To expand access to affordable health care and to strengthen the health care safety net and make health care services more available in rural and underserved areas.

June 13, 2005

Ms. COLLINS (for herself and Ms. LANDRIEU) introduced the following bill; which was read twice and referred to the Committee on Finance

To expand access to affordable health care and to strengthen the health care safety net and make health care services more available in rural and underserved areas.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

(a) SHORT TITLE- This Act may be cited as the `Access to Affordable Health Care Act'.

(b) TABLE OF CONTENTS- The table of contents of this Act is as follows:

Sec. 1. Short title; table of contents.

TITLE I--EXPANSION OF ACCESS TO AFFORDABLE HEALTH CARE FOR SMALL BUSINESSES

Subtitle A--Small Business Tax Credit

Sec. 101. Credit for employee health insurance expenses.

Subtitle B--Grants to States for Small Business Purchasing Groups

Sec. 121. Grants for small employer purchasing groups.

Sec. 122. Qualified small employer purchasing groups.

Subtitle C--Health Benefits Information for Small Employers

Sec. 131. Grant program to facilitate health benefits information for small employers.

Subtitle D--Grant Program to Encourage State Innovation

Sec. 141. Grant program to encourage State innovation.

TITLE II--EXPANSION OF ACCESS TO AFFORDABLE HEALTH CARE FOR INDIVIDUALS AND FAMILIES

Subtitle A--Internal Revenue Code Provisions

Sec. 201. Refundable health insurance costs credit.

Sec. 202. Advance payment of credit to issuers of qualified health insurance.

Subtitle B--FamilyCare

Sec. 211. Renaming of title XXI program.

Sec. 212. Familycare coverage of parents under the medicaid program and title XXI.

Sec. 213. Optional coverage of children through age 20 under the medicaid program and title XXI.

Sec. 214. Elimination of `dip' in CHIP allotments for fiscal years 2003 and 2004.

Sec. 215. Additional CHIP revisions.

Sec. 216. Limitations on conflicts of interest.

Sec. 217. Technical and conforming amendments to authority to pay medicaid expansion costs from title XXI appropriation.

Subtitle C--Simplified Enrollment

Sec. 221. Automatic enrollment of children born to title XXI parents.

Sec. 222. Application of simplified title XXI procedures under the medicaid program.

Sec. 223. Elimination of 100 hour rule and other AFDC-related eligibility restrictions.

Subtitle D--State Option to Extend Medicaid Coverage to Certain Low-Income Individuals

Sec. 231. State option to extend medicaid coverage to certain low-income individuals.

Subtitle E--Improving Welfare-to-Work Transition Under Medicaid

Sec. 241. Improving welfare-to-work transition under medicaid.

Subtitle F--Grants to Promote Innovative Outreach and Enrollment Under Medicaid and SCHIP

Sec. 251. Grants to promote innovative outreach and enrollment under medicaid and SCHIP.

Sec. 252. State option to provide for simplified determinations of a child's financial eligibility for medical assistance under medicaid or child health assistance under SCHIP.

Subtitle G--Demonstration Programs to Improve Medicaid and SCHIP Outreach to Homeless Individuals and Families

Sec. 261. Demonstration programs to improve medicaid and SCHIP outreach to homeless individuals and families.

TITLE III--STRENGTHENING THE HEALTH CARE SAFETY NET

Sec. 301. Increase in funding for the consolidated health centers program.

TITLE IV--EXPANSION OF ACCESS TO HEALTH CARE IN RURAL AND UNDERSERVED AREAS

Sec. 401. Expansion of funding.

Sec. 402. Loan repayment and scholarship programs.

TITLE V--EXPANDED ACCESS TO AFFORDABLE LONG-TERM CARE

Sec. 501. Treatment of premiums on qualified long-term care insurance contracts.

Sec. 502. Credit for taxpayers with long-term care needs.

Sec. 503. Additional consumer protections for long-term care insurance.

TITLE VI--PROMOTING HEALTHIER LIFESTYLES

Sec. 601. Community partnerships to promote healthy lifestyles.

Sec. 602. Worksite wellness grant program.

Sec. 603. Comprehensive school health education.

TITLE VII--MEDICARE FAIRNESS

Subtitle A--Medicare Value and Quality Demonstration

Sec. 701. Findings.

Sec. 702. Demonstration project to encourage the provision of high-quality, cost-effective inpatient hospital services.

Sec. 703. Demonstration project to encourage the provision of high-quality, cost-effective physicians' services.

Subtitle B--Graduate Medical Education Demonstration

Sec. 711. Clinical rotation demonstration project.

TITLE I--EXPANSION OF ACCESS TO AFFORDABLE HEALTH CARE FOR SMALL BUSINESSES

Subtitle A--Small Business Tax Credit

SEC. 101. CREDIT FOR EMPLOYEE HEALTH INSURANCE EXPENSES.

(a) IN GENERAL- Subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to business-related credits) is amended by inserting after section 45I the following:

`SEC. 45J. EMPLOYEE HEALTH INSURANCE EXPENSES.

`(a) GENERAL RULE- For purposes of section 38, in the case of an employer, the employee health insurance expenses credit determined under this section is an amount equal to the applicable percentage of the amount paid by the taxpayer during the taxable year for qualified employee health insurance expenses.

`(b) APPLICABLE PERCENTAGE- For purposes of subsection (a), the applicable percentage is equal to--

`(1) 50 percent in the case of an employer with less than 10 employees, and

`(2) 30 percent in the case of an employer with more than 9 but less than 26 employees.

`(c) PER EMPLOYEE DOLLAR LIMITATION- The amount of qualified employee health insurance expenses taken into account under subsection (a) with respect to any qualified employee for any taxable year shall not exceed--

`(1) $2,000 in the case of self-only coverage, and

`(2) $4,000 in the case of family coverage (as so defined).

`(d) SPECIAL RULES AND DEFINITIONS- For purposes of this section--

`(1) ELIGIBILITY FOR CREDIT- No credit shall be allowed under subsection (a) with respect to any employer which, with respect to the number of employees employed during any period, employs more than 20 percent of highly compensated employees (within the meaning of section 414(q)).

`(2) DETERMINATION OF EMPLOYMENT-

`(A) IN GENERAL- An employer shall be considered an employer described in paragraph (1) or (2) of subsection (b) if such employer employed an average of the number of employees described in such paragraph on business days during either of the 2 preceding calendar years. For purposes of the preceding sentence, a preceding calendar year may be taken into account only if the employer was in existence throughout such year.

`(B) EMPLOYERS NOT IN EXISTENCE IN PRECEDING YEAR- In the case of an employer which was not in existence throughout the 1st preceding calendar year, the determination under subparagraph (A) shall be based on the average number of employees that it is reasonably expected such employer will employ on business days in the current calendar year.

`(3) QUALIFIED EMPLOYEE HEALTH INSURANCE EXPENSES-

`(A) IN GENERAL- The term `qualified employee health insurance expenses' means any amount paid by an employer for health insurance coverage to the extent such amount--

`(i) is attributable to coverage provided to any employee while such employee is a qualified employee; and

`(ii) is at least 50 percent of the premium for such coverage.

`(B) EXCEPTION FOR AMOUNTS PAID UNDER SALARY REDUCTION ARRANGEMENTS- No amount paid or incurred for health insurance coverage pursuant to a salary reduction arrangement shall be taken into account under subparagraph (A).

`(C) HEALTH INSURANCE COVERAGE- The term `health insurance coverage' has the meaning given such term by section 9832(b)(1).

`(4) QUALIFIED EMPLOYEE-

`(A) IN GENERAL- The term `qualified employee' means, with respect to any period, an employee of an employer if the total amount of wages paid or incurred by such employer to such employee at an annual rate during the taxable year is not less than $5,000.

`(B) TREATMENT OF CERTAIN EMPLOYEES- For purposes of subparagraph (A), the term `employee'--

`(i) shall not include an employee within the meaning of section 401(c)(1), but

`(ii) shall include a leased employee within the meaning of section 414(n).

`(C) WAGES- The term `wages' has the meaning given such term by section 3121(a) (determined without regard to any dollar limitation contained in such section).

`(e) CERTAIN RULES MADE APPLICABLE- For purposes of this section, rules similar to the rules of section 52 shall apply.

`(f) DENIAL OF DOUBLE BENEFIT- No deduction or credit under any other provision of this chapter shall be allowed with respect to qualified employee health insurance expenses taken into account under subsection (a).'.

(b) CREDIT TO BE PART OF GENERAL BUSINESS CREDIT- Section 38(b) of the Internal Revenue Code of 1986 (relating to current year business credit) is amended by striking `plus' at the end of paragraph (18), by striking the period at the end of paragraph (19) and inserting `, plus', and by inserting after paragraph (19) the following:

`(20) the employee health insurance expenses credit determined under section 45J.'.

(c) CLERICAL AMENDMENT- The table of sections for subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following:

`Sec. 45J. Employee health insurance expenses.'.

(d) EFFECTIVE DATE- The amendments made by this section shall apply to amounts paid or incurred in taxable years beginning after December 31, 2005.

Subtitle B--Grants to States for Small Business Purchasing Groups

SEC. 121. GRANTS FOR SMALL EMPLOYER PURCHASING GROUPS.

