for 12 months
following a demonstration participant's transition from an
institution into the community. In a given fiscal year, funding
would be capped at the amount of a state's grant award. After
the 12 months of grant funding, the state would be required to
continue providing services through a Medicaid home and
community-based long-term care program, as described below.
Individuals will be eligible to participate in the
demonstration if they meet the following criteria: they are
residents of a hospital, nursing facility, ICF-MR, or an
institution for mental disease (IMD) (but only to the extent
that the IMD benefit is offered as part of the existing state
Medicaid plan); they have resided in the facility for no less
than six months or for a longer time period specified by the
state (up to a maximum of two years); they are receiving
Medicaid benefits for the services in this facility; and they
will continue to require the level of care of the facility but
for the provision of HCBS services.
The state's application for a demonstration project will
be required to include, at a minimum, the following
information: (1) assurance that the project was developed and
will be operated through a public input process; (2) assurance
that the project will operate in conjunction with an existing
Medicaid home and community-based program; (3) the duration of
the project, which must be for at least two consecutive fiscal
years in a five-year period starting in FY2009; (4) the service
area, which may be statewide or less-than-statewide; (5) the
target groups and the projected number to be enrolled and the
estimated total expenditures for each fiscal year; (6)
assurance that the project defers to individual choice and that
the state will continue services for participants after the
demonstration ends, as long as the state offers such services
and the individual remains eligible; (7) information on recent
Medicaid expenditures for long-term care and home and
community-based services and proposed methods to increase the
state's investment in home and community-based services; (8)
methods the state will use to eliminate barriers to paying for
long-term care services for participants in the setting(s) of
their choice; (9) assurance that the state will meet a
maintenance of effort for Medicaid HCBS expenditures and will
continue to operate a HCBS waiver that meets the statutory
requirements for cost-neutrality.
A state will also be required to describe a plan for
quality assurance and improvement of HCBS services under
Medicaid; any requested waivers of Medicaid law; if applicable,
the process for participants to self-direct his or her own
services (meeting standards outlined in this proposal); and
compliance with reports and evaluation, as required by the
Secretary.
In addition to evaluating the merits of a state's
application, in selecting demonstration projects, the Secretary
will be required to consider a national balance of target
groups and geographic distribution and to give a preference to
states that cover multiple groups or offer project participants
the opportunity to self-direct their services. The Secretary
will be authorized to waive certain sections of Medicaid law to
achieve the purpose of the demonstration.
To qualify for grant awards after year one, states will
be required to meet numerical benchmarks measuring the
increased investment in services under this proposal and the
number of individuals transitioned into the community. States
will also be required to demonstrate that they are assuring the
health and welfare of project participants. For states that do
not meet these requirements, the Secretary will be required to
rescind the grant award for future grant periods and will be
allowed to re-award unused funding.
The proposal would require the Secretary to provide
technical assistance and oversight to state grantees and may
use up to $2.4 million of the amounts appropriated for the
portion of fiscal year 2009 that begins on January 1, 2009, and
ends on September 30, 2009, and for fiscal year 2010, to carry
out these activities during the period beginning on January 1,
2009 and ending on September 30, 2013. The Secretary would also
be required to conduct a national evaluation and report its
findings to the President and Congress no later than September
30, 2012 and may use up to $1.1 million each year from FY2010
through FY2013 to carry out these activities.
This proposal would appropriate $250 million for the
portion of FY2009 which begins on January 1, 2009, and ends on
September 30, 2009; $300 million in FY2010; $350 million in
FY2011; $400 million in FY2012; and $450 million in FY2013 to
carry out the demonstration project. Funds not awarded to
states in a given fiscal year would continue to be available in
subsequent fiscal years through September 30, 2013.
Payments for home and community-based long-term care
services under the demonstration project would be in lieu of
payment with respect to expenditures that could otherwise be
paid for by Medicaid. However, if a state exhausts its grant
funding in a particular year, the state is not prevented from
using Medicaid to pay for home and community-based longterm
care services. Finally, a state that does not use all of its funding in
a given fiscal year will continue to have access to that funding for
four subsequent fiscal years.
House Bill
No provision.
Conftrence Agreement
The conference agreement follows the Senate provision,
but makes several changes to the Senate bill. First, to be
eligible an individual must continue to require the level of
care in an institution. However, in any case where a state
would apply a more stringent level of care standard as a result
of implementing a Medicaid state plan option under section
1915(I), established under this conference agreement, the
individual must continue to require the level of care which had
resulted in admission to the institution.
A state must assure that it will continue services for
participants after the demonstration ends, as long as the state
offers such services and the individual remains eligible. If
the state chooses to apply a more stringent level of care as a
result of covering the state plan option under Section 1915(I),
established under this conference agreement, the individual
must continue to meet the requirement for the level of care
that had resulted in his or her admission to the institution.
In addition, those states awarded a demonstration would
receive an enhanced FMAP rate (referred to as the ``MFP-
enhanced FMAP'') equal to the current FMAP rate for the state
increased by a number of percentage points equal to 50 percent
of the difference between 100 percent and the normal FMAP rate.
However, in no case can the FMAP rate exceed 90 percent for a
state. The state will receive the MFP-enhanced FMAP for the
costs of home and community-based, long-term care services for
12 months following a demonstration participant's transition
from an institution into the community.
Finally, demonstration grants would be awarded starting
in 2007, instead of 2009 which changes all relevant dates
within this provision including:
<bullet> The duration of the project must be for at least
two consecutive fiscal years in a five-year period starting in
FY2007; and
<bullet> The Secretary would be able to use up to $2.4
million of the amounts appropriated for the portion of fiscal
year 2007 that begins on January 1, 2007, and ends on September
30, 2007, and for fiscal year 2008, to carry out technical
assistance and quality assurance activities during the period
beginning on January 1, 2007 and ending on September 30, 2011;
and
<bullet> The Secretary will also be required to report
evaluation and findings to the President and Congress no later
than September 30, 2011 and may use up to $1.1 million each
year from FY2008 through FY2011 to carry out these activities;
and
<bullet> The provision would appropriate $250 million for
the portion of FY2007 which begins on January 1, 2007, and ends
on September 30, 2007; $300 million in FY2008; $350 million in
FY2OO9; $400 million in FY2010; and $450 million in FY2011 to
carry out the demonstration project; and
<bullet> Funds not awarded to states in a given fiscal
year would continue to be available in subsequent fiscal years
through September 30, 2011.
Subchapter C--Miscellaneous
Medicaid Transformation Grants (Section 6081 of the Conference
Agreement, no provision in the Senate Bill, and Section 3143 of
the House Bill)
Current Law
Section 1903(a) of the Social Security Act describes the
level of federal reimbursement available to states for various
Medicaid program functions. The federal medical assistance
percentage (FMAP) is the rate at which states are reimbursed
for most Medicaid service expenditures. It is based on a
formula that provides higher reimbursement to states with lower
per capita incomes relative to the national average (and vice
versa); it has a statutory minimum of 50 percent and maximum of
83 percent. The federal reimbursement rate for Medicaid
administrative expenditures does not vary by state and is
generally 50 percent, but certain administrative functions
receive enhanced (usually 75 percent) reimbursement.
Senate Bill
No provision.
House Bill
Under the House bill, in addition to the normal federal
Medicaid reimbursement received by states under section 1903(
a), the Secretary of HHS would provide for payments to states
for the adoption of innovative methods to improve the
effectiveness and efficiency in providing medical assistance
under Medicaid.
Examples of innovative methods for which such funds may
be used include: (1) methods for reducing patient error rates
through the implementation and use of electronic health
records, electronic clinical decision support tools, or e-
prescribing programs, (2) methods for improving rates of
collection from estates of owed to Medicaid, (3) methods for
reducing waste, fraud, and abuse under Medicaid, such as
reducing improper payment rates as measured by the annual
payment error rate measurement (PERM) project rates, (4)
implementation of a medication risk management program as part
of a drug use review program, and (5) methods for reducing, in
clinically appropriate ways, Medicaid expenditures 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 generics.
