# Patient Protection and Affordable Care Act/Title III/Subtitle C
## Subtitle C--Provisions Relating to Part C
### SEC. 3201. MEDICARE ADVANTAGE PAYMENT.

    (a) MA Benchmark Based on Plan's Competitive Bids-
       (1) IN GENERAL- Section 1853(j) of the Social Security Act (42 U.S.C. 1395w-23(j)) is amended--
          (A) by striking `Amounts- For purposes' and inserting `Amounts-
                `(1) IN GENERAL- For purposes';
          (B) by redesignating paragraphs (1) and (2) as subparagraphs (A) and (B), respectively, and indenting the subparagraphs appropriately;
          (C) in subparagraph (A), as redesignated by subparagraph (B)--
             (i) by redesignating subparagraphs (A) and (B) as clauses (i) and (ii), respectively, and indenting the clauses appropriately; and
             (ii) in clause (i), as redesignated by clause (i), by striking `an amount equal to' and all that follows through the end and inserting `an amount equal to--
                         `(I) for years before 2007, 1/12 of the annual MA capitation rate under section 1853(c)(1) for the area for the year, adjusted as appropriate for the purpose of risk adjustment;
                         `(II) for 2007 through 2011, 1/12 of the applicable amount determined under subsection (k)(1) for the area for the year;
                         `(III) for 2012, the sum of--
                            `(aa) 2/3 of the quotient of--
                               `(AA) the applicable amount determined under subsection (k)(1) for the area for the year; and
                               `(BB) 12; and
                            `(bb) 1/3 of the MA competitive benchmark amount (determined under paragraph (2)) for the area for the month;
                         `(IV) for 2013, the sum of--
                            `(aa) 1/3 of the quotient of--
                               `(AA) the applicable amount determined under subsection (k)(1) for the area for the year; and
                               `(BB) 12; and
                            `(bb) 2/3 of the MA competitive benchmark amount (as so determined) for the area for the month;
                         `(V) for 2014, the MA competitive benchmark amount for the area for a month in 2013 (as so determined), increased by the national per capita MA growth percentage, described in subsection (c)(6) for 2014, but not taking into account any adjustment under subparagraph (C) of such subsection for a year before 2004; and
                         `(VI) for 2015 and each subsequent year, the MA competitive benchmark amount (as so determined) for the area for the month; or';
             (iii) in clause (ii), as redesignated by clause (i), by striking `subparagraph (A)' and inserting `clause (i)';
          (D) by adding at the end the following new paragraphs:
                `(2) COMPUTATION OF MA COMPETITIVE BENCHMARK AMOUNT-
                   `(A) IN GENERAL- Subject to subparagraph (B) and paragraph (3), for months in each year (beginning with 2012) for each MA payment area the Secretary shall compute an MA competitive benchmark amount equal to the weighted average of the unadjusted MA statutory non-drug monthly bid amount (as defined in section 1854(b)(2)(E)) for each MA plan in the area, with the weight for each plan being equal to the average number of beneficiaries enrolled under such plan in the reference month (as defined in section 1858(f)(4), except that, in applying such definition for purposes of this paragraph, `to compute the MA competitive benchmark amount under section 1853(j)(2)' shall be substituted for `to compute the percentage specified in subparagraph (A) and other relevant percentages under this part').
                   `(B) WEIGHTING RULES-
                      `(i) SINGLE PLAN RULE- In the case of an MA payment area in which only a single MA plan is being offered, the weight under subparagraph (A) shall be equal to 1.
                      `(ii) USE OF SIMPLE AVERAGE AMONG MULTIPLE PLANS IF NO PLANS OFFERED IN PREVIOUS YEAR- In the case of an MA payment area in which no MA plan was offered in the previous year and more than 1 MA plan is offered in the current year, the Secretary shall use a simple average of the unadjusted MA statutory non-drug monthly bid amount (as so defined) for purposes of computing the MA competitive benchmark amount under subparagraph (A).
                `(3) CAP ON MA COMPETITIVE BENCHMARK AMOUNT- In no case shall the MA competitive benchmark amount for an area for a month in a year be greater than the applicable amount that would (but for the application of this subsection) be determined under subsection (k)(1) for the area for the month in the year.'; and
          (E) in subsection (k)(2)(B)(ii)(III), by striking `(j)(1)(A)' and inserting `(j)(1)(A)(i)'.
       (2) CONFORMING AMENDMENTS-
          (A) Section 1853(k)(2) of the Social Security Act (42 U.S.C. 1395w-23(k)(2)) is amended--
             (i) in subparagraph (A), by striking `through 2010' and inserting `and subsequent years'; and
             (ii) in subparagraph (C)--
                (I) in clause (iii), by striking `and' at the end;
                (II) in clause (iv), by striking the period at the end and inserting `; and'; and
                (III) by adding at the end the following new clause:
                      `(v) for 2011 and subsequent years, 0.00.'.