(a) IN GENERAL- The Secretary of Labor (referred to in this section as the `Secretary') shall award grants to States to assist such States in planning, developing, and operating qualified small employer purchasing groups.

(b) APPLICATION REQUIREMENTS- To be eligible to receive a grant under this section, a State shall prepare and submit to the Secretary an application in such form, at such time, and containing such information, certifications, and assurances as the Secretary shall reasonably require.

(c) USE OF FUNDS- Amounts awarded under this section may be used to finance the costs associated with planning, developing, and operating a qualified small employer purchasing group that meets the requirements of section 122. Such costs may include the costs associated with--

(1) engaging in education and outreach efforts to inform small employers, insurers, and the public about the small employer purchasing group;

(2) soliciting bids and negotiating with insurers to make available group health plans;

(3) preparing the documentation required to receive certification by the Secretary as a qualified small employer purchasing group; and

(4) such other activities determined appropriate by the Secretary.

(d) AUTHORIZATION OF APPROPRIATIONS- There are authorized to be appropriated to carry out this section, such sums as may be necessary for each of fiscal years 2006 through 2010.

SEC. 122. QUALIFIED SMALL EMPLOYER PURCHASING GROUPS.

(a) QUALIFIED SMALL EMPLOYER PURCHASING GROUPS DESCRIBED-

(1) IN GENERAL- A qualified small employer purchasing group is an entity that--

(A) is a nonprofit entity certified under State law;

(B) has a membership consisting solely of small employers;

(C) is administered solely under the authority and control of its member employers;

(D) with respect to each State in which its members are located, consists of not fewer than the number of small employers established by the State as appropriate for such a group;

(E) offers a program under which group health plans are offered to eligible employees and eligible individuals (including the dependents of such employees and individuals) through its member employers; and

(F) an insurer, agent, broker, or any other individual or entity engaged in the sale of insurance--

(i) does not form or underwrite; and

(ii) does not hold or control any right to vote with respect to.

(2) SPECIAL RULE- Notwithstanding paragraph (1)(B), an employer member of a small employer purchasing group that has been certified by the State as meeting the requirements of paragraph (1) may retain its membership in the group if the number of employees of the employer increases such that the employer is no longer a small employer.

(b) BOARD OF DIRECTORS- Each qualified small employer purchasing group established under this section shall be governed by a board of directors or have active input from an advisory board consisting of individuals and businesses participating in the group.

(c) MEMBERSHIP-

(1) IN GENERAL- A qualified small employer purchasing group shall accept all small employers residing within the area served by the group as members if such employers request such membership.

(2) VOTING- Members of a qualified small employer purchasing group shall have voting rights consistent with the rules established by the State.

(d) DUTIES OF QUALIFIED SMALL EMPLOYER PURCHASING GROUPS- Each qualified small employer purchasing group shall--

(1) enter into agreements with insurers offering qualified group health plans;

(2) enter into agreements with small employers for the purchase of health insurance;

(3) enroll only eligible employees, eligible individuals, and the dependents of such employees and individuals in group health plans; and

(4) provide enrollee information to the State.

(e) LIMITATION ON ACTIVITIES- A qualified small employer purchasing group shall not--

(1) perform any activity involving approval or enforcement of payment rates for providers;

(2) assume financial risk in relation to any such health plan; or

(3) perform other activities identified by the State as being inconsistent with the performance of its duties.

(f) RULES OF CONSTRUCTION-

(1) ESTABLISHMENT NOT REQUIRED- Nothing in this section shall be construed as requiring that a State organize, operate or otherwise establish a qualified small employer purchasing group, or otherwise require the establishment of purchasing groups.

(2) VOLUNTARY PARTICIPATION- Nothing in this section shall be construed as requiring any individual or small employer to purchase a group health plan exclusively through a qualified small employer purchasing group.

(g) DEFINITION- In this subtitle, the term `small employer' means an employer that employs at least 1, but not more than 50 employees. Such term shall include sole proprietorships and self-employed individuals.

Subtitle C--Health Benefits Information for Small Employers

SEC. 131. GRANT PROGRAM TO FACILITATE HEALTH BENEFITS INFORMATION FOR SMALL EMPLOYERS.

(a) IN GENERAL- The Small Business Administration shall award grants to 1 or more States, local governments, and non-profit organizations for the purposes of--

(1) demonstrating new and effective ways to provide information about the benefits of health insurance to small employers, including tax benefits, increased productivity of employees, and decreased turnover of employees;

(2) making small employers aware of their current rights in the marketplace under Federal and State health insurance reform laws; and

(3) making small employers aware of the tax treatment of insurance premiums.

(b) AUTHORIZATION- There is authorized to be appropriated to carry out this section, such sums as may be necessary for each of fiscal years 2006 through 2010.

Subtitle D--Grant Program to Encourage State Innovation

SEC. 141. GRANT PROGRAM TO ENCOURAGE STATE INNOVATION.

(a) IN GENERAL- The Secretary of Health and Human Services (in this section referred to as the `Secretary') shall establish a program (in this section referred to as the `program') to award demonstration grants under this section to States to allow States to demonstrate the effectiveness of innovative ways to increase access to health insurance through market reforms and other innovative means. Such innovative means may include any of the following:

(1) Alternative group purchasing or pooling arrangements, such as purchasing cooperatives for small businesses, reinsurance pools, or high risk pools.

(2) Individual or small group market reforms.

(3) Consumer education and outreach.

(4) Subsidies to individuals, employers, or both, in obtaining health insurance.

(b) SCOPE; DURATION- The program shall be limited to not more than 10 States and to a total period of 5 years, beginning on the date the first demonstration grant is made.

(c) CONDITIONS FOR DEMONSTRATION GRANTS-

(1) IN GENERAL- The Secretary may not provide for a demonstration grant to a State under the program unless the Secretary finds that under the proposed demonstration grant--

(A) the State will provide for demonstrated increase of access for some portion of the existing uninsured population through a market innovation (other than merely through a financial expansion of a program initiated before the date of enactment of this Act);

(B) the State will comply with applicable Federal laws;

(C) the State will not discriminate among participants on the basis of any health status-related factor (as defined in section 2791(d)(9) of the Public Health Service Act (42 U.S.C. 300gg-91(d)(9)), except to the extent a State wishes to focus on populations that otherwise would not obtain health insurance because of such factors; and

(D) the State will provide for such evaluation, in coordination with the evaluation required under subsection (d), as the Secretary may specify.

(2) APPLICATION- The Secretary shall not provide a demonstration grant under the program to a State unless--

(A) the State submits to the Secretary such an application, in such a form and manner, as the Secretary specifies;

(B) the application includes information regarding how the demonstration grant will address issues such as governance, targeted population, expected cost, and the continuation after the completion of the demonstration grant period; and

(C) the Secretary determines that the demonstration grant will be used consistent with this section.

(3) FOCUS- A demonstration grant proposal under this section need not cover all uninsured individuals in a State or all health care benefits with respect to such individuals.

(d) EVALUATION- The Secretary shall enter into a contract with an appropriate entity outside the Department of Health and Human Services to conduct an overall evaluation of the program at the end of the program period. Such evaluation shall include an analysis of improvements in access, costs, quality of care, or choice of coverage, under different demonstration grants.

(e) OPTION TO PROVIDE FOR INITIAL PLANNING GRANTS- Notwithstanding the previous provisions of this section, under the program the Secretary may provide for a portion of the amounts appropriated under subsection (f) (not to exceed $5,000,000) to be made available to any State for initial planning grants to permit States to develop demonstration grant proposals under the previous provisions of this section.

(f) AUTHORIZATION OF APPROPRIATIONS- There are authorized to be appropriated such sums as may be necessary to carry out this section. Amounts appropriated under this subsection shall remain available until expended.

(g) STATE DEFINED- In this section, the term `State' has the meaning given such term for purposes of title XIX of the Social Security Act (42 U.S.C. 1396 et seq.).

TITLE II--EXPANSION OF ACCESS TO AFFORDABLE HEALTH CARE FOR INDIVIDUALS AND FAMILIES

Subtitle A--Internal Revenue Code Provisions

SEC. 201. REFUNDABLE HEALTH INSURANCE COSTS CREDIT.

(a) ALLOWANCE OF CREDIT-

(1) IN GENERAL- Subpart C of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to refundable personal credits) is amended by redesignating section 36 as section 37 and inserting after section 35 the following:

`SEC. 36. HEALTH INSURANCE COSTS FOR UNINSURED ELIGIBLE INDIVIDUALS.

`(a) ALLOWANCE OF CREDIT- In the case of an uninsured eligible individual, there shall be allowed as a credit against the tax imposed by this subtitle for the taxable year an amount equal to the amount paid by the taxpayer during such taxable year for qualified health insurance for the taxpayer and the taxpayer's spouse and dependents.

`(b) LIMITATIONS-

`(1) IN GENERAL- The amount allowed as a credit under subsection (a) to the taxpayer for the taxable year shall not exceed the lesser of--

`(A) the sum of the monthly limitations for coverage months during such taxable year for the individuals referred to in subsection (a) for whom the taxpayer paid during the taxable year any amount for coverage under qualified health insurance, or

`(B) 90 percent of the amount paid by the taxpayer during such taxable year for qualified health insurance for such individuals.