No payments would be made to a state unless the state
applied to the Secretary of HHS for such payments in a form,
manner, and time specified by the Secretary. Payments would be
made under such terms and conditions consistent with the
subsection as the Secretary prescribes. Payment to a state
under the subsection would be conditioned on the state
submitting to the Secretary an annual report on the programs
supported by such payment. The reports would include
information on: (1) the specific uses of such payment, (2) an
assessment of the quality improvements and clinical outcomes
under such programs, and (3) estimates of the cost savings
resulting from such programs.
Total payments would equal and not exceed $50 million in
each of FY2007 and FY2008. The Secretary would specify a method
for allocating the funds among states. Such method would
provide preference for states that design programs that target
health providers that treat significant numbers of Medicaid
beneficiaries. The method would also allocate at least 25
percent of the funds among states whose populations as of July
1, 2004 were more than 105 percent of their populations as of
April 1, 2000.
Conference Agreement
The conference agreement follows the House bill, but
would increase total payments to equal and not exceed $75
million in each of FY2007 and FY2008. The agreement also adds,
as an additional option for use of funds, methods for improving
access to primary and specialty physician care for the
uninsured using integrated university-based hospital clinic
systems. Conferees believe that it is important to develop new
models to meet the needs of the uninsured. University-based
physicians are uniquely qualified to assume this task. Bringing
the resources of academia and health care systems together to
serve the poor and medically needy will create new
opportunities to develop strategies that can be used on a
broader scale.
Improved Enforcement of Documentation Requirements (Section 6082 of the
Conference Agreement, no provision in the Senate Bill, and
Section 3145 of the House Bill)
Current Law
To be eligible for the full range of benefits offered
under Medicaid, an individual must be a citizen or national of
the United States or a qualified alien (e.g., a legal permanent
resident, refugee, alien granted asylum or related relief) who
meets all other Medicaid program eligibility criteria. Non-
qualified aliens (e.g., those who are unauthorized or illegally
present, non-immigrants admitted for a temporary purpose such
as education or employment, short-term parolees) who would
otherwise be eligible for Medicaid except for their immigration
status may only receive Medicaid care and services that are
necessary for the treatment of an emergency medical condition
and are not related to an organ transplant procedure.
As a condition of an individual's eligibility for
Medicaid benefits, Section 1137(d) of the Social Security Act
requires a state to obtain a written declaration, under penalty
of perjury, stating whether the individual is a citizen or
national of the United States. If an individual declares that
he or she is a citizen or national, the state is not required
to obtain additional documentary evidence but may choose to do
so. According to a 2005 report from the Department of Health
and Human Services' Office of Inspector General, 46 states and
the District of Columbia allow or sometimes allow self-
declaration of United States citizenship, while four states
require Medicaid applicants to submit documentary evidence to
verify citizenship statements.
If an individual declares that he or she is not a citizen
or national, the individual must declare that he or she is a
qualified alien and must present: (1) alien registration
documentation or other proof of immigration registration from
the Department of Homeland Security's United States Citizenship
and Immigration Services Bureau (DHS/USCIS, formerly the
Immigration and Naturalization Service) or (2) other documents
determined by the state to constitute reasonable evidence of
satisfactory immigration status. If an individual presents DHS/
USCIS documentation, the state must verify the individual's
immigration status with DHS/USCIS through the automated
Systematic Alien Verification for Entitlements (SAVE) system,
or by using an alternative verification system approved by the
Secretary of Health and Human Services. States receive 100
percent federal reimbursement for the operation of such
systems.
Senate Bill
No provision.
House Bill
Under the House bill, states would be prohibited from
receiving federal reimbursement for medical assistance provided
under Medicaid to an individual who has not provided
satisfactory documentary evidence of citizenship or
nationality.
Such evidence would include one of the following
documents:
<bullet> a United States passport;
<bullet> Form N-550 or N-570 (Certificate of
Naturalization);
<bullet> Form N-560 or N-561 (Certificate of United
States Citizenship);
<bullet> such other document that 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.
Satisfactory documentary evidence would also include a
document from each of the fol1owing lists:
<bullet> a certificate of birth in the United States;
<bullet> Form FS-545 or Form DS-1350 (Certificate of
Birth Abroad);
<bullet> Form 1-97 (United States Citizen Identification
Card);
<bullet> Form FS-240 (Report of Birth Abroad of a Citizen
of the United States); or
<bullet> such other document as the Secretary may specify
(excluding a document specified by the Secretary as described
above) that provides proof of United States citizenship or
nationality;
AND
<bullet> any identity document described in section
274A(b)(l)(D) of the Immigration and Nationality Act; or
<bullet> any other documentation of personal identity of
such other type as the Secretary finds, by regulation, provides
a reliable means of identification.
The documentary requirements would not apply to an alien
who is: (1) eligible for Medicaid and is entitled to or
enrolled for Medicare benefits, (2) eligible for Medicaid on
the basis of receiving Supplemental Security Income benefits,
or (3) eligible for Medicaid on such other basis as the
Secretary may specify under which satisfactory documentary
evidence of citizenship or nationality had been previously
presented.
The provision would apply to determinations of initial
eligibility for Medicaid made on or after July 1, 2006, and to
redeterminations made after such date in the case of
individuals for whom the new documentary requirements were not
previously met.
Conference Agreement
The conference agreement follows the House bill, but
allows a state-issued driver's license or other identity
document described in section 274(A)(b)(1)(D) of the
Immigration and Nationality Act as satisfactory evidence, but
only if the state issuing the license or such document requires
proof of U.S. citizenship before issuance or obtains a Social
Security number from the applicant and verifies before
certification that such number is valid and assigned to an
applicant who is a citizen.
Health Opportunity Accounts (Section 6083 of the Conference Agreement,
no provision in the Senate Bill, and Section 3134 of the House
Bill)
Current Law
Medicaid is a joint federal-state entitlement program
that finances health care coverage for certain low-income
families, children, pregnant women, and individuals who are
aged or disabled. To qualify for Medicaid, an individual must
meet both categorical and financial eligibility requirements.
The specific income and resource limitations that apply to each
eligibility group are set through a combination of federal
parameters and state definitions. Each state designs and
administers its own program under broad federal guidelines.
Variation exists among states in eligibility, covered services,
and the delivery of, and reimbursement for services. States
that wish to experiment with new approaches for providing
health care coverage that promote the objectives of the
Medicaid program may seek approval for Section 1115
demonstration waivers.
Medicaid's basic benefits rules require all states to
provide certain ``mandatory'' services as listed in Medicaid
statute. Federal matching payments are also available for
optional services if states choose to include them in their
Medicaid plans. States define the specific features of each
service to be provided under that plan within broad federal
guidelines including: (1) Amount, duration, and scope. Each
covered service must be sufficient in amount, duration, and
scope to reasonably achieve its purpose, (2) Comparability.
With certain exceptions, services available to any
categorically needy beneficiary in a state must be equal in
amount, duration, and scope to those available to any other
categorically needy beneficiary in the state. Similarly,
services available to any medically needy beneficiary in a
state must be equal in amount, duration, and scope to those
available to any other medically needy beneficiary in the
state, (3) Statewideness. State plan services must be covered
throughout an entire state, and (4) Freedom of choice. With
certain exceptions, a state's Medicaid plan must allow
recipients freedom of choice among health care providers or
managed care entities participating in Medicaid.
States may generally impose nominal cost-sharing on
beneficiaries, with certain exceptions. They are precluded from
imposing cost sharing on services for children under 18,
services related to pregnancy, family planning or emergency
services, services provided to nursing facility residents who
are required to spend all of their income for medical care
except for a personal needs allowance, and services furnished
to individuals receiving hospice care. States may require
nominal copayments, coinsurance, or deductibles within federal
limits from other beneficiaries or for other services.
Beneficiaries may be charged only one type of cost sharing per
service. Providers may collect cost sharing amounts from
beneficiaries and generally are not to be reimbursed by the
state if they are unsuccessful in collecting cost sharing from
beneficiaries. Providers generally may not deny services if
beneficiaries are unable to pay cost sharing amounts.
For the most part, states establish their own rates to
pay Medicaid providers for services. By regulation these rates
must be sufficient to enlist enough providers so that covered
services will be available to Medicaid beneficiaries at least
to the extent they are available to the general population in a
geographic area. All providers are required to accept payments
under the program as payment in full for covered services
except where states require nominal cost-sharing by
beneficiaries.
Senate Bill
No provision.