          (B) Section 1854(b) of the Social Security Act (42 U.S.C. 1395w-24(b)) is amended--
             (i) in paragraph (3)(B)(i), by striking `1853(j)(1)' and inserting `1853(j)(1)(A)'; and
             (ii) in paragraph (4)(B)(i), by striking `1853(j)(2)' and inserting `1853(j)(1)(B)'.
          (C) Section 1858(f) of the Social Security Act (42 U.S.C. 1395w-27(f)) is amended--
             (i) in paragraph (1), by striking `1853(j)(2)' and inserting `1853(j)(1)(B)'; and
             (ii) in paragraph (3)(A), by striking `1853(j)(1)(A)' and inserting `1853(j)(1)(A)(i)'.
          (D) Section 1860C-1(d)(1)(A) of the Social Security Act (42 U.S.C. 1395w-29(d)(1)(A)) is amended by striking `1853(j)(1)(A)' and inserting `1853(j)(1)(A)(i)'.
    (b) Reduction of National Per Capita Growth Percentage for 2011- Section 1853(c)(6) of the Social Security Act (42 U.S.C. 1395w-23(c)(6)) is amended--
       (1) in clause (v), by striking `and' at the end;
       (2) in clause (vi)--
          (A) by striking `for a year after 2002' and inserting `for 2003 through 2010'; and
          (B) by striking the period at the end and inserting a comma; and
          (C) by adding at the end the following new clauses:
                      `(vii) for 2011, 3 percentage points; and
                      `(viii) for a year after 2011, 0 percentage points.'.
    (c) Enhancement of Beneficiary Rebates- Section 1854(b)(1)(C)(i) of the Social Security Act (42 U.S.C. 1395w-24(b)(1)(C)(i)) is amended by inserting `(or 100 percent in the case of plan years beginning on or after January 1, 2014)' after `75 percent'.
    (d) Bidding Rules-
       (1) REQUIREMENTS FOR INFORMATION SUBMITTED- Section 1854(a)(6)(A) of the Social Security Act (42 U.S.C. 1395w-24(a)(6)(A)) is amended, in the flush matter following clause (v), by adding at the end the following sentence: `Information to be submitted under this paragraph shall be certified by a qualified member of the American Academy of Actuaries and shall meet actuarial guidelines and rules established by the Secretary under subparagraph (B)(v).'.
       (2) ESTABLISHMENT OF ACTUARIAL GUIDELINES- Section 1854(a)(6)(B) of the Social Security Act (42 U.S.C. 1395w-24(a)(6)(B)) is amended--
          (A) in clause (i), by striking `(iii) and (iv)' and inserting `(iii), (iv), and (v)'; and
          (B) by adding at the end the following new clause:
                      `(v) ESTABLISHMENT OF ACTUARIAL GUIDELINES-
                         `(I) IN GENERAL- In order to establish fair MA competitive benchmarks under section 1853(j)(1)(A)(i), the Secretary, acting through the Chief Actuary of the Centers for Medicare & Medicaid Services (in this clause referred to as the `Chief Actuary'), shall establish--
                            `(aa) actuarial guidelines for the submission of bid information under this paragraph; and
                            `(bb) bidding rules that are appropriate to ensure accurate bids and fair competition among MA plans.
                         `(II) DENIAL OF BID AMOUNTS- The Secretary shall deny monthly bid amounts submitted under subparagraph (A) that do not meet the actuarial guidelines and rules established under subclause (I).
                         `(III) REFUSAL TO ACCEPT CERTAIN BIDS DUE TO MISREPRESENTATIONS AND FAILURES TO ADEQUATELY MEET REQUIREMENTS- In the case where the Secretary determines that information submitted by an MA organization under subparagraph (A) contains consistent misrepresentations and failures to adequately meet requirements of the organization, the Secretary may refuse to accept any additional such bid amounts from the organization for the plan year and the Chief Actuary shall, if the Chief Actuary determines that the actuaries of the organization were complicit in those misrepresentations and failures, report those actuaries to the Actuarial Board for Counseling and Discipline.'.
       (3) EFFECTIVE DATE- The amendments made by this subsection shall apply to bid amounts submitted on or after January 1, 2012.