`(2) MONTHLY LIMITATION-

`(A) IN GENERAL- The monthly limitation for an individual for each coverage month of such individual during the taxable year is the amount equal to 1/12 of--

`(i) $1,000 if such individual is the taxpayer,

`(ii) $1,000 if--

`(I) such individual is the spouse of the taxpayer,

`(II) the taxpayer and such spouse are married as of the first day of such month, and

`(III) the taxpayer files a joint return for the taxable year, and

`(iii) $500 if such individual is an individual for whom a deduction under section 151(c) is allowable to the taxpayer for such taxable year.

`(B) LIMITATION TO 2 DEPENDENTS- Not more than 2 individuals may be taken into account by the taxpayer under subparagraph (A)(iii).

`(C) SPECIAL RULE FOR MARRIED INDIVIDUALS- In the case of an individual--

`(i) who is married (within the meaning of section 7703) as of the close of the taxable year but does not file a joint return for such year, and

`(ii) who does not live apart from such individual's spouse at all times during the taxable year,

the limitation imposed by subparagraph (B) shall be divided equally between the individual and the individual's spouse unless they agree on a different division.

`(3) PHASEOUT OF CREDIT-

`(A) IN GENERAL- The amount which would (but for this paragraph) be taken into account under subsection (a) shall be reduced (but not below zero) by the amount determined under subparagraph (B).

`(B) AMOUNT OF REDUCTION- The amount determined under this subparagraph is the amount which bears the same ratio to the amount which would be so taken into account for the taxable year as--

`(i) the excess of--

`(I) the taxpayer's modified adjusted gross income for the preceding taxable year, over

`(II) $15,000 ($25,000 in the case of family coverage), bears to

`(ii) $15,000 ($35,000 in the case of family coverage).

`(C) MODIFIED ADJUSTED GROSS INCOME- The term `modified adjusted gross income' means adjusted gross income determined--

`(i) without regard to this section and sections 911, 931, and 933, and

`(ii) after application of sections 86, 135, 137, 219, 221, and 469.

`(4) COVERAGE MONTH- For purposes of this subsection--

`(A) IN GENERAL- The term `coverage month' means, with respect to an individual, any month if--

`(i) as of the first day of such month such individual is covered by qualified health insurance, and

`(ii) the premium for coverage under such insurance for such month is paid by the taxpayer.

`(B) EMPLOYER-SUBSIDIZED COVERAGE-

`(i) IN GENERAL- Such term shall not include any month for which such individual is eligible to participate in any subsidized health plan (within the meaning of section 162(l)(2)) maintained by any employer of the taxpayer or of the spouse of the taxpayer.

`(ii) PREMIUMS TO NONSUBSIDIZED PLANS- If an employer of the taxpayer or the spouse of the taxpayer maintains a health plan which is not a subsidized health plan (as so defined) and which constitutes qualified health insurance, employee contributions to the plan shall be treated as amounts paid for qualified health insurance.

`(C) CAFETERIA PLAN AND FLEXIBLE SPENDING ACCOUNT BENEFICIARIES- Such term shall not include any month during a taxable year if any amount is not includible in the gross income of the taxpayer for such year under section 106 with respect to--

`(i) a benefit chosen under a cafeteria plan (as defined in section 125(d)), or

`(ii) a benefit provided under a flexible spending or similar arrangement.

`(D) MEDICARE AND MEDICAID- Such term shall not include any month with respect to an individual if, as of the first day of such month, such individual--

`(i) is entitled to any benefits under title XVIII of the Social Security Act, or

`(ii) is a participant in the program under title XIX or XXI of such Act.

`(E) CERTAIN OTHER COVERAGE- Such term shall not include any month during a taxable year with respect to an individual if, at any time during such year, any benefit is provided to such individual under--

`(i) chapter 89 of title 5, United States Code,

`(ii) chapter 55 of title 10, United States Code,

`(iii) chapter 17 of title 38, United States Code, or

`(iv) any medical care program under the Indian Health Care Improvement Act.

`(F) PRISONERS- Such term shall not include any month with respect to an individual if, as of the first day of such month, such individual is imprisoned under Federal, State, or local authority.

`(G) INSUFFICIENT PRESENCE IN UNITED STATES- Such term shall not include any month during a taxable year with respect to an individual if such individual is present in the United States on fewer than 183 days during such year (determined in accordance with section 7701(b)(7)).

`(5) COORDINATION WITH DEDUCTION FOR HEALTH INSURANCE COSTS OF SELF-EMPLOYED INDIVIDUALS- In the case of a taxpayer who is eligible to deduct any amount under section 162(l) for the taxable year, this section shall apply only if the taxpayer elects not to claim any amount as a deduction under such section for such year.

`(c) QUALIFIED HEALTH INSURANCE- For purposes of this section, the term `qualified health insurance' means health insurance coverage (as defined in section 9832(b)(1)), including coverage under a COBRA continuation provision (as defined in section 9832(d)(1)).

`(d) ARCHER MSA CONTRIBUTIONS- If a deduction would be allowed under section 220 to the taxpayer for a payment for the taxable year to the Archer MSA of an individual, subsection (a) shall not apply to the taxpayer for such taxable year.

`(e) SPECIAL RULES-

`(1) COORDINATION WITH MEDICAL EXPENSE DEDUCTION- The amount which would (but for this paragraph) be taken into account by the taxpayer under section 213 for the taxable year shall be reduced by the credit (if any) allowed by this section to the taxpayer for such year.

`(2) DENIAL OF CREDIT TO DEPENDENTS- No credit shall be allowed under this section to any individual with respect to whom a deduction under section 151 is allowable to another taxpayer for a taxable year beginning in the calendar year in which such individual's taxable year begins.

`(3) COORDINATION WITH ADVANCE PAYMENT- Rules similar to the rules of section 32(g) shall apply to any credit to which this section applies.

`(f) EXPENSES MUST BE SUBSTANTIATED- A payment for insurance to which subsection (a) applies may be taken into account under this section only if the taxpayer substantiates such payment in such form as the Secretary may prescribe.

`(g) REGULATIONS- The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this section.'.

(b) INFORMATION REPORTING-

(1) IN GENERAL- Subpart B of part III of subchapter A of chapter 61 of the Internal Revenue Code of 1986 (relating to information concerning transactions with other persons) is amended by inserting after section 6050T the following:

`SEC. 6050U. RETURNS RELATING TO PAYMENTS FOR QUALIFIED HEALTH INSURANCE.

`(a) IN GENERAL- Any person who, in connection with a trade or business conducted by such person, receives payments during any calendar year from any individual for coverage of such individual or any other individual under creditable health insurance, shall make the return described in subsection (b) (at such time as the Secretary may by regulations prescribe) with respect to each individual from whom such payments were received.

`(b) FORM AND MANNER OF RETURNS- A return is described in this subsection if such return--

`(1) is in such form as the Secretary may prescribe, and

`(2) contains--

`(A) the name, address, and TIN of the individual from whom payments described in subsection (a) were received,

`(B) the name, address, and TIN of each individual who was provided by such person with coverage under creditable health insurance by reason of such payments and the period of such coverage,

`(C) the aggregate amount of payments described in subsection (a),

`(D) the qualified health insurance credit advance amount (as defined in section 7528(e)) received by such person with respect to the individual described in subparagraph (A), and

`(E) such other information as the Secretary may reasonably prescribe.

`(c) CREDITABLE HEALTH INSURANCE- For purposes of this section, the term `creditable health insurance' means qualified health insurance (as defined in section 36(c)).

`(d) STATEMENTS TO BE FURNISHED TO INDIVIDUALS WITH RESPECT TO WHOM INFORMATION IS REQUIRED- Every person required to make a return under subsection (a) shall furnish to each individual whose name is required under subsection (b)(2)(A) to be set forth in such return a written statement showing--

`(1) the name and address of the person required to make such return and the phone number of the information contact for such person,

`(2) the aggregate amount of payments described in subsection (a) received by the person required to make such return from the individual to whom the statement is required to be furnished,

`(3) the information required under subsection (b)(2)(B) with respect to such payments, and

`(4) the qualified health insurance credit advance amount (as defined in section 7528(e)) received by such person with respect to the individual described in paragraph (2).

The written statement required under the preceding sentence shall be furnished on or before January 31 of the year following the calendar year for which the return under subsection (a) is required to be made.

`(e) RETURNS WHICH WOULD BE REQUIRED TO BE MADE BY 2 OR MORE PERSONS- Except to the extent provided in regulations prescribed by the Secretary, in the case of any amount received by any person on behalf of another person, only the person first receiving such amount shall be required to make the return under subsection (a).'.

(2) ASSESSABLE PENALTIES-

(A) Subparagraph (B) of section 6724(d)(1) of such Code (relating to definitions) is amended by redesignating clauses (xiii) through (xviii) as clauses (xiv) through (xix), respectively, and by inserting after clause (xii) the following:

`(xiii) section 6050U (relating to returns relating to payments for qualified health insurance),'.

(B) Paragraph (2) of section 6724(d) of such Code is amended by striking `or' at the end of subparagraph (AA), by striking the period at the end of the subparagraph (BB) and inserting `, or', and by adding at the end the following:

`(CC) section 6050U(d) (relating to returns relating to payments for qualified health insurance).'.

