Creates a MassHealth Payment Policy Advisory Board to review and evaluate Medicaid rates and rate methodologies, especially rates paid to Community Health Centers.

Requires the Office of Medicaid to submit a report to the legislature on the previous year's activities of the Medical Care Advisory Committee.

Expands employee eligibility for participation in the Insurance Partnership Program to 300% of the Federal Poverty Level. • Ensures that Insurance Partnership subsidies are consistent with those provided under the Commonwealth Care program. • Specifies that self-employed individuals enrolled in the Insurance Partnership Program are eligible for employee subsidies only.

States that MassHealth must provide public hearing and notice before restricting eligibility or benefits.

Allows for higher Medicaid reimbursement rates to hospitals that meet certain quality standards and performance benchmarks.

Expands MassHealth CHIP eligibility for children from 200% of the Federal Poverty Level to 300% of the Federal Poverty Level.

Places in statute eligibility criteria for elderly and/or disabled special status immigrant for the MassHealth Essential program.

Restores all MassHealth adult benefits cut in 2002, including dental, vision, chiropractic, and prosthetics, effective July 1, 2006. (Note: This section was partially superseded by a provision in the FY 2011 budget authorizing reduction of dental benefits to adults in MassHealth.)

Creates a Wellness Program for MassHealth recipients to encourage healthy outcomes by authorizing incentives, including reduction of MassHealth premiums or copayments, as wellness goals are met.

Directs MassHealth to increase enrollment in the CommonHealth program for the disabled by 1600 people who were on the waiting list as of April 2006.

Directs MassHealth to increase enrollment in the Family Assistance program for HIV positive individuals by 250 people who were on the waiting list of April 2006.

Directs MassHealth to increase enrollment in the Essential program by 60,000 people who were on the waiting list as of April 2006.

Requires the creation of a MassHealth tobacco cessation and prevention program.

Directs the Secretary of the Executive Office of Health and Human Services to seek federal CHIP reimbursements where possible.

Requires the Commonwealth to request an amendment to the MassHealth demonstration waiver to implement Chapter 58 of the Acts of 2006 and to seek maximum federal reimbursement available for subsidized health insurance programs.

Authorizes funding for hospital rate increases of $90 million in each of the three fiscal years 2007-2009.

Directs the Secretary of the Executive Office of Health and Human Services to study the cost of allowing primary care givers to enroll in MassHealth.