    (e) MA Local Plan Service Areas-
       (1) IN GENERAL- Section 1853(d) of the Social Security Act (42 U.S.C. 1395w-23(d)) is amended--
          (A) in the subsection heading, by striking `MA Region' and inserting `MA Region; MA Local Plan Service Area';
          (B) in paragraph (1), by striking subparagraph (A) and inserting the following:
                   `(A) with respect to an MA local plan--
                      `(i) for years before 2012, an MA local area (as defined in paragraph (2)); and
                      `(ii) for 2012 and succeeding years, a service area that is an entire urban or rural area, as applicable (as described in paragraph (5)); and'; and
          (C) by adding at the end the following new paragraph:
                `(5) MA LOCAL PLAN SERVICE AREA- For 2012 and succeeding years, the service area for an MA local plan shall be an entire urban or rural area in each State as follows:
                   `(A) URBAN AREAS-
                      `(i) IN GENERAL- Subject to clause (ii) and subparagraphs (C) and (D), the service area for an MA local plan in an urban area shall be the Core Based Statistical Area (in this paragraph referred to as a `CBSA') or, if applicable, a conceptually similar alternative classification, as defined by the Director of the Office of Management and Budget.
                      `(ii) CBSA COVERING MORE THAN ONE STATE- In the case of a CBSA (or alternative classification) that covers more than one State, the Secretary shall divide the CBSA (or alternative classification) into separate service areas with respect to each State covered by the CBSA (or alternative classification).
                   `(B) RURAL AREAS- Subject to subparagraphs (C) and (D), the service area for an MA local plan in a rural area shall be a county that does not qualify for inclusion in a CBSA (or alternative classification), as defined by the Director of the Office of Management and Budget.
                   `(C) REFINEMENTS TO SERVICE AREAS- For 2015 and succeeding years, in order to reflect actual patterns of health care service utilization, the Secretary may adjust the boundaries of service areas for MA local plans in urban areas and rural areas under subparagraphs (A) and (B), respectively, but may only do so based on recent analyses of actual patterns of care.
                   `(D) ADDITIONAL AUTHORITY TO MAKE LIMITED EXCEPTIONS TO SERVICE AREA REQUIREMENTS FOR MA LOCAL PLANS- The Secretary may, in addition to any adjustments under subparagraph (C), make limited exceptions to service area requirements otherwise applicable under this part for MA local plans that have in effect (as of the date of enactment of the Patient Protection and Affordable Care Act)--
                      `(i) agreements with another MA organization or MA plan that preclude the offering of benefits throughout an entire service area; or
                      `(ii) limitations in their structural capacity to support adequate networks throughout an entire service area as a result of the delivery system model of the MA local plan.'.
       (2) CONFORMING AMENDMENTS-
          (A) IN GENERAL-
             (i) Section 1851(b)(1) of the Social Security Act (42 U.S.C. 1395w-21(b)(1)) is amended by striking subparagraph (C).
             (ii) Section 1853(b)(1)(B)(i) of such Act (42 U.S.C. 1395w-23(b)(1)(B)(i))--
                (I) in the matter preceding subclause (I), by striking `MA payment area' and inserting `MA local area (as defined in subsection (d)(2))'; and
                (II) in subclause (I), by striking `MA payment area' and inserting `MA local area (as so defined)'.
             (iii) Section 1853(b)(4) of such Act (42 U.S.C. 1395w-23(b)(4)) is amended by striking `Medicare Advantage payment area' and inserting `MA local area (as so defined)'.
             (iv) Section 1853(c)(1) of such Act (42 U.S.C. 1395w-23(c)(1)) is amended--
                (I) in the matter preceding subparagraph (A), by striking `a Medicare Advantage payment area that is'; and
                (II) in subparagraph (D)(i), by striking `MA payment area' and inserting `MA local area (as defined in subsection (d)(2))'.
             (v) Section 1854 of such Act (42 U.S.C. 1395w-24) is amended by striking subsection (h).
          (B) EFFECTIVE DATE- The amendments made by this paragraph shall take effect on January 1, 2012.
    (f) Performance Bonuses-
       (1) MA PLANS-
          (A) IN GENERAL- Section 1853 of the Social Security Act (42 U.S.C. 1395w-23) is amended by adding at the end the following new subsection:
             `(n) Performance Bonuses-
                `(1) CARE COORDINATION AND MANAGEMENT PERFORMANCE BONUS-
                   `(A) IN GENERAL- For years beginning with 2014, subject to subparagraph (B), in the case of an MA plan that conducts 1 or more programs described in subparagraph (C) with respect to the year, the Secretary shall, in addition to any other payment provided under this part, make monthly payments, with respect to coverage of an individual under this part, to the MA plan in an amount equal to the product of--
                      `(i) 0.5 percent of the national monthly per capita cost for expenditures for individuals enrolled under the original medicare fee-for-service program for the year; and
                      `(ii) the total number of programs described in clauses (i) through (ix) of subparagraph (C) that the Secretary determines the plan is conducting for the year under such subparagraph.
                   `(B) LIMITATION- In no case may the total amount of payment with respect to a year under subparagraph (A) be greater than 2 percent of the national monthly per capita cost for expenditures for individuals enrolled under the original medicare fee-for-service program for the year, as determined prior to the application of risk adjustment under paragraph (4).