(3) CLERICAL AMENDMENT- The table of sections for subpart B of part III of subchapter A of chapter 61 of such Code is amended by inserting after the item relating to section 6050T the following:

`Sec. 6050U. Returns relating to payments for qualified health insurance.'.

(c) CRIMINAL PENALTY FOR FRAUD- Subchapter B of chapter 75 of the Internal Revenue Code of 1986 (relating to other offenses) is amended by adding at the end the following:

`SEC. 7276. PENALTIES FOR OFFENSES RELATING TO HEALTH INSURANCE TAX CREDIT.

`Any person who knowingly misuses Department of the Treasury names, symbols, titles, or initials to convey the false impression of association with, or approval or endorsement by, the Department of the Treasury of any insurance products or group health coverage in connection with the credit for health insurance costs under section 36 shall on conviction thereof be fined not more than $10,000, or imprisoned not more than 1 year, or both.'.

(d) CONFORMING AMENDMENTS-

(1) Section 162(l) of the Internal Revenue Code of 1986 is amended by adding at the end the following:

`(6) ELECTION TO HAVE SUBSECTION APPLY- No deduction shall be allowed under paragraph (1) for a taxable year unless the taxpayer elects to have this subsection apply for such year.'.

(2) Paragraph (2) of section 1324(b) of title 31, United States Code, is amended by inserting before the period `, or from section 36 of such Code'.

(3) The table of sections for subpart C of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by striking the last item and inserting the following:

`Sec. 36. Health insurance costs for uninsured eligible individuals.

`Sec. 37. Overpayments of tax.'.

(4) The table of sections for subchapter B of chapter 75 of such Code is amended by adding at the end the following:

`Sec. 7276. Penalties for offenses relating to health insurance tax credit.'.

(e) EFFECTIVE DATES-

(1) IN GENERAL- Except as provided in paragraph (2), the amendments made by this section shall apply to taxable years beginning after December 31, 2005, without regard to whether final regulations to carry out such amendments have been promulgated by such date.

(2) PENALTIES- The amendments made by subsections (c) and (d)(4) shall take effect on the date of the enactment of this Act.

SEC. 202. ADVANCE PAYMENT OF CREDIT TO ISSUERS OF QUALIFIED HEALTH INSURANCE.

(a) IN GENERAL- Chapter 77 of the Internal Revenue Code of 1986 (relating to miscellaneous provisions) is amended by inserting after section 7527 the following:

`SEC. 7527A ADVANCE PAYMENT OF HEALTH INSURANCE CREDIT FOR PURCHASERS OF QUALIFIED HEALTH INSURANCE.

`(a) GENERAL RULE- Every plan sponsor of a group health plan providing, or qualified health insurance issuer of, qualified health insurance to an eligible individual shall--

`(1) make qualified premium payments with respect to such individual in an amount equal to the qualified health insurance credit advance amount, and

`(2) treat such payments in the manner provided in subsection (g).

`(b) ELIGIBLE INDIVIDUAL- For purposes of this section, the term `eligible individual' means any individual--

`(1) who purchases qualified health insurance (as defined in section 36(c)), and

`(2) for whom a qualified health insurance credit eligibility certificate is in effect.

`(c) DEFINITIONS- For purposes of this section--

`(1) QUALIFIED HEALTH INSURANCE ISSUER- The term `qualified health insurance issuer' means a health insurance issuer described in section 9832(b)(2) (determined without regard to the last sentence thereof) offering coverage in connection with a group health plan.

`(2) GROUP HEALTH PLAN- The term `group health plan' has the meaning given such term by section 5000(b)(1) (determined without regard to subsection (d) thereof).

`(3) QUALIFIED PREMIUM PAYMENTS- The term `qualified premium payments' means any amount paid or incurred, cost incurred, or health coverage value provided, with respect to qualified health insurance for an eligible individual and the individual's spouse and dependents. For purposes of the preceding sentence, in the case of a group health plan, the health coverage value is equal to the applicable premium under the plan for the qualified health insurance coverage provided to an eligible individual and the individual's spouse and dependents, as determined under section 4980B.

`(d) QUALIFIED HEALTH INSURANCE CREDIT ELIGIBILITY CERTIFICATE- For purposes of this section, a qualified health insurance credit eligibility certificate is a statement furnished by an individual to a plan sponsor of a group health plan or qualified health insurance issuer which--

`(1) certifies that the individual will be eligible to receive the credit provided by section 36 for the taxable year,

`(2) estimates the amount of such credit for such taxable year, and

`(3) provides such other information as the Secretary may require for purposes of this section.

`(e) QUALIFIED HEALTH INSURANCE CREDIT ADVANCE AMOUNT- For purposes of this section, the term `qualified health insurance credit advance amount' means, with respect to any plan sponsor of a group health plan providing, or qualified health insurance issuer of, qualified health insurance, the amount of credit allowable under section 36 to the individual for the taxable year which is attributable to the insurance provided to the individual by such sponsor or issuer.

`(f) REQUIRED DOCUMENTATION FOR RECEIPT OF PAYMENTS OF ADVANCE AMOUNT- No payment of a qualified health insurance credit advance amount with respect to any eligible individual may be made under subsection (a) unless the plan sponsor of the group health plan or qualified health insurance issuer provides to the Secretary--

`(1) the qualified health insurance credit eligibility certificate of such individual, and

`(2) the return relating to such individual under section 6050U.

`(g) QUALIFIED PREMIUM PAYMENTS TO BE TREATED AS PAYMENTS OF WITHHOLDING AMOUNTS AND CERTAIN EMPLOYER TAX-

`(1) IN GENERAL- For purposes of this title, qualified premium payments made or costs incurred by the sponsor of a group health plan, or any entity designated by the sponsor to make such payments or incur such costs--

`(A) shall not be treated as compensation, and

`(B) shall be treated, in such manner as provided by the Secretary, as made out of--

`(i) amounts required to be deposited by the taxpayer as estimated income tax under section 6654 or 6655,

`(ii) amounts required to be deducted and withheld under section 3401 (relating to wage withholding),

`(iii) amounts of the taxes imposed under section 3111(a) or 50 percent of taxes imposed under section 1401(a) (relating to FICA employer taxes), or

`(iv) amounts required to be deducted under section 3102 with respect to taxes imposed under section 3101(a) or 50 percent of taxes imposed under section 1401(a) (relating to FICA employee taxes),

as if such sponsor, or such designated entity, had paid to the Secretary an amount equal to such payments.

`(2) QUALIFIED PREMIUM PAYMENTS EXCEED TAXES DUE- In the case of any entity, if for any time period the aggregate qualified premium payments exceed the amounts described in paragraph (1)(B), the Secretary shall reduce amounts described in such paragraph for any succeeding time period as necessary to reflect such excess.

`(3) FAILURE TO MAKE QUALIFIED PREMIUM PAYMENTS- For purposes of this title (including penalties), failure to make a qualified premium payment with respect to an eligible individual at the time provided therefor shall be treated as the failure at such time to deduct and withhold under chapter 24 of such Code in an amount equal to the amount of such qualified premium payments.

`(h) REGULATIONS- The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this section.'.

(b) CLERICAL AMENDMENT- The table of sections for chapter 77 of the Internal Revenue Code of 1986 is amended by inserting after the item relating to section 7527 the following:

`Sec. 7527A. Advance payment of health insurance credit for purchasers of qualified health insurance.'.

(c) EFFECTIVE DATE- The amendments made by this section shall take effect on January 1, 2007, without regard to whether final regulations to carry out such amendments have been promulgated by such date.

Subtitle B--FamilyCare

SEC. 211. RENAMING OF TITLE XXI PROGRAM.

(a) IN GENERAL- The heading of title XXI of the Social Security Act (42 U.S.C. 1397aa et seq.) is amended to read as follows:

`TITLE XXI--FAMILYCARE PROGRAM'.

(b) PROGRAM REFERENCES- Any reference in any provision of Federal law or regulation to `SCHIP' or `State children's health insurance program' under title XXI of the Social Security Act shall be deemed a reference to the FamilyCare program under such title.

SEC. 212. FAMILYCARE COVERAGE OF PARENTS UNDER THE MEDICAID PROGRAM AND TITLE XXI.

(a) INCENTIVES TO IMPLEMENT FAMILYCARE COVERAGE-

(1) UNDER MEDICAID-

(A) ESTABLISHMENT OF NEW OPTIONAL ELIGIBILITY CATEGORY- Section 1902(a)(10)(A)(ii) of the Social Security Act (42 U.S.C. 1396a(a)(10)(A)(ii)) is amended--

(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:

`(XIX) who are individuals described in subsection (k)(1) (relating to parents of categorically eligible children);'.

(B) PARENTS DESCRIBED- Section 1902 of the Social Security Act is further amended by inserting after subsection (j) the following:

`(k)(1)(A) Individuals described in this paragraph are individuals--

`(i) who are the parents of an individual who is under 19 years of age (or such higher age as the State may have elected under section 1902(l)(1)(D)) and who is eligible for medical assistance under subsection (a)(10)(A);

`(ii) who are not otherwise eligible for medical assistance under such subsection, under section 1931, or under a waiver approved under section 1115 or otherwise (except under subsection (a)(10)(A)(ii)(XIX)); and

`(iii) whose family income exceeds the income level applicable under the State plan under part A of title IV as in effect as of July 16, 1996, but does not exceed the highest income level applicable to a child in the family under this title.