House Bill
The House bill would require the Secretary of HHS to
establish no more than 10 demonstration programs within
Medicaid for health opportunity accounts (HOA), effective
January 1, 2006. While demonstration programs described in the
House bill have some of the elements of a Section 1115
demonstration waiver, ``Health Opportunity Accounts,'' as
defined by the provision, are not explicitly authorized under
current law.
If successful during the initial 5-year test period,
other demonstrations would be approved. HOAs would be used to
pay (via electronic funds transfers) health care expenses
specified by the state; payments could be restricted to
licensed or otherwise authorized providers as well as to items
and services that are medically appropriate or necessary.
Eligibility for HOAs would be determined by the state, though
individuals age 65 or older, or who are disabled, pregnant, or
receiving terminal care or long-term care, would be among those
who would be precluded from participating. Once account holders
were no longer eligible for Medicaid they could continue to
make HOA withdrawals under state-specified conditions, though
accounts could then also be used to pay for health insurance
or, at state option, for job training or education. Among other
things, state demonstration programs would have to make
patients aware of the high cost of medical care, provide
incentives for them to seek preventive care, and reduce
inappropriate uses of health care.
Demonstration participants would have both an HOA and
coverage for medical items and services that, after an annual
deductible is met, were available under the existing Medicaid
state plan and/or Section 1115 waiver authorities. HOA
contributions could be made by the state or by other persons or
entities, including charitable organizations. Including federal
shares, state contributions generally could not exceed $2,500
for each adult and $1,000 for each child.
Demonstration participants would be required to meet an
annual deductible before they would be permitted to access
coverage for medical items and services available under the
existing Medicaid state plan and/or Section 1115 waiver
authorities. The deductible would have to be at least 100
percent, but no more than 110 percent, of the annual state
contributions to the HOA. Both the deductible and the maximum
for out-of-pocket cost-sharing could vary among families. The
deductible need not apply to preventive care.
The House bill would require demonstration participants
to be able to obtain services from Medicaid providers or
managed care organizations at the same payment rates that would
be applicable if the coverage deductible did not apply, or from
any provider for payment rates not exceeding 125 percent of
those rates.
Conference Agreement
The House bill is agreed to with the following
modifications. The conference agreement requires the Secretary
of HHS to establish no more then 10 demonstration programs
within Medicaid for health opportunity accounts (HOA),
effective January 1, 2007. If successful (based on cost-
effectiveness, quality of care and other Secretary-specified
criteria) during the initial 5-year test period, such
demonstrations may be extended or made permanent, and other
demonstrations may be approved. Not later than 3 months prior
to the end of the initial 5-year test period, the conference
agreement requires the Comptroller General of the Unites States
to submit an evaluation of the demonstration programs to
Congress.
HOAs are used to pay (via electronic funds transfers)
health care expenses specified by the state; payments could be
restricted to licensed or otherwise authorized providers as
well as to items and services that are medically appropriate or
necessary. Eligibility for HOAs is determined by the state,
though individuals age 65 or older, or who are disabled,
pregnant, or receiving terminal care or long-term care, are
among those who are precluded from participating. Once account
holders are no longer eligible for Medicaid they may continue
to make HOA withdrawals under state-specified conditions for a
period of three years, though no additional account
contributions will be made and the account balances will be
reduced by 25 percent. For ineligible individuals who
participated in the demonstration program for at least one
year, accounts could then also be used to pay for health
insurance or, at state option, for additional expenditures such
as job training or education. The conference agreement adds a
1-year moratorium for reenrollment, whereby eligible
individuals disenrolled from the state demonstration programs
are not permitted to reenroll for a full year from such
individual's disenrollment date. Among other things, state
demonstration programs are required to make patients aware of
the high cost of medical care, provide incentives for them to
seek preventive care, and reduce inappropriate uses of health
care.
The conference agreement requires demonstration
participants have both an HOA and coverage for medical items
and services that, after an. annual deductible is met, are
available under the existing Medicaid state plan and/or Section
1115 waiver authorities. HOA contributions could be made by the
state or by other persons or entities, including charitable
organizations as permitted under current law. Including federal
shares, state contributions generally may not exceed $2,500 for
each adult and $1,000 for each child.
The conference agreement requires demonstration
participants to meet an annual deductible before they are
permitted to access coverage for medical items and services
available under the existing Medicaid state plan and/or Section
1115 waiver authorities. The deductible must be at least 100
percent, but no more than 110 percent, of the annual state
contributions to the HOA without regard to state-specified
limits on the HOA balance. Both the deductible and the maximum
for out-of-pocket cost-sharing could vary among families. The
deductible need not apply to preventive care.
The conference agreement requires demonstration
participants to be able to obtain services from Medicaid
providers, or Medicaid managed care organizations at the same
payment rates that are applicable if the coverage deductible
did not apply, or from any other provider or managed care
organization at payment rates not exceeding 125 percent of such
Medicaid provider payment rates. The conference agreement
requires that the payment rates for Medicaid providers or
managed care organizations be computed without regard to any
cost sharing that are otherwise applicable under current law
(as modified by the conference agreement).
State Option to Establish Non-emergency Medical Transportation Program
(Section 6084 of the Conference Agreement, no provision in the
Senate Bill, and Section 3125 of the House Bill)
Current Law
Federal regulations require states to ensure necessary
transportation for beneficiaries to and from providers. When
states offer transportation as an optional benefit, federal
reimbursement uses the federal assistance medical percentage
(FMAP) rate which varies by state and ranges from 50 percent to
83 percent. FMAP reimbursement is only available if
transportation is furnished by a provider to whom a direct
payment can be made. Beneficiaries must have freedom of choice
among transportation providers and such services must be equal
in amount, duration and scope for all beneficiaries classified
as categorically needy (CN). This comparability requirement
also applies among medically needy (MN) groups. Other
arrangements, such as payments to a broker who manages and pays
transportation vendors, must be c1aimed as an administrative
expense rather than as a benefit. Such costs are reimbursed by
the federal government at 50 percent, and fewer federal
requirements must be met.
Senate Bill
No provision.
House Bill
The House bill would allow states to establish a non-
emergency medical transportation brokerage program for
beneficiaries who need access to medical care but have no other
means of transportation. The state would not be required to
provide comparable services for all Medicaid enrollees, nor
freedom of choice among providers. The program would include
wheelchair van, taxi, stretcher car, bus passes and tickets,
and other transportation methods deemed appropriate by the
Secretary, and could be conducted under contract with a broker
who: (1) is selected through a competitive bidding process that
assesses the broker's experience, references, qualifications,
resources and costs; (2) has oversight procedures to monitor
beneficiary access and complaints and to ensure that transport
personnel are licensed, qualified, competent and courteous; (3)
is subject to regular auditing by the state to ensure quality
of services and adequacy of beneficiary access to medical care;
and (4) complies with requirements related to prohibitions on
referrals and conflict of interest established by the
Secretary. These provisions would be effective upon enactment.
The Office of the Inspector General (OIG) of DHHS would
be required to submit a report to Congress examining the non-
emergency medical transportation brokerage program implemented
under this provision no later than January 1, 2007. This report
must include findings regarding conflicts of interest and
improper utilization of transportation services under this
program, as well as recommendations for improvements.
Conference Agreement
The conference agreement includes the House bill, and
specifies that non-emergency medical transportation brokerage
programs do not have to be available statewide.
Extension of Transitional Medical Assistance (TMA) and Abstinence
Education Program (Section 6085 of the Conference Agreement, no
provision in the Senate Bill, no provision in the House Bill)
Current Law
States are required to continue Medicaid benefits for
certain low-income families who would otherwise lose coverage
because of changes in their income. This continuation of
benefits is known as transitional medical assistance (TMA).
States are currently required to provide TMA to families losing
eligibility for Medicaid under two scenarios: one related to
child or spousal support, and one related to work.
First, under 1931(c) of the Social Security Act, states
must provide four months of TMA coverage to families losing
Medicaid eligibility due to increased child or spousal support.
This is a permanent provision of law with no sunset date.