                   `(C) PROGRAMS DESCRIBED- The following programs are described in this paragraph:
`(i) Care management programs that--
`(I) target individuals with 1 or more chronic conditions;
`(II) identify gaps in care; and
`(III) facilitate improved care by using additional resources like nurses, nurse practitioners, and physician assistants.
`(ii) Programs that focus on patient education and self-management of health conditions, including interventions that--
`(I) help manage chronic conditions;
`(II) reduce declines in health status; and
`(III) foster patient and provider collaboration.
`(iii) Transitional care interventions that focus on care provided around a hospital inpatient episode, including programs that target post-discharge patient care in order to reduce unnecessary health complications and readmissions.
`(iv) Patient safety programs, including provisions for hospital-based patient safety programs in contracts that the Medicare Advantage organization offering the MA plan has with hospitals.
`(v) Financial policies that promote systematic coordination of care by primary care physicians across the full spectrum of specialties and sites of care, such as medical homes, capitation arrangements, or pay-for-performance programs.
`(vi) Programs that address, identify, and ameliorate health care disparities among principal at-risk subpopulations.
`(vii) Medication therapy management programs that are more extensive than is required under section 1860D-4(c) (as determined by the Secretary).
`(viii) Health information technology programs, including clinical decision support and other tools to facilitate data collection and ensure patient-centered, appropriate care.
`(ix) Such other care management and coordination programs as the Secretary determines appropriate.
`(D) CONDUCT OF PROGRAM IN URBAN AND RURAL AREAS- An MA plan may conduct a program described in subparagraph (C) in a manner appropriate for an urban or rural area, as applicable.
`(E) REPORTING OF DATA- Each Medicare Advantage organization shall provide to the Secretary the information needed to determine whether they are eligible for a care coordination and management performance bonus at a time and in a manner specified by the Secretary.
`(F) PERIODIC AUDITING- The Secretary shall provide for the annual auditing of programs described in subparagraph (C) for which an MA plan receives a care coordination and management performance bonus under this paragraph. The Comptroller General shall monitor auditing activities conducted under this subparagraph.
`(2) QUALITY PERFORMANCE BONUSES-
`(A) QUALITY BONUS- For years beginning with 2014, the Secretary shall, in addition to any other payment provided under this part, make monthly payments, with respect to coverage of an individual under this part, to an MA plan that achieves at least a 3 star rating (or comparable rating) on a rating system described in subparagraph (C) in an amount equal to--
`(i) in the case of a plan that achieves a 3 star rating (or comparable rating) on such system 2 percent of the national monthly per capita cost for expenditures for individuals enrolled under the original medicare fee-for-service program for the year; and
`(ii) in the case of a plan that achieves a 4 or 5 star rating (or comparable rating on such system, 4 percent of such national monthly per capita cost for the year.
`(B) IMPROVED QUALITY BONUS- For years beginning with 2014, in the case of an MA plan that does not receive a quality bonus under subparagraph (A) and is an improved quality MA plan with respect to the year (as identified by the Secretary), the Secretary shall, in addition to any other payment provided under this part, make monthly payments, with respect to coverage of an individual under this part, to the MA plan in an amount equal to 1 percent of such national monthly per capita cost for the year.
`(C) USE OF RATING SYSTEM- For purposes of subparagraph (A), a rating system described in this paragraph is--
`(i) a rating system that uses up to 5 stars to rate clinical quality and enrollee satisfaction and performance at the Medicare Advantage contract or MA plan level; or
`(ii) such other system established by the Secretary that provides for the determination of a comparable quality performance rating to the rating system described in clause (i).
`(D) DATA USED IN DETERMINING SCORE-
`(i) IN GENERAL- The rating of an MA plan under the rating system described in subparagraph (C) with respect to a year shall be based on based on the most recent data available.
`(ii) PLANS THAT FAIL TO REPORT DATA- An MA plan which does not report data that enables the Secretary to rate the plan for purposes of subparagraph (A) or identify the plan for purposes of subparagraph (B) shall be counted, for purposes of such rating or identification, as having the lowest plan performance rating and the lowest percentage improvement, respectively.
`(3) QUALITY BONUS FOR NEW AND LOW ENROLLMENT MA PLANS-
`(A) NEW MA PLANS- For years beginning with 2014, in the case of an MA plan that first submits a bid under section 1854(a)(1)(A) for 2012 or a subsequent year, only receives enrollments made during the coverage election periods described in section 1851(e), and is not able to receive a bonus under subparagraph (A) or (B) of paragraph (2) for the year, the Secretary shall, in addition to any other payment provided under this part, make monthly payments, with respect to coverage of an individual under this part, to the MA plan in an amount equal to 2 percent of national monthly per capita cost for expenditures for individuals enrolled under the original medicare fee-for-service program for the year. In its fourth year of operation, the MA plan shall be paid in the same manner as other MA plans with comparable enrollment.