`(B) In establishing an income eligibility level for individuals described in this paragraph, a State may vary such level consistent with the various income levels established under subsection (l)(2) based on the ages of children described in subsection (l)(1) in order to ensure, to the maximum extent possible, that such individuals shall be enrolled in the same program as their children.

`(C) An individual may not be treated as being described in this paragraph unless, at the time of the individual's enrollment under this title, the child referred to in subparagraph (A)(i) of the individual is also enrolled under this title.

`(D) In this subsection, the term `parent' includes an individual treated as a caregiver for purposes of carrying out section 1931.

`(2) In the case of a parent described in paragraph (1) who is also the parent of a child who is eligible for child health assistance under title XXI, the State may elect (on a uniform basis) to cover all such parents under section 2111 or under this title.'.

(C) ENHANCED MATCHING FUNDS AVAILABLE IF CERTAIN CONDITIONS MET- Section 1905 of the Social Security Act (42 U.S.C. 1396d) is amended--

(i) in the fourth sentence of subsection (b), by striking `or subsection (u)(3)' and inserting `, (u)(3), or (u)(4)'; and

(ii) in subsection (u)--

(I) by redesignating paragraph (4) as paragraph (6), and

(II) by inserting after paragraph (3) the following:

`(4) For purposes of subsection (b) and section 2105(a)(1):

`(A) FAMILYCARE PARENTS- The expenditures described in this subparagraph are the expenditures described in the following clauses (i) and (ii):

`(i) PARENTS- If the conditions described in clause (iii) are met, expenditures for medical assistance for parents described in section 1902(k)(1) and for parents who would be described in such section but for the fact that they are eligible for medical assistance under section 1931 or under a waiver approved under section 1115.

`(ii) CERTAIN PREGNANT WOMEN- Expenditures for medical assistance for pregnant women under section 1902(l)(1)(A) in a family the income of which exceeds the income level applicable under section 1902(l)(2)(A) to a family of the size involved as of January 1, 2005.

`(iii) CONDITIONS- The conditions described in this clause are the following:

`(I) The State has a State child health plan under title XXI which (whether implemented under such title or under this title) has an effective income level for children that is at least 200 percent of the poverty line.

`(II) Such State child health plan does not limit the acceptance of applications, does not use a waiting list for children who meet eligibility standards to qualify for assistance, and provides benefits to all children in the State who apply for and meet eligibility standards.

`(III) The State plans under this title and title XXI do not provide coverage for parents with higher family income without covering parents with a lower family income.

`(IV) The State does not apply an income level for parents that is lower than the effective income level (expressed as a percent of the poverty line) that has been specified under the State plan under title XIX (including under a waiver authorized by the Secretary or under section 1902(r)(2)), as of January 1, 2005, to be eligible for medical assistance as a parent under this title.

`(iv) DEFINITIONS- For purposes of this subsection:

`(I) The term `parent' has the meaning given such term for purposes of section 1902(k)(1).

`(II) The term `poverty line' has the meaning given such term in section 2110(c)(5).'.

(D) APPROPRIATION FROM TITLE XXI ALLOTMENT FOR CERTAIN MEDICAID EXPANSION COSTS- Subparagraph (B) of section 2105(a)(1) of the Social Security Act, as amended by section 217(a), is amended to read as follows:

`(B) FAMILYCARE PARENTS- Expenditures for medical assistance that is attributable to expenditures described in section 1905(u)(4)(A).'.

(E) ONLY COUNTING ENHANCED PORTION FOR COVERAGE OF ADDITIONAL PREGNANT WOMEN- Section 1905 of the Social Security Act (42 U.S.C. 1396d) is amended--

(i) in the fourth sentence of subsection (b), by inserting `(except in the case of expenditures described in subsection (u)(5))' after `do not exceed'; and

(ii) in subsection (u), by inserting after paragraph (4) (as inserted by subparagraph (C)), the following:

`(5) For purposes of the fourth sentence of subsection (b) and section 2105(a), the following payments under this title do not count against a State's allotment under section 2104:

`(A) REGULAR FMAP FOR EXPENDITURES FOR PREGNANT WOMEN WITH INCOME ABOVE JANUARY 1, 2005 INCOME LEVEL AND BELOW 185 PERCENT OF POVERTY- The portion of the payments made for expenditures described in paragraph (4)(A)(ii) that represents the amount that would have been paid if the enhanced FMAP had not been substituted for the Federal medical assistance percentage.'.

(2) UNDER TITLE XXI-

(A) FAMILYCARE COVERAGE- Title XXI of the Social Security Act (42 U.S.C. 1397aa et seq.) is amended by adding at the end the following:

`SEC. 2111. OPTIONAL FAMILYCARE COVERAGE OF PARENTS OF TARGETED LOW-INCOME CHILDREN.

`(a) OPTIONAL COVERAGE- Notwithstanding any other provision of this title, a State child health plan may provide for coverage, through an amendment to its State child health plan under section 2102, of FamilyCare assistance for individuals who are targeted low-income parents in accordance with this section, but only if--

`(1) the State meets the conditions described in section 1905(u)(4)(A)(iii); and

`(2) the State elects to provide medical assistance under section 1902(a)(10)(A)(ii)(XIX), under section 1931, or under a waiver under section 1115 to individuals described in section 1902(k)(1)(A)(i) and elects an applicable income level for such individuals that consistent with paragraphs (1)(B) and (2) of section 1902(k), ensures to the maximum extent possible, that those individuals shall be enrolled in the same program as their children if their children are eligible for coverage under title XIX (including under a waiver authorized by the Secretary or under section 1902(r)(2)).'.

`(b) DEFINITIONS- For purposes of this title:

`(1) FAMILYCARE ASSISTANCE- The term `FamilyCare assistance' has the meaning given the term child health assistance in section 2110(a) as if any reference to targeted low-income children were a reference to targeted low-income parents.

`(2) TARGETED LOW-INCOME PARENT- The term `targeted low-income parent' has the meaning given the term targeted low-income child in section 2110(b) as if the reference to a child were deemed a reference to a parent (as defined in paragraph (3)) of the child; except that in applying such section--

`(A) there shall be substituted for the income level described in paragraph (1)(B)(ii)(I) the applicable income level in effect for a targeted low-income child;

`(B) in paragraph (3), January 1, 2005, shall be substituted for July 1, 1997; and

`(C) in paragraph (4), January 1, 2005, shall be substituted for March 31, 1997.

`(3) PARENT- The term `parent' includes an individual treated as a caregiver for purposes of carrying out section 1931.

`(4) OPTIONAL TREATMENT OF PREGNANT WOMEN AS PARENTS- A State child health plan may treat a pregnant woman who is not otherwise a parent as a targeted low-income parent for purposes of this section but only if the State has established an income level under section 1902(l)(2)(A)(i) for pregnant women that is at least 185 percent of the income official poverty line described in such section.

`(c) REFERENCES TO TERMS AND SPECIAL RULES- In the case of, and with respect to, a State providing for coverage of FamilyCare assistance to targeted low-income parents under subsection (a), the following special rules apply:

`(1) Any reference in this title (other than subsection (b)) to a targeted low-income child is deemed to include a reference to a targeted low-income parent.

`(2) Any such reference to child health assistance with respect to such parents is deemed a reference to FamilyCare assistance.

`(3) In applying section 2103(e)(3)(B) in the case of a family provided coverage under this section, the limitation on total annual aggregate cost-sharing shall be applied to the entire family.

`(4) In applying section 2110(b)(4), any reference to `section 1902(l)(2) or 1905(n)(2) (as selected by a State)' is deemed a reference to the income level applicable to parents under section 1931 or under a waiver approved under section 1115, or, in the case of a pregnant woman described in subsection (b)(4), the income level established under section 1902(l)(2)(A).

`(5) In applying section 2102(b)(3)(B), any reference to children is deemed a reference to parents.'.

(B) ADDITIONAL ALLOTMENT FOR STATES PROVIDING FAMILYCARE-

(i) 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 FOR STATE PROVIDING FAMILYCARE-

`(1) APPROPRIATION; TOTAL ALLOTMENT- For the purpose of providing additional allotments to States to provide FamilyCare coverage under section 2111, there is appropriated, out of any money in the Treasury not otherwise appropriated--

`(A) for fiscal year 2006, $2,000,000,000;

`(B) for fiscal year 2007, $3,000,000,000;

`(C) for fiscal year 2008, $3,000,000,000;

`(D) for fiscal year 2009, $6,000,000,000;

`(E) for fiscal year 2010, $7,000,000,000;

`(F) for fiscal year 2011, $8,000,000,000;

`(G) for fiscal year 2012, $9,000,000,000;

`(H) for fiscal year 2013, $10,000,000,000; and

`(I) for fiscal year 2014 and each fiscal year thereafter, the amount of the allotment provided under this paragraph for the preceding fiscal year increased by the percentage increase (if any) in the medical care expenditure category of the Consumer Price Index for All Urban Consumers (United States city average).

