# H.R. 3200/Division B/Title I/Subtitle D/Part 1
## PART 1 — PAYMENT AND ADMINISTRATION
### Sec. 1161. Phase-in of Payment Based On Fee-for-Service Costs.

    Section 1853 of the Social Security Act (42 U.S.C. 1395w–23) is amended—
          (1) in subsection (j)(1)(A)—
                (A) by striking ``beginning with 2007´´ and inserting ``for 2007, 2008, 2009, and 2010´´; and
                (B) by inserting after ``(k)(1)´´ the following: ``, or, beginning with 2011, 1⁄12 of the blended benchmark amount determined under subsection (n)(1)´´; and
          (2) by adding at the end the following new subsection:
             ``(n) Determination of blended benchmark amount.—
                ``(1) In general.—For purposes of subsection (j), subject to paragraphs (3) and (4), the term ‘blended benchmark amount’ means for an area—
                   ``(A) for 2011 the sum of—
                      ``(i) 2⁄3 of the applicable amount (as defined in subsection (k)) for the area and year; and
                      ``(ii) 1⁄3 of the amount specified in paragraph (2) for the area and year;
                   ``(B) for 2012 the sum of—
                      ``(i) 1⁄3 of the applicable amount for the area and year; and
                      ``(ii) 2⁄3 of the amount specified in paragraph (2) for the area and year; and
                   ``(C) for a subsequent year the amount specified in paragraph (2) for the area and year.
                ``(2) Specified amount.—The amount specified in this paragraph for an area and year is the amount specified in subsection (c)(1)(D)(i) for the area and year adjusted (in a manner specified by the Secretary) to take into account the phase-out in the indirect costs of medical education from capitation rates described in subsection (k)(4).
                ``(3) Fee-for-service payment floor.—In no case shall the blended benchmark amount for an area and year be less than the amount specified in paragraph (2).
                ``(4) Exception for PACE plans.—This subsection shall not apply to payments to a PACE program under section 1894.´´.