`(B) LOW ENROLLMENT PLANS- For years beginning with 2014, in the case of an MA plan that has low enrollment (as defined by the Secretary) and would not otherwise be able to receive a bonus under subparagraph (A) or (B) of paragraph (2) or subparagraph (A) of this paragraph for the year (referred to in this subparagraph as a `low enrollment plan'), the Secretary shall use a regional or local mean of the rating of all MA plans in the region or local area, as determined appropriate by the Secretary, on measures used to determine whether MA plans are eligible for a quality or an improved quality bonus, as applicable, to determine whether the low enrollment plan is eligible for a bonus under such a subparagraph.
`(4) RISK ADJUSTMENT- The Secretary shall risk adjust a performance bonus under this subsection in the same manner as the Secretary risk adjusts beneficiary rebates described in section 1854(b)(1)(C).
`(5) NOTIFICATION- The Secretary, in the annual announcement required under subsection (b)(1)(B) for 2014 and each succeeding year, shall notify the Medicare Advantage organization of any performance bonus (including a care coordination and management performance bonus under paragraph (1), a quality performance bonus under paragraph (2), and a quality bonus for new and low enrollment plans under paragraph (3)) that the organization will receive under this subsection with respect to the year. The Secretary shall provide for the publication of the information described in the previous sentence on the Internet website of the Centers for Medicare & Medicaid Services.'
(B) CONFORMING AMENDMENT- Section 1853(a)(1)(B) of the Social Security Act (42 U.S.C. 1395w-23(a)(1)(B)) is amended--
(i) in clause (i), by inserting `and any performance bonus under subsection (n)' before the period at the end; and
(ii) in clause (ii), by striking `(G)' and inserting `(G), plus the amount (if any) of any performance bonus under subsection (n)'.
(2) APPLICATION OF PERFORMANCE BONUSES TO MA REGIONAL PLANS- Section 1858 of the Social Security Act (42 U.S.C. 1395w-27a) is amended--
(A) in subsection (f)(1), by striking `subsection (e)' and inserting `subsections (e) and (i)'; and
(B) by adding at the end the following new subsection:
`(i) Application of Performance Bonuses to MA Regional Plans- For years beginning with 2014, the Secretary shall apply the performance bonuses under section 1853(n) (relating to bonuses for care coordination and management, quality performance, and new and low enrollment MA plans) to MA regional plans in a similar manner as such performance bonuses apply to MA plans under such subsection.'.
(g) Grandfathering Supplemental Benefits for Current Enrollees After Implementation of Competitive Bidding- Section 1853 of the Social Security Act (42 U.S.C. 1395w-23), as amended by subsection (f), is amended by adding at the end the following new subsection:
`(o) Grandfathering Supplemental Benefits for Current Enrolles After Implementation of Competitive Bidding-
`(1) IDENTIFICATION OF AREAS- The Secretary shall identify MA local areas in which, with respect to 2009, average bids submitted by an MA organization under section 1854(a) for MA local plans in the area are not greater than 75 percent of the adjusted average per capita cost for the year involved, determined under section 1876(a)(4), for the area for individuals who are not enrolled in an MA plan under this part for the year, but adjusted to exclude costs attributable to payments under section 1848(o), 1886(n), and 1886(h).
`(2) ELECTION TO PROVIDE REBATES TO GRANDFATHERED ENROLLEES-
`(A) IN GENERAL- For years beginning with 2012, each Medicare Advantage organization offering an MA local plan in an area identified by the Secretary under paragraph (1) may elect to provide rebates to grandfathered enrollees under section 1854(b)(1)(C). In the case where an MA organization makes such an election, the monthly per capita dollar amount of such rebates shall not exceed the applicable amount for the year (as defined in subparagraph (B)).
`(B) APPLICABLE AMOUNT- For purposes of this subsection, the term `applicable amount' means--
`(i) for 2012, the monthly per capita dollar amount of such rebates provided to enrollees under the MA local plan with respect to 2011; and
`(ii) for a subsequent year, 95 percent of the amount determined under this subparagraph for the preceding year.
`(3) SPECIAL RULES FOR PLANS IN IDENTIFIED AREAS- Notwithstanding any other provision of this part, the following shall apply with respect to each Medicare Advantage organization offering an MA local plan in an area identified by the Secretary under paragraph (1) that makes an election described in paragraph (2):
`(A) PAYMENTS- The amount of the monthly payment under this section to the Medicare Advantage organization, with respect to coverage of a grandfathered enrollee under this part in the area for a month, shall be equal to--
`(i) for 2012 and 2013, the sum of--
`(I) the bid amount under section 1854(a) for the MA local plan; and
`(II) the applicable amount (as defined in paragraph (2)(B)) for the MA local plan for the year.