`(2) STATE AND TERRITORIAL ALLOTMENTS-

`(A) IN GENERAL- In addition to the allotments provided under subsections (b) and (c), subject to paragraphs (3) and (4), of the amount available for the additional allotments under paragraph (1) for a fiscal year, the Secretary shall allot to each State with a State child health plan approved under this title--

`(i) in the case of such a State other than a commonwealth or territory described in clause (ii), the same proportion as the proportion of the State's allotment under subsection (b) (determined without regard to subsection (f)) to 98.95 percent of the total amount of the allotments under such section for such States eligible for an allotment under this subparagraph for such fiscal year; and

`(ii) in the case of a 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 total amount of the allotments under such section for commonwealths and territories eligible for an allotment under this subparagraph for such fiscal year.

`(B) AVAILABILITY AND REDISTRIBUTION OF UNUSED ALLOTMENTS- In applying subsections (e) and (f) with respect to additional allotments made available under this subsection, the procedures established under such subsections shall ensure such additional allotments are only made available to States which have elected to provide coverage under section 2111.

`(3) USE OF ADDITIONAL ALLOTMENT- Additional allotments provided under this subsection are not available for amounts expended before October 1, 2005. Such amounts are available for amounts expended on or after such date for child health assistance for targeted low-income children, as well as for FamilyCare assistance.

`(4) REQUIRING ELECTION TO PROVIDE FAMILYCARE COVERAGE- No payments may be made to a State under this title from an allotment provided under this subsection unless the State has made an election to provide FamilyCare assistance.'.

(ii) CONFORMING AMENDMENTS- Section 2104 of the Social Security Act (42 U.S.C. 1397dd) is amended--

(I) in subsection (a), by inserting `subject to subsection (d),' after `under this section,';

(II) in subsection (b)(1), by inserting `and subsection (d)' after `Subject to paragraph (4)'; and

(III) in subsection (c)(1), by inserting `subject to subsection (d),' after `for a fiscal year,'.

(C) NO COST-SHARING FOR PREGNANCY-RELATED BENEFITS- Section 2103(e)(2) of the Social Security Act (42 U.S.C. 1397cc(e)(2)) is amended--

(i) in the heading, by inserting `AND PREGNANCY-RELATED SERVICES' after `PREVENTIVE SERVICES'; and

(ii) by inserting before the period at the end the following: `and for pregnancy-related services'.

(3) EFFECTIVE DATE- The amendments made by this subsection apply to items and services furnished on or after October 1, 2005, whether or not regulations implementing such amendments have been issued.

(b) RULES FOR IMPLEMENTATION BEGINNING WITH FISCAL YEAR 2008-

(1) REQUIRED COVERAGE OF FAMILYCARE PARENTS- Section 1902(a)(10)(A)(i) of the Social Security Act (42 U.S.C. 1396a(a)(10)(A)(i)) is amended--

(A) by striking `or' at the end of subclause (VI);

(B) by striking the semicolon at the end of subclause (VII) and insert `, or'; and

(C) by adding at the end the following:

`(VIII) who are described in subsection (k)(1) (or would be described if subparagraph (A)(ii) of such subsection did not apply) and who are in families with incomes that do not exceed 100 percent of the poverty line applicable to a family of the size involved;'.

(2) EXPANSION OF AVAILABILITY OF ENHANCED MATCH UNDER MEDICAID FOR PRE-CHIP EXPANSIONS- Paragraph (4) of section 1905(u) of the Social Security Act (42 U.S.C. 1396d(u)), as inserted by subsection (a)(1)(C), is amended--

(A) by amending clause (ii) of subparagraph (A) to read as follows:

`(ii) CERTAIN PREGNANT WOMEN- Expenditures for medical assistance for pregnant women under section 1902(l)(1)(A) in a family the income of which exceeds the 133 percent of the income official poverty line.'; and

(B) by adding at the end the following:

`(B) CHILDREN IN FAMILIES WITH INCOME ABOVE MEDICAID MANDATORY LEVEL NOT PREVIOUSLY DESCRIBED- The expenditures described in this subparagraph are expenditures (other than expenditures described in paragraph (2) or (3)) for medical assistance made available to any child who is eligible for assistance under section 1902(a)(10)(A) (other than under clause (i)) and the income of whose family exceeds the minimum income level required under subsection 1902(l)(2) (or, if higher, the minimum level required under section 1931 for that State) for a child of the age involved (treating any child who is 19 or 20 years of age as being 18 years of age).'.

(3) OFFSET OF ADDITIONAL EXPENDITURES FOR ENHANCED MATCH FOR PRE-CHIP EXPANSION; ELIMINATION OF OFFSET FOR REQUIRED COVERAGE OF FAMILYCARE PARENTS-

(A) IN GENERAL- Section 1905(u)(5) of the Social Security Act (42 U.S.C. 1396d(u)(5)), as added by subsection (a)(1)(E), is amended--

(i) by amending subparagraph (A) to read as follows:

`(A) REGULAR FMAP FOR EXPENDITURES FOR PREGNANT WOMEN WITH INCOME ABOVE 133 PERCENT OF POVERTY- The portion of the payments made for expenditures described in paragraph (4)(A)(ii) that represents the amount that would have been paid if the enhanced FMAP had not been substituted for the Federal medical assistance percentage.'; and

(ii) by adding at the end the following:

`(B) FAMILYCARE PARENTS UNDER 100 PERCENT OF POVERTY- Payments for expenditures described in paragraph (4)(A)(i) in the case of parents whose income does not exceed 100 percent of the income official poverty line applicable to a family of the size involved.

`(C) REGULAR FMAP FOR EXPENDITURES FOR CERTAIN CHILDREN IN FAMILIES WITH INCOME ABOVE MEDICAID MANDATORY LEVEL- The portion of the payments made for expenditures described in paragraph (4)(B) that represents the amount that would have been paid if the enhanced FMAP had not been substituted for the Federal medical assistance percentage.'.

(B) CONFORMING AMENDMENTS- Subparagraph (B) of section 2105(a)(1) of the Social Security Act, as amended by section 217(a) and subsection (a)(1)(D), is amended to read as follows:

`(B) CERTAIN FAMILYCARE PARENTS AND OTHERS- Expenditures for medical assistance that is attributable to expenditures described in section 1905(u)(4), except as provided in section 1905(u)(5).'.

(4) EFFECTIVE DATE- The amendments made by this subsection apply as of October 1, 2007, to fiscal years beginning on or after such date and to expenditures under the State plan on and after such date, whether or not regulations implementing such amendments have been issued.

(c) MAKING TITLE XXI BASE ALLOTMENTS PERMANENT- Section 2104(a) of the Social Security Act (42 U.S.C. 1397dd(a)) is amended--

(1) by striking `and' at the end of paragraph (9);

(2) by striking the period at the end of paragraph (10) and inserting `; and'; and

(3) by adding at the end the following:

`(11) for fiscal year 2008 and each fiscal year thereafter, the amount of the allotment provided under this subsection for the preceding fiscal year increased by the percentage increase (if any) in the medical care expenditure category of the Consumer Price Index for All Urban Consumers (United States city average).'.

(d) OPTIONAL APPLICATION OF PRESUMPTIVE ELIGIBILITY PROVISIONS TO PARENTS- Section 1920A of the Social Security Act (42 U.S.C. 1396r-1a) is amended by adding at the end the following:

`(e) A State may elect to apply the previous provisions of this section to provide for a period of presumptive eligibility for medical assistance for a parent (as defined for purposes of section 1902(k)(1)) of a child with respect to whom such a period is provided under this section.'.

(e) CONFORMING AMENDMENTS-

(1) ELIGIBILITY CATEGORIES- Section 1905(a) of the Social Security Act (42 U.S.C. 1396d(a)) is amended, in the matter before paragraph (1)--

(A) by striking `or' at the end of clause (xii);

(B) by inserting `or' at the end of clause (xiii); and

(C) by inserting after clause (xiii) the following:

`(xiv) who are parents described (or treated as if described) in section 1902(k)(1),'.

(2) INCOME LIMITATIONS- Section 1903(f)(4) of the Social Security Act (42 U.S.C. 1396b(f)(4)) is amended--

(A) effective October 1, 2007, by inserting `1902(a)(10)(A)(i)(VIII),' after `1902(a)(10)(A)(i)(VII),'; and

(B) by inserting `1902(a)(10)(A)(ii)(XIX),' after `1902(a)(10)(A)(ii)(XVIII),'.

(3) CONFORMING AMENDMENT RELATING TO NO WAITING PERIOD FOR PREGNANT WOMEN- Section 2102(b)(1)(B) of the Social Security Act (42 U.S.C. 1397bb(b)(1)(B)) is amended--

(A) by striking `, and' at the end of clause (i) and inserting a semicolon;

(B) by striking the period at the end of clause (ii) and inserting `; and'; and

(C) by adding at the end the following:

`(iii) may not apply a waiting period (including a waiting period to carry out paragraph (3)(C)) in the case of a targeted low-income parent who is pregnant.'.

SEC. 213. OPTIONAL COVERAGE OF CHILDREN THROUGH AGE 20 UNDER THE MEDICAID PROGRAM AND TITLE XXI.