Second, states are required to provide TMA to families
losing Medicaid eligibility for work-related reasons. While
Section 1902(e)(1) of the Social Security Act permanently
requires states to provide four months of TMA to families
losing Medicaid eligibility due to an increase in hours of work
or income from employment, the Family Support Act (FSA) of 1988
expanded state TMA requirements under Section 1925 of the
Social Security Act. As a result, states are currently required
to provide at least six, and up to 12, months of TMA coverage
to families losing Medicaid eligibility due to increased hours
of work or income from employment, as well as to families who
lose eligibility due to the loss of a time-limited earned
income disregard (such disregards have the effect of increasing
the income level at which a family may qualify for Medicaid).
FSA originally authorized Section 1925 to replace the four-
month requirement in Section 1902(e)(1) through FY1998.
However, the sunset date for Section 1925 has been extended a
number of times, most recently through December 31, 2005.
Under Section 510 of the Social Security Act, federal law
appropriated $50 million annually for each of the fiscal years
1998-2003 for matching grants to states to provide abstinence
education and, at state option, mentoring, counseling, and
adult supervision to promote abstinence from sexual activity,
with a focus on groups that are most likely to bear children
out-of-wedlock. Funds must be requested by states when they
apply for Maternal and Child Health Services (MCR) Block Grant
funds and must be used exclusively for the teaching of
abstinence. States must match every $4 in federal funds with $3
in state funds.
A state's allotment of abstinence education block grant
program funding is based on the proportion of low-income
children in the state as compared to the national total.
Funding for the abstinence education block grant has been
extended through December 31, 2005 by temporary extension
measures.
Senate Bill
No provision.
House Bill
No provision.
Conference Agreement
The conference agreement extends TMA under Section 1925
of the Social Security Act through December 31, 2006. It also
extends the $50 million annual appropriation for the abstinence
education block grant program through fiscal year 2006 and
provides an additional $12.5 million for the program for the
first quarter of fiscal year 2007 (i.e., through December 31,
2006).
Emergency Services Furnished by Non-Contract Providers for Medicaid
Managed Care Entities (Section 6086 of the Conference
Agreement, no provision in the Senate Bill, and Section 3147 of
the House Bill)
Current Law
Medicaid law provides certain protections for
beneficiaries enrolled in managed care, including assuring
coverage of emergency services under each managed care contract
awarded by the state.
Senate Bill
No provision.
House Bill
A Medicaid provider that does not have a contract with a
Medicaid managed care entity (MCE) that furnishes emergency
care to a beneficiary enrolled with that MCO must accept as
payment in full the amount otherwise applicable outside of
managed care (e.g., in the fee-for-service setting) minus any
payments for indirect costs of medical education and direct
costs of graduate medical education. The effective date of this
provision would be January 1, 2007.
Conference Agreement
The conference agreement includes the House bill, but
clarifies that the fee-for-service rate is the maximum payment
rate. Also, 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 provision
must 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 the plan for tertiary
hospitals.
Subtitle B--SCHIP
Additional allotments to eliminate fiscal year 2006 funding shortfalls
(Section 6101 Subsection a of the Conference Agreement, Section
6051 Subsection a of the Senate Bill, and no provision in the
House Bill)
Current Law
In general, funds for the SCHIP program are authorized
and appropriated for FY1998 through FY2007. From each year's
appropriation, a state is allotted an amount detennined by a
formula set in law. Federal funds not drawn from a state's
allotment by the end of each fiscal year continue to be
available to that state for two additional fiscal years. At the
end of the three-year period, unspent funds from the original
allotment are reallocated in ways that vary depending on the
fiscal year. The original SCHIP law, (i.e., BBA97), specifies
that only those states that spend all of their original
allotment by the applicable three-year deadline would receive
redistributed funds from the other states' unspent allotments,
based on a process determined by the Secretary of Health and
Human Services (HHS); and these redistributed funds would be
available for one year. However, later laws (i.e., P.L. 106-554
and P.L. 108-74) overrode how the reallocation of unspent
FY1998 to FY2001 original allotments would occur. The
redistribution of unspent FY2002 SCHIP original allotments was
determined by the Secretary of HHS in accordance with the
default redistribution provision in BBA97.
Under current law, unspent original allotments from
FY2003 forward are to be redistributed according to the
original BBA97 methodology. That is, redistributed funds will
go only to those states that spend all of their original
allotments by the applicable three-year deadline, with the
redistributed amounts determined by the Secretary of HHS and
made available for one year only.
Senate Bill
In general, the Senate bill would reduce the period of
availability of the FY2004 and FY2005 original allotments from
three years to two, and would specify rules for the
reallocation of unspent FY2003, FY2004, and FY2005 SCHIP
original allotments. The reallocated FY2003 and FY2004 funds
would be available in FY2006; the reallocated FY2005 funds
would be available in FY2007.
In FY2006, the Senate bill would require that unspent
FY2003 original allotments remaining at the end of FY2005
(after a set-aside of 1.05 percent of the total unspent FY2003
funds for the territories) would be redistributed to states
with an initial projected FY2006 shortfall. The initial
projected shortfall is the amount by which a state's estimated
federal SCHIP expenditures in FY2006 would exceed the amounts
available from the state's FY2005 and FY2006 original
allotments. Each state with an initial projected shortfall
would receive a portion of the available unspent FY2003
original allotments in proportion to its contribution to the
total pool of such shortfalls. From the 1.05 percent territory
set-aside, each territory would receive an amount in proportion
to its contribution to the total pool of FY2003 original
allotments for the territories.
Also in FY2006, the Senate bill would require that the
territories receive a set-aside of 1.05 percent of the total
unspent FY2004 original allotments available at the end of
FY2005. Described states would be permitted to extend the use
of their unspent FY2004 original allotments in an amount equal
to the shortfall still remaining after receiving redistributed
FY2003 funds. Described states would be defined as states that:
(1) spent all FY2003 original allotments by the end of FY2005,
(2) did not spend all of their FY2004 original allotment by the
end of FY2005, and (3) reported an initial projected FY2006
shortfall. After the set-aside for the territories as well as
the reduction of FY2004 extended funds for the described
states, the remaining unspent FY2004 funds would be available
to states with a net projected FY2006 shortfall, defined as
each state's initial projected shortfall reduced by the
redistributed FY2003 funds it received and by the extended
FY2004 funds if it is a described state. Each state with a net
projected shortfall would receive a redistribution of FY2004
funds to cover its net projected shortfall. Any remaining
FY2004 unspent original allotments would then be extended
proportionally to states that did not spend their FY2004
allotments by the end of the two-year period of availability.
From the 1.05 percent territory set-aside, each territory would
receive an amount in proportion to its contribution to the
total pool of FY2004 original allotments for the territories.
In FY2007, the Senate bill would require that the
territories receive a set-aside of 1.05 percent of the total
unspent FY2005 original allotments available at the end of
FY2006. Described states would be permitted to extend the use
of their unspent FY2005 original allotments in an amount equal
to their initial projected FY2007 shortfall. The initial
projected shortfall is the amount by which a state's estimated
federal SCHIP expenditures for FY2007 exceeds the amount
available from the state's FY2006 and FY2007 original
allotments. Described states would be defined as states that:
(1) did not spend all of their FY2005 original allotment by the
end of FY2006, and (2) reported an initial projected FY2007
shortfall. After the set-aside for the territories as well as
the reduction of FY2005 extended funds for the described
states, the remaining unspent FY2005 funds would be available
to states with a net projected FY2007 shortfall, described as
each state's initial projected shortfall reduced by the
extended FY2005 funds for the described states. Each state with
a net projected shortfall would receive a redistribution of
FY2005 funds to cover its net projected shortfall or, if the
remaining funds are inadequate to cover the FY2007 projected
shortfalls, a portion of the available unspent FY2005 original
allotments in proportion to the state's contribution to the
total shortfall pool. If any FY2005 unspent original allotments
remain, they would then be extended proportionally to states
that did not spend their FY2005 allotments by the end of the
two-year period of availability. From the 1.05 percent
territory set-aside, each territory would receive an amount in
proportion to its contribution to the total pool of FY2005
original allotments for the territories.
To calculate the amounts available for redistribution and
retention in each formula described above, the Secretary would
use expenditures reported by states not later than November 30,
2005, for the FY2003 and FY2004 redistributions, and November
30, 2006, for the FY2005 redistribution. To calculate states
with projected shortfalls in each formula described above, the
Secretary would use projected expenditures reported by the
states not later than September 30, 2005, for the FY2003 and
FY2004 redistributions, and not later than September 30, 2006,
for the FY2005 redistribution. This provision of the Senate
bill would be effective upon enactment of this Act.