`(ii) for 2014 and subsequent years, the sum of--
`(I) the MA competitive benchmark amount under subsection (j)(1)(A)(i) for the area for the month, adjusted, only to the extent the Secretary determines necessary, to account for induced utilization as a result of rebates provided to grandfathered enrollees (except that such adjustment shall not exceed 0.5 percent of such MA competitive benchmark amount); and
`(II) the applicable amount (as so defined) for the MA local plan for the year.
`(B) REQUIREMENT TO SUBMIT BIDS UNDER COMPETITIVE BIDDING- The Medicare Advantage organization shall submit a single bid amount under section 1854(a) for the MA local plan. The Medicare Advantage organization shall remove from such bid amount any effects of induced demand for care that may result from the higher rebates available to grandfathered enrollees under this subsection.
`(C) NONAPPLICATION OF BONUS PAYMENTS AND ANY OTHER REBATES- The Medicare Advantage organization offering the MA local plan shall not be eligible for any bonus payment under subsection (n) or any rebate under this part (other than as provided under this subsection) with respect to grandfathered enrollees.
`(D) NONAPPLICATION OF UNIFORM BID AND PREMIUM AMOUNTS TO GRANDFATHERED ENROLLEES- Section 1854(c) shall not apply with respect to the MA local plan.
`(E) NONAPPLICATION OF LIMITATION ON APPLICATION OF PLAN REBATES TOWARD PAYMENT OF PART B PREMIUM- Notwithstanding clause (iii) of section 1854(b)(1)(C), in the case of a grandfathered enrollee, a rebate under such section may be used for the purpose described in clause (ii)(III) of such section.
`(F) RISK ADJUSTMENT- The Secretary shall risk adjust rebates to grandfathered enrollees under this subsection in the same manner as the Secretary risk adjusts beneficiary rebates described in section 1854(b)(1)(C).
`(4) DEFINITION OF GRANDFATHERED ENROLLEE- In this subsection, the term `grandfathered enrollee' means an individual who is enrolled (effective as of the date of enactment of this subsection) in an MA local plan in an area that is identified by the Secretary under paragraph (1).'.
(h) Transitional Extra Benefits- Section 1853 of the Social Security Act (42 U.S.C. 1395w-23), as amended by subsections (f) and (g), is amended by adding at the end the following new subsection:
`(p) Transitional Extra Benefits-
`(1) IN GENERAL- For years beginning with 2012, the Secretary shall provide transitional rebates under section 1854(b)(1)(C) for the provision of extra benefits (as specified by the Secretary) to enrollees described in paragraph (2).
`(2) ENROLLEES DESCRIBED- An enrollee described in this paragraph is an individual who--
`(A) enrolls in an MA local plan in an applicable area; and
`(B) experiences a significant reduction in extra benefits described in clause (ii) of section 1854(b)(1)(C) as a result of competitive bidding under this part (as determined by the Secretary).
`(3) APPLICABLE AREAS- In this subsection, the term `applicable area' means the following:
`(A) The 2 largest metropolitan statistical areas, if the Secretary determines that the total amount of such extra benefits for each enrollee for the month in those areas is greater than $100.
`(B) A county where--
`(i) the MA area-specific non-drug monthly benchmark amount for a month in 2011 is equal to the legacy urban floor amount (as described in subsection (c)(1)(B)(iii)), as determined by the Secretary for the area for 2011;
`(ii) the percentage of Medicare Advantage eligible beneficiaries in the county who are enrolled in an MA plan for 2009 is greater than 30 percent (as determined by the Secretary); and
`(iii) average bids submitted by an MA organization under section 1854(a) for MA local plans in the county for 2011 are not greater than the adjusted average per capita cost for the year involved, determined under section 1876(a)(4), for the county for individuals who are not enrolled in an MA plan under this part for the year, but adjusted to exclude costs attributable to payments under section 1848(o), 1886(n), and 1886(h).
`(C) If the Secretary determines appropriate, a county contiguous to an area or county described in subparagraph (A) or (B), respectively.
`(4) REVIEW OF PLAN BIDS- In the case of a bid submitted by an MA organization under section 1854(a) for an MA local plan in an applicable area, the Secretary shall review such bid in order to ensure that extra benefits (as specified by the Secretary) are provided to enrollees described in paragraph (2).
`(5) FUNDING- The Secretary shall provide for the transfer from the Federal Hospital Insurance Trust Fund under section 1817 and the Federal Supplementary Medical Insurance Trust Fund established under section 1841, in such proportion as the Secretary determines appropriate, of an amount not to exceed $5,000,000,000 for the period of fiscal years 2012 through 2019 for the purpose of providing transitional rebates under section 1854(b)(1)(C) for the provision of extra benefits under this subsection.'.