(a) MEDICAID-

(1) IN GENERAL- Section 1902(l)(1)(D) of the Social Security Act (42 U.S.C. 1396a(l)(1)(D)) is amended by inserting `(or, at the election of a State, 20 or 21 years of age)' after `19 years of age'.

(2) CONFORMING AMENDMENTS-

(A) Section 1902(e)(3)(A) of the Social Security Act (42 U.S.C. 1396a(e)(3)(A)) is amended by inserting `(or 1 year less than the age the State has elected under subsection (l)(1)(D))' after `18 years of age'.

(B) Section 1902(e)(12) of the Social Security Act (42 U.S.C. 1396a(e)(12)) is amended by inserting `or such higher age as the State has elected under subsection (l)(1)(D)' after `19 years of age'.

(C) Section 1920A(b)(1) of the Social Security Act (42 U.S.C. 1396r-1a(b)(1)) is amended by inserting `or such higher age as the State has elected under section 1902(l)(1)(D)' after `19 years of age'.

(D) Section 1928(h)(1) of the Social Security Act (42 U.S.C. 1396s(h)(1)) is amended by inserting `or 1 year less than the age the State has elected under section 1902(l)(1)(D)' before the period at the end.

(E) Section 1932(a)(2)(A) of the Social Security Act (42 U.S.C. 1396u-2(a)(2)(A)) is amended by inserting `(or such higher age as the State has elected under section 1902(l)(1)(D))' after `19 years of age'.

(b) TITLE XXI- Section 2110(c)(1) of the Social Security Act (42 U.S.C. 1397jj(c)(1)) is amended by inserting `(or such higher age as the State has elected under section 1902(l)(1)(D))'.

(c) EFFECTIVE DATE- The amendments made by this section take effect on October 1, 2006, and apply to medical assistance and child health assistance provided on or after such date, whether or not regulations implementing such amendments have been issued.

SEC. 214. ELIMINATION OF `DIP' IN CHIP ALLOTMENTS FOR FISCAL YEARS 2003 AND 2004.

Paragraphs (6) and (7) of section 2104(a) of the Social Security Act (42 U.S.C. 1397dd(a)) are amended by striking `$3,150,000,000' each place it appears and inserting `$4,150,000,000'.

SEC. 215. ADDITIONAL CHIP REVISIONS.

(a) LIMITING COST-SHARING TO 2.5 PERCENT FOR FAMILIES WITH INCOME BELOW 150 PERCENT OF POVERTY- Section 2103(e)(3)(A) of the Social Security Act (42 U.S.C. 1397cc(e)(3)(A)) is amended--

(1) by striking `and' at the end of clause (i);

(2) by striking the period at the end of clause (ii) and inserting `; and'; and

(3) by adding at the end the following new clause:

`(iii) total annual aggregate cost-sharing described in clauses (i) and (ii) with respect to all such targeted low-income children in a family under this title that exceeds 2.5 percent of such family's income for the year involved.'.

(b) REPORTING OF ENROLLMENT DATA-

(1) QUARTERLY REPORTS- Section 2107(b)(1) of such Act (42 U.S.C. 1397gg(b)(1)) is amended by adding at the end the following: `In quarterly reports on enrollment required under this paragraph, a State shall include information on the age, gender, race, ethnicity, service delivery system, and family income of individuals enrolled.'.

(2) ANNUAL REPORTS- Section 2108(b)(1)(B)(i) of such Act (42 U.S.C. 1397hh(b)(1)(B)(i)) is amended by inserting `primary language of enrollees,' after `family income,'.

(c) EMPLOYER COVERAGE WAIVER CHANGES- Section 2105(c)(3) of such Act (42 U.S.C. 1397ee(c)(3)) is amended--

(1) by redesignating subparagraphs (A) and (B) as clauses (i) and (ii) and indenting appropriately;

(2) by designating the matter beginning with `Payment may be made' as a subparagraph (A) with the heading `IN GENERAL' and indenting appropriately;

(3) in subparagraph (A) (as so designated)--

(A) in the matter preceding clause (i) (as redesignated by paragraph (1)), by striking `targeted low-income children' and inserting `a targeted low-income child, a targeted low-income parent, or a pregnant woman who is treated as a targeted low-income parent under section 2111(b)(4)';

(B) in clause (i) (as so redesignated), by striking `children' and inserting `child, targeted low-income parent, or pregnant woman treated as such a parent'; and

(C) in clause (ii) (as so redesignated), by striking `children' and inserting `child, parent, or pregnant women'; and

(4) by adding at the end the following new subparagraphs:

`(B) APPLICATION OF REQUIREMENTS- In carrying out subparagraph (A)--

`(i) the Secretary shall not require a minimum employer contribution level that is separate from the requirement of cost-effectiveness under subparagraph (A)(i), but a State shall identify a reasonable minimum employer contribution level that is based on data demonstrating that such a level is representative to the employer-sponsored insurance market in the State and shall monitor employer contribution levels over time to determine whether substitution is occurring and report the findings in annual reports under section 2108(a);

`(ii) the State shall establish a waiting period of at least 6 months without group health coverage, but may establish reasonable exceptions to such period and shall not apply such a waiting period to a child who is provided coverage under a group health plan under section 1906;

`(iii) subject to clause (iv), the State shall provide satisfactory assurances that the minimum benefits and cost-sharing protections established under this title are provided, either through the coverage under subparagraph (A) or as a supplement to such coverage; and

`(iv) coverage under such subparagraph shall not be considered to violate clause (iii) because it does not comply with requirements relating to reviews of health service decisions if the enrollee involved is provided the option of being provided benefits directly under this title.

`(C) ACCESS TO EXTERNAL REVIEW PROCESS- In carrying out subparagraph (A), if a State provides coverage under a group health plan that does not meet the following external review requirements, the State must give applicants and enrollees (at initial enrollment and at each redetermination of eligibility) the option to obtain health benefits coverage other than through that group health plan:

`(i) The enrollee has an opportunity for external review of a--

`(I) delay, denial, reduction, suspension, or termination of health services, in whole or in part, including a determination about the type or level of services; and

`(II) failure to approve, furnish, or provide payment for health services in a timely manner.

`(ii) The external review is conducted by the State or a impartial contractor other than the contractor responsible for the matter subject to external review.

`(iii) The external review decision is made on a timely basis in accordance with the medical needs of the patient. If the medical needs of the patient do not dictate a shorter time frame, the review must be completed--

`(I) within 90 calendar days of the date of the request for internal or external review; or

`(II) within 72 hours if the enrollee's physician or plan determines that the deadline under subclause (I) could seriously jeopardize the enrollee's life or health or ability to attain, maintain, or regain maximum function (except that a State may extend the 72-hour deadline by up to 14 days if the enrollee requests an extension).

`(iv) The external review decision shall be in writing.

`(v) Applicants and enrollees have an opportunity--

`(I) to represent themselves or have representatives of their choosing in the review process;

`(II) timely review their files and other applicable information relevant to the review of the decision; and

`(III) fully participate in the review process, whether the review is conducted in person or in writing, including by presenting supplemental information during the review process.'.

(d) SENSE OF THE SENATE REGARDING AUTHORITY TO USE SCHIP FUNDS TO PURCHASE FAMILY COVERAGE- It is the sense of the Senate that section 2105(c)(3) of the Social Security Act (42 U.S.C. 1397ee(c)(3)) permits States to use funds provided under the State children's health insurance program established under title XXI of that Act (42 U.S.C. 1397aa et seq.) to help low-income working families and pregnant women eligible for assistance under that program pay their share of employer-sponsored health insurance coverage.

(e) EFFECTIVE DATE- The amendments made by this section apply as of October 1, 2006, whether or not regulations implementing such amendments have been issued.

SEC. 216. LIMITATIONS ON CONFLICTS OF INTEREST.

(a) LIMITATION ON CONFLICTS OF INTEREST IN MARKETING ACTIVITIES-

(1) TITLE XXI- Section 2105(c) of the Social Security Act (42 U.S.C. 300aa-5(c)) is amended by adding at the end the following:

`(8) LIMITATION ON EXPENDITURES FOR MARKETING ACTIVITIES- Amounts expended by a State for the use of an administrative vendor in marketing health benefits coverage to low-income children under this title shall not be considered, for purposes of subsection (a)(2)(D), to be reasonable costs to administer the plan unless the following conditions are met with respect to the vendor:

`(A) The vendor is independent of any entity offering the coverage in the same area of the State in which the vendor is conducting marketing activities.

`(B) No person who is an owner, employee, consultant, or has a contract with the vendor either has any direct or indirect financial interest with such an entity or has been excluded from participation in the program under this title or title XVIII or XIX or debarred by any Federal agency, or subject to a civil money penalty under this Act.'.

(b) PROHIBITION OF AFFILIATION WITH DEBARRED INDIVIDUALS-

(1) MEDICAID- Section 1903(i) of the Social Security Act (42 U.S.C. 1396b(i))is amended--

(A) by striking the period at the end of paragraph (20) and inserting `; or'; and

(B) by inserting after paragraph (20) the following:

`(21) with respect to any amounts expended for an entity that receives payments under the plan unless--

`(A) no person with an ownership or control interest (as defined in section 1124(a)(3)) in the entity is a person that is debarred, suspended, or otherwise excluded from participating in procurement or non-procurement activities under the Federal Acquisition Regulation; and

`(B) such entity has not entered into an employment, consulting, or other agreement for the provision of items or services that are material to such entity's obligations under the plan with a person described in subparagraph (A).'.