### Sec. 1162. Quality Bonus Payments.

    (a) In General.—
       Section 1853 of the Social Security Act (42 U.S.C. 1395w–23), as amended by section 1161, is amended—
          (1) in subsection (j), by inserting ``subject to subsection (o),´´ after ``For purposes of this part´´; and
          (2) by adding at the end the following new subsection:
             ``(o) Quality based payment adjustment.—
                ``(1) High quality plan adjustment.—For years beginning with 2011, in the case of a Medicare Advantage plan that is identified (under paragraph (3)(E)(ii)) as a high quality MA plan with respect to the year, the blended benchmark amount under subsection (n)(1) shall be increased—
                   ``(A) for 2011, by 1.0 percent;
                   ``(B) for 2012, by 2.0 percent; and
                   ``(C) for a subsequent year, by 3.0 percent.
                ``(2) Improved quality plan adjustment.—For years beginning with 2011, in the case of a Medicare Advantage plan that is identified (under paragraph (3)(E)(iii)) as an improved quality MA plan with respect to the year, blended benchmark amount under subsection (n)(1) shall be increased—
                   ``(A) for 2011, by 0.33 percent;
                   ``(B) for 2012, by 0.66 percent; and
                   ``(C) for a subsequent year, by 1.0 percent.
                ``(3) Determinations of quality.—
                   ``(A) Quality performance.—The Secretary shall provide for the computation of a quality performance score for each Medicare Advantage plan to be applied for each year beginning with 2010.
                   ``(B) Computation of score.—
                      ``(i) For years before 2014.—For years before 2014, the quality performance score for a Medicare Advantage plan shall be computed based on a blend (as designated by the Secretary) of the plan’s performance on—
                         ``(I) HEDIS effectiveness of care quality measures;
                         ``(II) CAHPS quality measures; and
                         ``(III) such other measures of clinical quality as the Secretary may specify.
                      ``Such measures shall be risk-adjusted as the Secretary deems appropriate.
                      ``(ii) Establishment of outcome-based measures.—By not later than for 2013 the Secretary shall implement reporting requirements for quality under this section on measures selected under clause (iii) that reflect the outcomes of care experienced by individuals enrolled in Medicare Advantage plans (in addition to measures described in clause (i)). Such measures may include—
                         ``(I) measures of rates of admission and readmission to a hospital;
                         ``(II) measures of prevention quality, such as those established by the Agency for Healthcare Research and Quality (that include hospital admission rates for specified conditions);
                         ``(III) measures of patient mortality and morbidity following surgery;
                         ``(IV) measures of health functioning (such as limitations on activities of daily living) and survival for patients with chronic diseases;
                         ``(V) measures of patient safety; and
                         ``(VI) other measure of outcomes and patient quality of life as determined by the Secretary.
                      ``Such measures shall be risk-adjusted as the Secretary deems appropriate. In determining the quality measures to be used under this clause, the Secretary shall take into consideration the recommendations of the Medicare Payment Advisory Commission in its report to Congress under section 168 of the Medicare Improvements for Patients and Providers Act of 2008 (Public Law 110-275) and shall provide preference to measures collected on and comparable to measures used in measuring quality under parts A and B.
                      ``(iii) Rules for selection of measures.—The Secretary shall select measures for purposes of clause (ii) consistent with the following:
                         ``(I) The Secretary shall provide preference to clinical quality measures that have been endorsed by the entity with a contract with the Secretary under section 1890(a).
                         ``(II) Prior to any measure being selected under this clause, the Secretary shall publish in the Federal Register such measure and provide for a period of public comment on such measure.
                      ``(iv) Transitional use of blend.—For payments for 2014 and 2015, the Secretary may compute the quality performance score for a Medicare Advantage plan based on a blend of the measures specified in clause (i) and the measures described in clause (ii) and selected under clause (iii).
                      ``(v) Use of quality outcomes measures.—For payments beginning with 2016, the preponderance of measures used under this paragraph shall be quality outcomes measures described in clause (ii) and selected under clause (iii).
                   ``(C) Data used in computing score.—Such score for application for—
                      ``(i) payments in 2011 shall be based on quality performance data for plans for 2009; and
                      ``(ii) payments in 2012 and a subsequent year shall be based on quality performance data for plans for the second preceding year.
                   ``(D) Reporting of data.—Each Medicare Advantage organization shall provide for the reporting to the Secretary of quality performance data described in subparagraph (B) (in order to determine a quality performance score under this paragraph) in such time and manner as the Secretary shall specify.
                   ``(E) Ranking of plans.—
                      ``(i) Initial ranking.—Based on the quality performance score described in subparagraph (B) achieved with respect to a year, the Secretary shall rank plan performance—
                         ``(I) from highest to lowest based on absolute scores; and
                         ``(II) from highest to lowest based on percentage improvement in the score for the plan from the previous year.
                      ``A plan which does not report quality performance data under subparagraph (D) shall be counted, for purposes of such ranking, as having the lowest plan performance and lowest percentage improvement.
                      ``(ii) Identification of high quality plans in top quintile based on projected enrollment.—The Secretary shall, based on the scores for each plan under clause (i)(I) and the Secretary’s projected enrollment for each plan and subject to clause (iv), identify those Medicare Advantage plans with the highest score that, based upon projected enrollment, are projected to include in the aggregate 20 percent of the total projected enrollment for the year. For purposes of this subsection, a plan so identified shall be referred to in this subsection as a ‘high quality MA plan’.
                      ``(iii) Identification of improved quality plans in top quintile based on projected enrollment.—The Secretary shall, based on the percentage improvement score for each plan under clause (i)(II) and the Secretary’s projected enrollment for each plan and subject to clause (iv), identify those Medicare Advantage plans with the greatest percentage improvement score that, based upon projected enrollment, are projected to include in the aggregate 20 percent of the total projected enrollment for the year. For purposes of this subsection, a plan so identified that is not a high quality plan for the year shall be referred to in this subsection as an ‘improved quality MA plan’.
                      ``(iv) Authority to disqualify certain plans.—In applying clauses (ii) and (iii), the Secretary may determine not to identify a Medicare Advantage plan if the Secretary has identified deficiencies in the plan’s compliance with rules for such plans under this part.
                   ``(F) Notification.—The Secretary, in the annual announcement required under subsection (b)(1)(B) in 2011 and each succeeding year, shall notify the Medicare Advantage organization that is offering a high quality plan or an improved quality plan of such identification for the year and the quality performance payment adjustment for such plan for the year. The Secretary shall provide for publication on the website for the Medicare program of the information described in the previous sentence.´´.