(i) Nonapplication of Competitive Bidding and Related Provisions and Clarification of MA Payment Area for PACE Programs-
(1) NONAPPLICATION OF COMPETITIVE BIDDING AND RELATED PROVISIONS FOR PACE PROGRAMS- Section 1894 of the Social Security Act (42 U.S.C. 1395eee) is amended--
(A) by redesignating subsections (h) and (i) as subsections (i) and (j), respectively;
(B) by inserting after subsection (g) the following new subsection:
`(h) Nonapplication of Competitive Bidding and Related Provisions Under Part C- With respect to a PACE program under this section, the following provisions (and regulations relating to such provisions) shall not apply:
`(1) Section 1853(j)(1)(A)(i), relating to MA area-specific non-drug monthly benchmark amount being based on competitive bids.
`(2) Section 1853(d)(5), relating to the establishment of MA local plan service areas.
`(3) Section 1853(n), relating to the payment of performance bonuses.
`(4) Section 1853(o), relating to grandfathering supplemental benefits for current enrollees after implementation of competitive bidding.
`(5) Section 1853(p), relating to transitional extra benefits.'.
(2) SPECIAL RULE FOR MA PAYMENT AREA FOR PACE PROGRAMS- Section 1853(d) of the Social Security Act (42 U.S.C. 1395w-23(d)), as amended by subsection (e), is amended by adding at the end the following new paragraph:
`(6) SPECIAL RULE FOR MA PAYMENT AREA FOR PACE PROGRAMS- For years beginning with 2012, in the case of a PACE program under section 1894, the MA payment area shall be the MA local area (as defined in paragraph (2)).'.
SEC. 3202. BENEFIT PROTECTION AND SIMPLIFICATION.
(a) Limitation on Variation of Cost Sharing for Certain Benefits-
(1) IN GENERAL- Section 1852(a)(1)(B) of the Social Security Act (42 U.S.C. 1395w-22(a)(1)(B)) is amended--
(A) in clause (i), by inserting `, subject to clause (iii),' after `and B or'; and
(B) by adding at the end the following new clauses:
`(iii) LIMITATION ON VARIATION OF COST SHARING FOR CERTAIN BENEFITS- Subject to clause (v), cost-sharing for services described in clause (iv) shall not exceed the cost-sharing required for those services under parts A and B.
`(iv) SERVICES DESCRIBED- The following services are described in this clause:
`(I) Chemotherapy administration services.
`(II) Renal dialysis services (as defined in section 1881(b)(14)(B)).
`(III) Skilled nursing care.
`(IV) Such other services that the Secretary determines appropriate (including services that the Secretary determines require a high level of predictability and transparency for beneficiaries).
`(v) EXCEPTION- In the case of services described in clause (iv) for which there is no cost-sharing required under parts A and B, cost-sharing may be required for those services in accordance with clause (i).'.
(2) EFFECTIVE DATE- The amendments made by this subsection shall apply to plan years beginning on or after January 1, 2011.
(b) Application of Rebates, Performance Bonuses, and Premiums-
(1) APPLICATION OF REBATES- Section 1854(b)(1)(C) of the Social Security Act (42 U.S.C. 1395w-24(b)(1)(C)) is amended--
(A) in clause (ii), by striking `REBATE- A rebate' and inserting `REBATE FOR PLAN YEARS BEFORE 2012- For plan years before 2012, a rebate';
(B) by redesignating clauses (iii) and (iv) as clauses (iv) and (v); and
(C) by inserting after clause (ii) the following new clause:
`(iii) FORM OF REBATE FOR PLAN YEAR 2012 AND SUBSEQUENT PLAN YEARS- For plan years beginning on or after January 1, 2012, a rebate required under this subparagraph may not be used for the purpose described in clause (ii)(III) and shall be provided through the application of the amount of the rebate in the following priority order:
`(I) First, to use the most significant share to meaningfully reduce cost-sharing otherwise applicable for benefits under the original medicare fee-for-service program under parts A and B and for qualified prescription drug coverage under part D, including the reduction of any deductibles, copayments, and maximum limitations on out-of-pocket expenses otherwise applicable. Any reduction of maximum limitations on out-of-pocket expenses under the preceding sentence shall apply to all benefits under the original medicare fee-for-service program option. The Secretary may provide guidance on meaningfully reducing cost-sharing under this subclause, except that such guidance may not require a particular amount of cost-sharing or reduction in cost-sharing.
`(II) Second, to use the next most significant share to meaningfully provide coverage of preventive and wellness health care benefits (as defined by the Secretary) which are not benefits under the original medicare fee-for-service program, such as smoking cessation, a free flu shot, and an annual physical examination.