(2) TITLE XXI- Section 2107(e)(1) of the Social Security Act (42 U.S.C. 1397gg(e)(1)) is amended--

(A) in subparagraph (B), by striking `and (17)' and inserting `(17), and (21)'; and

(B) by adding at the end the following:

`(E) Section 1902(a)(67) (relating to prohibition of affiliation with debarred individuals).'.

(c) EFFECTIVE DATE- The amendments made by this section shall apply to expenditures made on or after October 1, 2006, whether or not regulations implementing such amendments have been issued.

SEC. 217. TECHNICAL AND CONFORMING AMENDMENTS TO AUTHORITY TO PAY MEDICAID EXPANSION COSTS FROM TITLE XXI APPROPRIATION.

(a) AUTHORITY TO PAY MEDICAID EXPANSION COSTS FROM TITLE XXI APPROPRIATION- Section 2105(a) of the Social Security Act (42 U.S.C. 1397ee(a)) is amended to read as follows:

`(a) ALLOWABLE EXPENDITURES-

`(1) IN GENERAL- Subject to the succeeding provisions of this section, the Secretary shall pay to each State with a plan approved under this title, from its allotment under section 2104, an amount for each quarter equal to the enhanced FMAP of the following expenditures in the quarter:

`(A) CHILD HEALTH ASSISTANCE UNDER MEDICAID- Expenditures for child health assistance under the plan for targeted low-income children in the form of providing medical assistance for expenditures described in the fourth sentence of section 1905(b).

`(B) RESERVED- [reserved].

`(C) CHILD HEALTH ASSISTANCE UNDER THIS TITLE- Expenditures for child health assistance under the plan for targeted low-income children in the form of providing health benefits coverage that meets the requirements of section 2103.

`(D) ASSISTANCE AND ADMINISTRATIVE EXPENDITURES SUBJECT TO LIMIT- Expenditures only to the extent permitted consistent with subsection (c)--

`(i) for other child health assistance for targeted low-income children;

`(ii) for expenditures for health services initiatives under the plan for improving the health of children (including targeted low-income children and other low-income children);

`(iii) for expenditures for outreach activities as provided in section 2102(c)(1) under the plan; and

`(iv) for other reasonable costs incurred by the State to administer the plan.

`(2) ORDER OF PAYMENTS- Payments under a subparagraph of paragraph (1) from a State's allotment for expenditures described in each such subparagraph shall be made on a quarterly basis in the order of such subparagraph in such paragraph.

`(3) NO DUPLICATIVE PAYMENT- In the case of expenditures for which payment is made under paragraph (1), no payment shall be made under title XIX.'.

(b) CONFORMING AMENDMENTS-

(1) SECTION 1905(u)- Section 1905(u)(1)(B) of the Social Security Act (42 U.S.C. 1396d(u)(1)(B)) is amended by inserting `and section 2105(a)(1)' after `subsection (b)'.

(2) SECTION 2105(c)- Section 2105(c)(2)(A) of the Social Security Act (42 U.S.C. 1397ee(c)(2)(A)) is amended by striking `subparagraphs (A), (C), and (D) of'.

(c) EFFECTIVE DATE- The amendments made by this section shall be effective as if included in the enactment of the Balanced Budget Act of 1997 (Public Law 105-33; 111 Stat. 251).

Subtitle C--Simplified Enrollment

SEC. 221. AUTOMATIC ENROLLMENT OF CHILDREN BORN TO TITLE XXI PARENTS.

Section 2102(b)(1) of the Social Security Act (42 U.S.C. 1397bb(b)(1)) is amended by adding at the end the following:

`(C) AUTOMATIC ELIGIBILITY OF CHILDREN BORN TO A PARENT BEING PROVIDED FAMILYCARE- Such eligibility standards shall provide for automatic coverage of a child born to an individual who is provided assistance under this title in the same manner as medical assistance would be provided under section 1902(e)(4) to a child described in such section.'.

SEC. 222. APPLICATION OF SIMPLIFIED TITLE XXI PROCEDURES UNDER THE MEDICAID PROGRAM.

(a) APPLICATION UNDER MEDICAID-

(1) IN GENERAL- Section 1902(l) of the Social Security Act (42 U.S.C. 1396a(l)) is amended--

(A) in paragraph (3), by inserting `subject to paragraph (5)', after `Notwithstanding subsection (a)(17),'; and

(B) by adding at the end the following:

`(5) With respect to determining the eligibility of individuals under 19 years of age (or such higher age as the State has elected under paragraph (1)(D)) for medical assistance under subsection (a)(10)(A) and, separately, with respect to determining the eligibility of individuals for medical assistance under subsection (a)(10)(A)(i)(VIII) or (a)(10)(A)(ii)(XIX), notwithstanding any other provision of this title, if the State has established a State child health plan under title XXI--

`(A) the State may not apply a resource standard;

`(B) the State shall use the same simplified eligibility form (including, if applicable, permitting application other than in person) as the State uses under such State child health plan with respect to such individuals;

`(C) the State shall provide for initial eligibility determinations and redeterminations of eligibility using verification policies, forms, and frequency that are no less restrictive than the policies, forms, and frequency the State uses for such purposes under such State child health plan with respect to such individuals; and

`(D) the State shall not require a face-to-face interview for purposes of initial eligibility determinations and redeterminations unless the State requires such an interview for such purposes under such child health plan with respect to such individuals.'.

(2) EFFECTIVE DATE- The amendments made by paragraph (1) apply to determinations of eligibility made on or after the date that is 1 year after the date of enactment of this Act, whether or not regulations implementing such amendments have been issued.

(b) PRESUMPTIVE ELIGIBILITY-

(1) IN GENERAL- Section 1920A(b)(3)(A)(i) of the Social Security Act (42 U.S.C. 1396r-1a(b)(3)(A)(i)) is amended by inserting `a child care resource and referral agency,' after `a State or tribal child support enforcement agency,'.

(2) APPLICATION TO PRESUMPTIVE ELIGIBILITY FOR PREGNANT WOMEN UNDER MEDICAID- Section 1920(b) of the Social Security Act (42 U.S.C. 1396r-1(b)) is amended by adding at the end after and below paragraph (2) the following flush sentence:

`The term `qualified provider' includes a qualified entity as defined in section 1920A(b)(3).'.

(3) APPLICATION UNDER TITLE XXI-

(A) IN GENERAL- Section 2107(e)(1)(D) of the Social Security Act (42 U.S.C. 1397gg(e)(1)) is amended to read as follows:

`(D) Sections 1920 and 1920A (relating to presumptive eligibility).'.

(B) CONFORMING ELIMINATION OF RESOURCE TEST- Section 2102(b)(1)(A) of such Act (42 U.S.C. 1397bb(b)(1)(A)) is amended--

(i) by striking ` and resources (including any standards relating to spenddowns and disposition of resources)'; and

(ii) by adding at the end the following: `Effective 1 year after the date of enactment of the Access to Affordable Health Care Act, such standards may not include the application of a resource standard or test.'.

(c) AUTOMATIC REASSESSMENT OF ELIGIBILITY FOR TITLE XXI AND MEDICAID BENEFITS FOR CHILDREN LOSING MEDICAID OR TITLE XXI ELIGIBILITY-

(1) LOSS OF MEDICAID ELIGIBILITY- Section 1902(a) of the Social Security Act (42 U.S.C. 1396a(a)) is amended--

(A) by striking `and' at the end of paragraph (66):

(B) by striking the period at the end of paragraph (67) and inserting `; and', and

(B) by inserting after paragraph (67) the following:

`(68) provide, in the case of a State with a State child health plan under title XXI, that before medical assistance to a child (or a parent of a child) is discontinued under this title, a determination of whether the child (or parent) is eligible for benefits under title XXI shall be made and, if determined to be so eligible, the child (or parent) shall be automatically enrolled in the program under such title without the need for a new application.'.

(2) LOSS OF TITLE XXI ELIGIBILITY AND COORDINATION WITH MEDICAID- Section 2102(b) (42 U.S.C. 1397bb(b)) is amended--

(A) in paragraph (3), by redesignating subparagraphs (D) and (E) as subparagraphs (E) and (F), respectively, and by inserting after subparagraph (C) the following:

`(D) that before health assistance to a child (or a parent of a child) is discontinued under this title, a determination of whether the child (or parent) is eligible for benefits under title XIX is made and, if determined to be so eligible, the child (or parent) is automatically enrolled in the program under such title without the need for a new application;';

(B) by redesignating paragraph (4) as paragraph (5); and

(C) by inserting after paragraph (3) the following new paragraph:

`(4) COORDINATION WITH MEDICAID- The State shall coordinate the screening and enrollment of individuals under this title and under title XIX consistent with the following:

`(A) Information that is collected under this title or under title XIX which is needed to make an eligibility determination under the other title shall be transmitted to the appropriate administering entity under such other title in a timely manner so that coverage is not delayed and families do not have to submit the same information twice. Families shall