House Bill
No provision.
Conference Agreement
Out of money not otherwise available in the Treasury, the
conference agreement authorizes and appropriates $283 million
for the purpose of providing additional SCHIP allotments to
shortfall states in FY2006. The conference agreement defines
shortfall states asthose with an approved SCHIP plan for which
(based on the most recent SCHIP data as of December 16, 2005) the
Secretary estimates that such state's FY2006 projected expenditures
exceed the sum of all funds available for expenditure by that state in
FY2006 including: (1) the amount of such state's FY2004 and FY2005
original allotments that will not be expended in FY2005; (2) the
amount, if any, that is redistributed to such state during FY2006; and
(3) the amount of such state's FY2006 original allotment. From the
additional SCHIP appropriation, each FY2006 shortfall state would
receive an allotment to cover its projected shortfall or, if the
appropriated funds are inadequate to cover the FY2006 projected
shortfalls, the Secretary shall distribute the available funds on a pro
rata basis based on each such state's estimated shortfall. Such
additional SCHIP allotments are available for one year only. On October
1, 2006, any remaining unspent additional allotments will not be
subject to redistribution, but will instead revert to the Treasury.
The conference agreement limits the types of payments
that may be matched at the SCHIP enhanced matching rate for
SCHIP expenditures drawn against the additional FY2006
appropriation available to shortfall states to include child
health assistance payments made on behalf of targeted low-
income children. The amendments made by this section of the
conference agreement 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.
Prohibition against covering nonpregnant childless adults with SCHIP
funds (Section 6102 of the Conference Agreement, and Section
6053 of the Senate Bill)
Current Law
Section 1115 of the Social Security Act gives the
Secretary of HHS broad authority to modify virtually all
aspects of the Medicaid and SCHIP programs. Under Section 1115,
the Secretary may waive requirements in Section 1902 (usually,
freedom of choice of provider, comparability, and
statewideness). For SCHIP, no specific sections or requirements
are cited as ``waive-able.'' SCHIP statute simply states that
Section 1115, pertaining to research and demonstration
projects, applies to SCHIP.
With respect to SCHIP, the Clinton Administration issued
a July 31, 2000, letter regarding treatment of adults. While
this Administration was supportive of using the 1115 authority
to expand SCHIP to parents of Medicaid or SCHIP-eligible
children, as well as to certain pregnant women, it opposed
coverage of childless adults. Under the Bush Administration,
the Health Insurance Flexibility and Accountability (HIFA)
Initiative was implemented using the 1115 waiver authority. The
initiative was created to encourage states to increase the
number of individuals with health insurance coverage (including
childless adults) within current program resources.
Senate Bill
The Senate bill would limit the Secretary of Health and
Human Services's Section 1115 waiver authority by prohibiting
the approval of new waiver, experimental, pilot, or
demonstration projects that allow federal SCHIP funds to be
used to provide child health assistance or other health
benefits coverage to nonpregnant childless adults. The
provision would allow the Secretary to continue to approve
projects that expand the SCHIP program to caretaker relatives
of Medicaid or SCHIP-eligible children (as defined under
Section 1931 of Medicaid statue), and to pregnant adults.
Finally, the provision would allow for the continuation of
existing Medicaid or SCHIP waiver projects (and/or extensions,
amendments, or renewals to such projects) affecting federal
SCHIP funds that had been approved under the Section 1115
waiver authority before the date of enactment of this Act. This
provision would be effective upon the enactment of this Act.
House Bill
No provision.
Conference Agreement
The Senate bill is agreed to.
Continued authority for qualifying states to use certain funds for
Medicaid expenditures. (Section 6103 of the Conference
Agreement, Section 6054 of the Senate Bill, and no provision in
the House Bill)
Current Law
Current law permits qualifying states (i.e., states that
on or after April 15, 1997, had an income eligibility standard
for children, other than infants, of at least 184 percent of
the FPL.--Other qualifications also apply to states with
statewide waivers under Section 1115 of the Social Security
Act.) to receive the SCHIP enhanced federal matching rate for
the coverage of certain children enrolled in regular Medicaid.
Specifically, for services delivered to Medicaid beneficiaries
under the age of 19 who are not otherwise eligible for SCHIP
and have family income that exceeds 150 percent of the FPL,
federal SCHIP funds can be used to pay the difference between
the SCHIP enhanced federal matching rate and the regular
Medicaid federal matching rate. The maximum amount that
qualifying states may claim under this allowance is the lesser
of the following two amounts: (1) 20 percent of the state's
available FY1998 through FY2001 original SCHIP allotments; and
(2) the state's balance (calculated quarterly) of any available
FY1998 to FY2001 federal SCHIP funds (original allotments or
reallocated funds). If there is no balance, states may not
claim 20 percent spending. No 20 percent spending will be
permitted in FY2006 or any fiscal year thereafter.
House Bill
No provision.
Senate Bill
The Senate bill would continue the authority for
qualifying states to apply federal SCHIP matching funds toward
the coverage of certain children enrolled in regular Medicaid
(not an SCHIP Medicaid expansion). Specifically, the bill would
allow qualifying states to use any available FY2004 and FY2005
SCHIP funds (i.e., FY2005 original allotments, and/or FY2004
and FY2005 retained allotments or redistributed funds, as the
case may be) for such Medicaid services made on or after
October 1, 2005 under the 20 percent allowance. This provision
of the Senate bill would be effective on or after October 1,
2005.
Conference Agreement
The Senate bill is agreed to.
Use of Redistributed Funds for Child Health Assistance for Targeted
Low-income Children (No provision in the Conference Agreement,
Section 6051--Subsection b of the Senate Bill, and no provision
in the House Bill)
Current Law
Like Medicaid, SCHIP is a federal-state matching program.
For each dollar of state spending, the federal government makes
a matching payment drawn from SCHIP accounts. The federal
government contributes more toward the coverage of individuals
in SCHIP than it does for those covered under Medicaid. All
SCHIP assistance for targeted low-income children, including
claims submitted to and approved by CMS for expenditures under
the Section 1115 waiver authority, are matched at the enhanced
federal medical assistance percentage (enhanced-FMAP).
Title XXI of the Social Security Act specifies that
federal SCHIP funds can be used for child health assistance
that meets certain requirements. Apart from these benefit
payments, SCHIP payments at the enhanced FMAP rate for four
other specific health care activities can be made, including:
(1) other child health assistance for targeted low-income
children; (2) health services initiatives to improve the health
of targeted low-income children and other low-income children;
(3) outreach activities; and (4) other reasonable
administrative costs.
Senate Bill
The Senate bill would limit the types of payments that
could be matched at the SCHIP enhanced matching rate for SCHIP
expenditures drawn against the FY2003, FY2004, and FY2005
redistributed funds available to shortfall states.
Specifically, the Senate bill would require the federal
government to make matching payments at the SCHIP enhanced
matching rate for child health assistance payments made on
behalf of targeted low-income children. However, expenditures
drawn against the FY2003, FY2004, and FY2005 redistributed
SCHIP funds would occur at the regular Medicaid FMAP rate for
all other approved SCHIP expenditures, consisting of the
following: (1) benefit expenditures for adults (other than
pregnant women) approved under the Section 1115 waiver
authority; (2) health services initiatives to improve the
bealth of targeted low-income children and other low-income
children: (3) outreach activities; and (4) other reasonable
administrative costs.
House Bill
No provision.
Conference Agreement
The conference agreement does not include this provision.
Authority to Use up to 10 Percent of Fiscal Year 2006 and 2007
Allotments for Outreach (No provision in the Conference
Agreement, Section 6052 of the Senate Bill, and no provision in
the House Bill)
Current Law
In general, Title XXI of the Social Security Act
specifies that federal SCHIP funds can be used for child health
assistance that meets certain requirements. Apart from these
benefit payments, SCHIP payments at the enhanced FMAP rate can
be made for the following four specific health care activities:
(1) other child health assistance for targeted low-income
children; (2) health services initiatives to improve the health
of targeted low-income children and other low-income children;
(3) outreach activities; and (4) other reasonable
administrative costs. For a given fiscal year, payments for
these four specific health care activities cannot exceed 10
percent of the total amount of expenditures for SCHIP insurance
benefits and other specific health care activities combined.