### Sec. 1163. Extension of Secretarial Coding Intensity Adjustment Authority.

    Section 1853(a)(1)(C)(ii) of the Social Security Act (42 U.S.C. 1395w–23(a)(1)(C)(ii)) is amended—
          (1) in the matter before subclause (I), by striking ``through 2010´´ and inserting ``and each subsequent year´´; and
          (2) in subclause (II)—
                (A) by inserting ``periodically´´ before ``conduct an analysis´´;
                (B) by inserting ``on a timely basis´´ after ``are incorporated´´; and
                (C) by striking ``only for 2008, 2009, and 2010´´ and inserting ``for 2008 and subsequent years´´.

### Sec. 1164. Simplification of Annual Beneficiary Election Periods.

    (a) 2 Week Processing Period for Annual Enrollment Period (AEP).—
       Paragraph (3)(B) of section 1851(e) of the Social Security Act (42 U.S.C. 1395w–21(e)) is amended—
          (1) by striking ``and´´ at the end of clause (iii);
          (2) in clause (iv)—
                (A) by striking ``and succeeding years´´ and inserting ``, 2008, 2009, and 2010´´; and
                (B) by striking the period at the end and inserting ``; and´´; and
          (3) by adding at the end the following new clause:
             ``(v) with respect to 2011 and succeeding years, the period beginning on November 1 and ending on December 15 of the year before such year.´´.
    (b) Elimination of 3-Month Additional Open Enrollment Period (OEP).—
       Effective for plan years beginning with 2011, paragraph (2) of such section is amended by striking subparagraph (C).

### Sec. 1165. Extension of Reasonable Cost Contracts.

    Section 1876(h)(5)(C) of the Social Security Act (42 U.S.C. 1395mm(h)(5)(C)) is amended—
          (1) in clause (ii), by striking ``January 1, 2010´´ and inserting ``January 1, 2012´´; and
          (2) in clause (iii), by striking ``the service area for the year´´ and inserting ``the portion of the plan’s service area for the year that is within the service area of a reasonable cost reimbursement contract´´.

### Sec. 1166. Limitation of Waiver Authority for Employer Group Plans.

    (a) In General.—
       The first sentence of paragraph (2) of section 1857(i) of the Social Security Act (42 U.S.C. 1395w–27(i)) is amended by inserting before the period at the end the following: ``, but only if 90 percent of the Medicare Advantage eligible individuals enrolled under such plan reside in a county in which the MA organization offers an MA local plan´´.
    (b) Effective Date.—
       The amendment made by subsection (a) shall apply for plan years beginning on or after January 1, 2011, and shall not apply to plans which were in effect as of December 31, 2010.

### Sec. 1167. Improving Risk Adjustment for Payments.

    (a) Report to Congress.—
       Not later than 1 year after the date of the enactment of this Act, the Secretary of Health and Human Services shall submit to Congress a report that evaluates the adequacy of the risk adjustment system under section 1853(a)(1)(C) of the Social Security Act (42 U.S.C. 1395–23(a)(1)(C)) in predicting costs for beneficiaries with chronic or co-morbid conditions, beneficiaries dually-eligible for Medicare and Medicaid, and non-Medicaid eligible low-income beneficiaries; and the need and feasibility of including further gradations of diseases or conditions and multiple years of beneficiary data.
    (b) Improvements to Risk Adjustment.—
       Not later than January 1, 2012, the Secretary shall implement necessary improvements to the risk adjustment system under section 1853(a)(1)(C) of the Social Security Act (42 U.S.C. 1395–23(a)(1)(C)), taking into account the evaluation under subsection (a).

### Sec. 1168. Elimination of MA Regional Plan Stabilization Fund.

    (a) In General.—
       Section 1858 of the Social Security Act (42 U.S.C. 1395w–27a) is amended by striking subsection (e).
    (b) Transition.—
       Any amount contained in the MA Regional Plan Stabilization Fund as of the date of the enactment of this Act shall be transferred to the Federal Supplementary Medical Insurance Trust Fund.