The Medicare, Medicaid and SCHIP Benefits Improvement and
Protection Act of 2000 (BIPA) created a special rule for the
redistribution of unspent FY1998 and FY1999 original
allotments. Under BIPA, states that did not use all of their
original allotments for the year were permitted to use up to 10
percent of their retained FY1998 funds for outreach activities.
This allowance is over and above spending for such activities
under the general administrative cap, described above.
Senate Bill
The Senate bill would allow states to use up to 10
percent of their FY2006 and FY2007 original allotments for
expenditures on outreach activities incurred during FY2006 and
FY2007 respectively. This allowance would be over and above
spending for such activities under the general administrative
cap described under current law. Outreach activities would
include: (1) activities to promote the coordination of the
administration of SCHIP with other public and private health
insurance programs; and (2) strategies to market the program to
the target population and to simplify and expedite the
eligibility determination and enrollment process. This
provision would be effective upon enactment of this Act.
House Bill
No provision.
Conference Agreement
The conference agreement does not include this provision.
Grants to Promote Innovative Outreach and Enrollment Under Medicaid and
SCHIP (No provision in the Conference Agreement, Section 6055
of the Senate Bill, and no provision in the House Bill)
Current Law
The federal and state governments share in the costs of
both Medicaid and SCHIP, based on formulas defining the federal
contribution in federal law. States are responsible for the
nonfederal share, using state tax revenues, for example, but
can also use local government funds tocomprise a portion of the
non-federal share. Generally, the non-federal share of costs under
Medicaid and SCHIP cannot be comprised of other federal funds.
Under Medicaid, there are no caps on administrative
expenses that may be claimed for federal matching dollars.
Title XXI specifies that federal SCHIP funds can be used for
SCHIP health insurance coverage, called child health assistance
that meets certain requirements. Apart from these benefit
payments, SCHIP payments for four other specific health care
activities can be made, including: (1) other child health
assistance for targeted low-income children; (2) health
services initiatives to improve the health of SCHIP children
and other low-income children; (3) outreach activities; and (4)
other reasonable administrative costs. For a given fiscal year,
payments for other specific health care activities cannot
exceed 10 percent of the total amount of expenditures for SCHIP
benefits and other specific health care activities combined.
Senate Bill
The Senate bill would establish a new grant program under
SCHIP to (1) finance outreach and enrollment efforts to
increase participation of eligible children in both SCHIP and
Medicaid, and (2) promote understanding of the importance of
health insurance coverage for prenatal care and children. The
Secretary would be permitted to reserve a portion of the grant
funds for the purpose of awarding performance bonuses to
eligible entities (defined below) that meet enrollment goals or
other criteria established by the Secretary.
In awarding grants, the Secretary would be required to
give priority to: (1) entities that propose to target
geographic areas with high rates of eligible but not enrolled
children, or racial and ethnic minorities and health disparity
populations, and (2) entities targeting the same populations
that are federal health safety net organizations (defined
below) or faith-based organizations or consortia. Of the funds
appropriated for this grant program (see below), 10 percent
would be set aside for grants to certain Indian health care
providers for outreach and enrollment of Indian children. These
Indian health care providers would include the Indian Health
Service (IHS) and Urban Indian Organization (UIO) providers
that receive funds under Title V of the Indian Health Care
Improvement Act.
The Senate bill would require entities seeking a grant to
submit an application to the Secretary containing information
on the quality and outcome performance measures to be used to
evaluate the effectiveness of grant activities to ensure that
these activities are meeting their goals. In addition, the
application must provide assurances that the entity would: (1)
conduct an assessment of the effectiveness using such
performance measures, and (2) collect and report enrollment
data and other information from these assessments to the
Secretary in a form and manner as required by the Secretary.
The Senate bill would require the Secretary to
disseminate to eligible entities and make publicly available
the enrollment data and information collected and reported by
grantees. The Secretary would also be required to submit an
annual report to Congress on the funded outreach activities.
The Senate bill would require that federal funds awarded
under this new grant be used to supplement, not supplant, non-
federal funds that are otherwise available for these grant
activities.
Specific definitions would be applicable to the new grant
program. Five types of entities would be eligible to receive
these grants, including: (1) state or local governments, (2)
federal health safety net organizations, (3) national, local or
community-based public or nonprofit private organizations, (4)
faith-based organizations or consortia, to the extent that a
grant awarded to such an entity is consistent with the
requirements of Section 1955 of the Public Health Service Act
(relating to grant awards to non-governmental entities), and
(5) elementary or secondary schools. Federal health safety net
organizations include a number of different types of entities,
including for example: (1) Indian tribes, tribal organizations,
UIOs and IHS providers, (2) federally qualified health centers,
(3) hospitals that receive disproportionate share hospital
(DSH) payments, (4) entities described in Section 340B(a)(4) of
the Public Health Service Act (e.g., certain family planning
projects, certain grantees providing early intervention
services for HIV disease, certain comprehensive hemophilia
diagnostic treatment centers, and certain Native Hawaiian
health centers), and (5) any other entity that serves children
under a federally-funded program, including the Special
Supplemental Nutrition Program for Women, Infants and Children
(WIC), Head Start programs, school lunch programs, and
elementary or secondary schools.
The Senate bill would appropriate $25 million for fiscal
year 2007 for these grants. These grants would be in addition
to existing SCHIP appropriations, and would not be subject to
restrictions on expenditures for outreach activities under
current law.
These provisions would be effective with the FY2007
appropriation for this new grant program.
House Bill
No provision.
Conference Agreement
The conference agreement does not include this provision.
Subtitle C--Katrina Relief
Additional Federal Payments Under Hurricane-Related Multi-State Section
1115 Demonstrations (Section 6201 of the Conference Agreement,
Sections 6032 and 6071 of the Senate Bill, and Sections 3100
and 3201 of the House Bill)
Current Law
The federal medical assistance percentage (FMAP) is the
rate at which states are reimbursed for most Medicaid service
expenditures. It is based on a formula that provides higher
reimbursement to states with lower per capita incomes relative
to the national average (and vice versa); it has a statutory
minimum of 50 percent and maximum of 83 percent. An enhanced
FMAP is available for both services and administration under
SCHIP, subject to the availability of funds from a state's
SCHIP allotment. In order for a state to receive federal
Medicaid or SCHIPreimbursement, it must have in effect a state
plan approved by the Secretary of HHS that meets requirements set forth
in federal statute and regulations.
Using an application template developed by the Centers
for Medicare and Medicaid Service within HHS, a number of
states (17 as of December 15, 2005) have been granted waivers
under Section 1115 of the Social Security Act to provide
Medicaid and SCHIP services to certain individuals affected by
Hurricane Katrina (these waivers are referred to as being part
of a multistate demonstration project). For purposes of FMAP
reimbursement, Section 1115 waivers are deemed to be part of a
state's Medicaid or SCHIP state plan (i.e., its ``regular''
Medicaid or SCHIP program).
All of the waivers granted thus far under the Hurricane
Katrina multi-state Section 1115 demonstration create a
temporary eligibility period, not to exceed five months, during
which certain Hurricane Katrina evacuees will be granted access
to Medicaid and SCHIP services in the host state (i.e., the
state that has been granted a Section 1115 waiver) based on
simplified eligibility criteria. In addition to creating
temporary Medicaid or SCHIP eligibility for evacuees, waivers
for some states also create an uncompensated care pool that may
be used through January 31, 2006, to augment Medicaid and SCHIP
services for evacuees and to reimburse providers that incur
uncompensated care costs for uninsured evacuees who do not
qualify for Medicaid or SCHIP.
Disaster declarations were issued in the wake of
Hurricane Katrina pursuant to the Robert T. Stafford Disaster
Relief and Emergency Assistance Act, which authorizes the
President to issue such declarations to speed a wide range of
federal aid--including individual assistance (e.g., housing for
individuals and families) and public assistance (e.g., repair
of community infrastructure)--to states determined to be
overwhelmed by hurricanes or other catastrophes. The Federal
Emergency Management Agency (FEMA) makes the decision as to
when a major disaster or emergency is ``closed out'' for
administrative purposes.
Senate Bill
Under the Senate bill, for items and services furnished
during the period August 28, 2005 through May 15, 2006, states
would receive 100 percent FMAP reimbursement for Medicaid and
SCHIP assistance provided to individuals who resided during the
week preceding Hurricane Katrina in one of the parishes of
Louisiana or counties of Mississippi and Alabama specified in
the bill. Costs directly attributable to related administrative
activities would also be reimbursed at 100 percent.
A separate provision would allow the state of Louisiana,
Mississippi, or Alabama to elect to not have the Medicaid
subtitle of the bill apply with respect to the state during any
period for which a major disaster declared in accordance with
the Stafford Act with respect to a parish (in the case of
Louisiana) or a county (in the case of Mississippi or Alabama)
as a result of Hurricane Katrina is in effect.
House Bill
Under the House bill, for items and services furnished
during the period August 28, 2005 through May 15, 2006, states
would receive 100 percent FMAP reimbursement for Medicaid and
SCHIP assistance provided to: (1) any individual residing in a
parish of Louisiana, a county of Mississippi, or a major
disaster county of Alabama and (2) individuals who resided
during the week preceding Hurricane Katrina in a parish or
county for which a major disaster has been declared as a result
of the hurricane and for which the President has determined, as
of September 14, 2005, warrants individual assistance under the
Stafford Act. Costs directly attributable to related
administrative activities would also be reimbursed at 100
percent.
A separate provision would allow the Medicaid subtitle of
the bill to not apply during the 11-month period beginning
September 1, 2005, to individuals entitled to Medicaid
assistance by reason of their residence in a parish of
Louisiana or a county of Mississippi or Alabama for which a
major disaster has been declared as a result of Hurricane
Katrina and for which the President has determined, before
September 14, 2005, warrants individual and public assistance
under the Stafford Act.
Conference Agreement
The conference agreement appropriates $2 billion (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) for use by the
Secretary of HHS to pay eligible states (those who have
provided care to affected individuals or evacuees under a
Section 1115 project) for the following purposes:
<bullet> the non-federal share of expenditures for health
care provided to affected individuals (those who reside in a
major disaster area declared as a result of Hurricane Katrina
and continue to reside in the same state) and evacuees
(affected individuals who have been displaced to another state)
under approved multi-state Section 1115 demonstration projects;
<bullet> reasonable administrative costs related to such
projects;
<bullet> the non-federal share of expenditures for
medical care provided to individuals under existing Medicaid
and SCHIP state plans; and
<bullet> other purposes, if approved by the Secretary, to
restore access to health care in impacted communities.
The non-federal share paid to eligible states shall not
be regarded as federal funds for purposes of Medicaid matching
requirements. No payment obligations may be incurred under
approved multi-state Section 1115 projects for costs of: (1)
health care provided as Medicaid or SCHIP medical assistance
incurred after June 30, 2006 and (2) uncompensated care or
services and supplies beyond those included as Medicaid or
SCHIP medical assistance incurred after January 31, 2006.
State High Risk Health Insurance Pool Funding (Section 6202 of the
Conference Agreement, no provision in the Senate Bill, and
Section 3202 of the House Bill)
Current Law
A majority of states have established high-risk health
insurance pool programs as one approach to reduce the number of
uninsured persons. These programs target individuals who cannot
obtain or afford health insurance in the private health
insurance market, primarily because of pre-existing health
conditions. Many states also use their high-risk pools to
provide access to health insurance to individuals eligible
under the guaranteed issue and portability provisions ofthe
Health Insurance Portability and Accountability Act of 1996 (HIPAA,
P.L. 104-191). In general, high-risk pools are operated through state-
established nonprofit organizations that contract with private
insurance companies to collect premiums, administer benefits, and pay
claims. These programs tend to be small and enroll a small percentage
of the uninsured. As of December 2004, 33 states operate high risk
health insurance pool programs. Authorizing legislation for federal
funding of these pools expired September 30, 2005.
Senate Bill
No provision.
House Bill
The House bill would amend the Public Health Service Act
to reauthorize federal funding for state high risk health
insurance pools. For FY2006, it would provide $90 million in
appropriations for grants to states to be used to cover up to
50 percent of operating expenses of existing state high risk
pools.
Conference Agreement
The conference agreement would appropriate, for FY2006,
$75 million for the losses incurred by a State in connection
with the operation of their qualified high risk pool. There is
also $15 million in FY2006 appropriated to fund seed grants to
States to create, and initially fund, a high risk pool. This
funding will also apply upon the enactment of the State High
Risk Pool Funding Extension Act of 2005.
Recomputation of HPSA, MUA, and MUP Designations Within Hurricane
Katrina Affected Areas (No provision in the Conference
Agreement, no provision in the Senate Bill, and Section 3203 of
the House Bill)
Current Law
The Public Health Service Act provides for the
designation of areas underserved by healthcare personnel,
providing federal loans, scholarships and grants to improve the
distribution of health care workers. The program is authorized
through 2006.
Senate Bill
No provision.
House Bill
The House bill would direct the Secretary of HHS to
review all such shortage designations in Hurricane Katrina
declared disaster areas (pursuant to the Stafford Act),
considering potential new shortages of health care workers.
Conference Agreement
No provision.
Waiver of Certain Requirements Applicable to the Provision of Health
Care in Areas Impacted by Hurricane Katrina (No provision in
the Conference Agreement, no provision in the Senate Bill, and
Section 3204 of the House Bill)
Current Law
The Public Health Service Act establishes requirements
for federally qualified health centers and personnel in the
National Health Service Corps. Programs are authorized through
2006.
Senate Bill
No provision.
House Bill
The House bill would direct the Secretary of HHS to relax
certain requirements for the conduct of federally qualified
health centers, and National Health Service Corps personnel
staffing them, in areas directly affected by Hurricane Katrina,
or indirectly affected by hosting large numbers of evacuees.
Conference Agreement
No provision.
House Bill
Section 7001 temporarily increases the vessel tonnage
fees paid by vessels arriving in the United States.
Specifically, section 7001 increases the vessel tonnage fees
paid by vessels arriving in the U.S. from a place in North
America, Central America, the West India Islands, the Bahama
Islands, and Newfoundland, and by certain vessels returning
from a ``voyage to nowhere.'' The fees are increased from 2
cents per ton, not to exceed 10 cents per ton in a single year,
to 4.5 cents per ton, not to exceed 22.5 cents per ton in a
single year. In addition, section 7001 increases the vessel
tonnage fees paid by vessels arriving from a foreign port
anywhere else in the world from 6 cents per ton, not to exceed
to 30 cents per ton, to 13.5 cents per ton, not to exceed 67.5
cents per ton in a single year. These increased rates will be
in effect for fiscal years 2006 through 2010.
Title VII--House Committee on Ways and Means
TANF--Temporary Assistance for Needy Families (Subtitle A)
Reauthorization of Grants
Current Law
The TANF block grant provides states with funding for a
wide range of benefits and services to families with children,
including cash welfare. Basic block grants are funded
nationally at $16.5 billion per year. The law also provides
supplemental grants to certain states funded at $319 million
per year; performance bonus funds of $200 million per year for
meeting program goals and $100 million per year for reducing
out-of-wedlock pregnancies; contingency funds of $2 billion for
states experiencing economic downturns; and a loan fund.
Funding authority for the program expires December 31, 2005.
Allows up to 30 percent of TANF block grants to be
transferred to the Child Care and Development Block Grant
(CCDBG) and Social Services Block Grant (SSBG), although limit
on transfers to SSBG is set at 4.25 percent for FY2006 and
later.
House Passed Bill
Extends TANF block grant at current level through FY2010
and TANF supplemental grants at current levels through FY2009.
Eliminates all bonus funds and the loan fund. (Some of these
savings are used to finance grants to promote healthy marriages
and responsible fatherhood, see below.) Continues a $2 billion
contingency fund through FY2010.
Raises overall transfer authority to 50 percent of the
TANF block grant, and increases maximum transfer to SSBG to 10
percent (level allowed in the original 1996 welfare law).
Senate Passed Bill
No provision.
Conference Report
Recede to the House, with the modification that TANF
supplemental grants are authorized at their current level for
three fiscal years (through FY2008). Recede to the Senate with
regard to transfer authority.
Work Participation Requirements
Current Law
States are required to make an assessment of the work-
readiness of TANF assistance recipients and may establish an
Individual Responsibility plan for them. States are required to
sanction families with a recipient who does not comply with
work.
Recipients are required to visit their children's schools
twice per year.
Senate Passed Bill
No provision.
Conference Report
Recede to the Senate with respect to self-sufficiency
plans, sanctions, and the increase in work participation
standard to 70 percent.
Recede to the House with regard to the caseload reduction
credit, with the modification that the base year for this
credit is changed to FY2005, effective October 1, 2006. Adds
that families receiving assistance under separate state
programs are included in the calculation of work participation
rates; and the Secretary of Health and Human Services is to
provide additional direction to and oversight of states related
to activities that may be counted as work activities, how to
count and verify reported hours of work, and determining who is
a work-eligible individual, with a new penalty for states that
fail to establish and maintain such improved work participation
verification procedures.
Recede to the Senate on additional credits for states
with large past caseload declines, hours of work, partial
credits, special allowances or requirements, and changes in
list of work activities and extent to which such activities may
be counted as work.
Healthy Marriage Promotion Grants
Current Law
No special grants. States may use TANF funds for
activities to promote the formation and maintenance of two-
parent families.
House Passed Bill
Establishes $100 million per year in matching grants and
$100 million per year in demonstration grants to fund various
activities to promote healthy marriages. Requires that marriage
promotion activities be voluntary. Requires that grantees
consult with organizations with experts in domestic violence.
Senate Passed Bill
No provision.
Conference Report
Recede to the House with the modification that the
Secretary of HHS will award $150 million per fiscal year in
healthy marriage promotion, responsible fatherhood, and related
grants in each of FYs 2006-2010. Of this amount, up to $50
million per fiscal year may be awarded on a competitive basis
for activities promoting responsible fatherhood, and up to $2
million per fiscal year is available for demonstration projects
for coordination of child welfare and TANF services to tribal
families at risk of child abuse or neglect.
Conference Report
Recede to the House with the modification that total
child care funding will increase by $1 billion above the
current level over five years, appropriating $2.917 billion in
mandatory child care funding for each of FYs 2006-2010.
Child Support Enforcement (Subtitle C)
Current Law
The Child Support Enforcement (CSE) program is a federal-
state program that provides the following basic services to
both welfare and nonwelfare families: parent location, review
and modification of child support orders, collection of child
support payments, establishment of medical child support, and
distribution of child support payments. The CSE program is
funded with both state and federal dollars. There are four
funding mechanisms. First, states spend their own money to
operate a CSE program. Second, the federal government
reimburses each state 66 percent for most of its child support
enforcement activities or services. The federal government
reimburses states at a higher 90 percent matching rate for
paternity determination expenditures. Third, states collect
child support on behalf of families receiving welfare benefits
to reimburse themselves (and the federal government) for the
cost of welfare payments to the family. Fourth, an incentive
payment is given to states for operating a good program
(current law requires that states reinvest incentive payments
back into the CSE program or related activities).
House Passed Bill
Revises some child support enforcement collection
mechanisms and add others.
Provides financial incentives to states that send more
child support collected on behalf of families on welfare to the
families themselves (rather than retain funds as reimbursement
for welfare costs). The federal government would pay for a
share of support passed through to welfare families as long as
that support did not reduce the family's welfare benefit. Also
gives states financing incentives to send to former welfare
families more of the child support payments collected on their
behalf.
Includes a provision to gradually reduce (from FY2007-
FY2010) the federal matching rate for child support
administrative expenditures from its current 66 percent to 50
percent. Also, prohibits the federal government from matching
child support incentive payments reinvested in the CSE program.
Senate Passed Bill
No provision.
Conference Report
Recede to the House with modifications that revise child
support enforcement collection mechanisms, and provide
financial incentives to states that pass through more child
support to current and former TANF families. Recede to the
House with respect to ending federal matching of state
expenditure of federal child support incentive funds, effective
in FY 2008. Recede to the Senate with regard to reducing the
federal administrative matching rate. Includes provision
changing to 66 percent the federal matching rate for laboratory
costs incurred in determining paternity, effective October 1,
of the Social Security Act and determinations regarding foster
care placement, termination of parental rights, and recognition
of adoptions. Courts can also use these grant funds to
implement changes found necessary as a result of the
assessments.
House Passed Bill
Restates the federal foster care eligibility rules to
effectively nullify the Rosales decision. Restates adoption
assistance eligibility to make the same clarification and to
simplify the eligibility determination.
Senate Passed Bill
No provision.
Conference Report
Recede to the House, with the modification to include (1)
new funds totaling $100 million over the five-year period FY
2006-2010 for strengthening courts involved in child welfare
proceedings, and (2) new funds for the Safe and Stable Families
program, increasing mandatory funding to $345 million in FY
2006 (and thus totaling $200 million over the five-year period
FY 2006-2010).
Limit Federal Foster Care Administrative Claims
Current Law
States may claim reimbursement for some administrative
costs related to children who are at ``imminent'' risk of
entering foster care. Some states, relying on prior HHS policy
guidance, make additional administrative claims for children
placed in unlicensed, or otherwise federally ineligible
placement settings, provided the foster child meets all other
federal foster care eligibility criteria.
House Passed Bill
Specifies in which cases, and for how long, states may
seek reimbursement of foster care administrative costs only on
behalf of otherwise federally eligible children who are living
with unlicensed relatives, in another ineligible setting, or
who have not yet entered foster care.
Senate Passed Bill
No provision.
Conference Report
Recede to the House.
Supplemental Security Income (Subtitle E)
Review of State Agency Blindness and Disability Determinations
Current Law
No provision.
Conference Report
Recede to the Senate.
Statement of Managers
Title VIII--Education and Pension Benefit Provisions
With respect to Section 2201(d) of the House amendment,
the managers on the Part of the House agree to request a study
by the Government Accountability Office regarding the effect of
the premium as provided under Section 4006(a)(7) of ERISA on
persons who are a contributing sponsor of the plan or a member
of such sponsor's controlled group and who has filed or has had
filed against such person a petition seeking reorganization in
a case under title 11 of the 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 and report the same to the Committees on
Education and the Workforce and the Committee on the Judiciary
within 18 months of enactment of this Act.
Statement of Managers
LIHEAP Provision
The Congress finds the following:
(1) Hurricanes Katrina and Rita severely disrupted crude
oil and natural gas production in the Gulf of Mexico. The
Energy Information Administration estimates that as a result of
these two hurricanes, the amount of shut in crude oil
production nearly doubled to almost 1,600,000 barrels per day,
and the amount of natural gas production shut in also doubled
to about 8,000,000,000 cubic feet per day. The hurricanes also
initially shut down most of the crude oil refinery capacity in
the Gulf of Mexico region. These disruptions led to
significantly higher prices for crude oil, refined oil
products, and natural gas expected to continue in the
foreseeable future.
(2) These production and supply disruptions are expected
to lead to significantly higher heating costs for consumers for
the foreseeable future. These significant increases in home
heating costs this winter and for the foreseeable future will
particularly harm low-income consumers. The Low-Income Home
Energy Assistance Program is designed to assist these low-
income consumers in this situation. Accordingly, Congress seeks
a one-time only supplement to the Low-Income Home Energy
Assistance Program fund to assist low-income consumers with the
additional home heating expenditures that they will face in the
foreseeable future as a result of Hurricanes Katrina and Rita.
SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION
Section 9001 Funding Availability
This section appropriates to the Secretary of Health and
Human Services for a 1-time only obligation and expenditure
$250,000,000 for fiscal year 2007 for allocation under section
2604(a) through (d) and $750,000,000 for allotment of emergency
funds under section 2604(e) of the Low-Income Home Energy
Assistance Act of 1981 (42 D.S.C. 8623(a) through (e)), for the
sole purpose of providing assistance to offset the anticipated
higher energy costs caused by Hurricane Katrina and Hurricane
Rita.
This section sunsets after September 30, 2007, and no
monies provided for under this section shall be available after
such date.
P.L. 109-58, the Energy Policy Act of 2005, reauthorized
annual regular LIHEAP funds at $5.1 billion per year from
FY2005 to FY2007. The LIHEAP appropriation for FY2005 was
$2.182 billion for allocation pursuant to the formula set forth
by law. No funds were appropriated for allotment of emergency
funds.
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 Bachus
(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.
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