`(III) Third, to use the remaining share to meaningfully provide coverage of other health care benefits which are not benefits under the original medicare fee-for-service program, such as eye examinations and dental coverage, and are not benefits described in subclause (II).'.
(2) APPLICATION OF PERFORMANCE BONUSES- Section 1853(n) of the Social Security Act, as added by section 3201(f), is amended by adding at the end the following new paragraph:
`(6) APPLICATION OF PERFORMANCE BONUSES- For plan years beginning on or after January 1, 2014, any performance bonus paid to an MA plan under this subsection shall be used for the purposes, and in the priority order, described in subclauses (I) through (III) of section 1854(b)(1)(C)(iii).'.
(3) APPLICATION OF MA MONTHLY SUPPLEMENTARY BENEFICIARY PREMIUM- Section 1854(b)(2)(C) of the Social Security Act (42 U.S.C. 1395w-24(b)(2)(C)) is amended--
(A) by striking `PREMIUM- The term' and inserting `PREMIUM-
`(i) IN GENERAL- The term'; and
(B) by adding at the end the following new clause:
`(ii) APPLICATION OF MA MONTHLY SUPPLEMENTARY BENEFICIARY PREMIUM- For plan years beginning on or after January 1, 2012, any MA monthly supplementary beneficiary premium charged to an individual enrolled in an MA plan shall be used for the purposes, and in the priority order, described in subclauses (I) through (III) of paragraph (1)(C)(iii).'.
SEC. 3203. APPLICATION OF CODING INTENSITY ADJUSTMENT DURING MA PAYMENT TRANSITION.
Section 1853(a)(1)(C) of the Social Security Act (42 U.S.C. 1395w-23(a)(1)(C)) is amended by adding at the end the following new clause:
`(iii) APPLICATION OF CODING INTENSITY ADJUSTMENT FOR 2011 AND SUBSEQUENT YEARS-
`(I) REQUIREMENT TO APPLY IN 2011 THROUGH 2013- In order to ensure payment accuracy, the Secretary shall conduct an analysis of the differences described in clause (ii)(I). The Secretary shall ensure that the results of such analysis are incorporated into the risk scores for 2011, 2012, and 2013.
`(II) AUTHORITY TO APPLY IN 2014 AND SUBSEQUENT YEARS- The Secretary may, as appropriate, incorporate the results of such analysis into the risk scores for 2014 and subsequent years.'.
SEC. 3204. SIMPLIFICATION OF ANNUAL BENEFICIARY ELECTION PERIODS.
(a) Annual 45-day Period for Disenrollment From MA Plans To Elect To Receive Benefits Under the Original Medicare Fee-for-service Program-
(1) IN GENERAL- Section 1851(e)(2)(C) of the Social Security Act (42 U.S.C. 1395w-1(e)(2)(C)) is amended to read as follows:
`(C) ANNUAL 45-DAY PERIOD FOR DISENROLLMENT FROM MA PLANS TO ELECT TO RECEIVE BENEFITS UNDER THE ORIGINAL MEDICARE FEE-FOR-SERVICE PROGRAM- Subject to subparagraph (D), at any time during the first 45 days of a year (beginning with 2011), an individual who is enrolled in a Medicare Advantage plan may change the election under subsection (a)(1), but only with respect to coverage under the original medicare fee-for-service program under parts A and B, and may elect qualified prescription drug coverage in accordance with section 1860D-1.'.
(2) EFFECTIVE DATE- The amendment made by paragraph (1) shall apply with respect to 2011 and succeeding years.
(b) Timing of the Annual, Coordinated Election Period Under Parts C and D- Section 1851(e)(3)(B) of the Social Security Act (42 U.S.C. 1395w-1(e)(3)(B)) is amended--
(1) in clause (iii), by striking `and' at the end;
(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 2012 and succeeding years, the period beginning on October 15 and ending on December 7 of the year before such year.'.
SEC. 3205. EXTENSION FOR SPECIALIZED MA PLANS FOR SPECIAL NEEDS INDIVIDUALS.
(a) Extension of SNP Authority- Section 1859(f)(1) of the Social Security Act (42 U.S.C. 1395w-28(f)(1)), as amended by section 164(a) of the Medicare Improvements for Patients and Providers Act of 2008 (Public Law 110-275), is amended by striking `2011' and inserting `2014'.
(b) Authority To Apply Frailty Adjustment Under PACE Payment Rules- Section 1853(a)(1)(B) of the Social Security Act (42 U.S.C. 1395w-23(a)(1)(B)) is amended by adding at the end the following new clause:
`(iv) AUTHORITY TO APPLY FRAILTY ADJUSTMENT UNDER PACE PAYMENT RULES FOR CERTAIN SPECIALIZED MA PLANS FOR SPECIAL NEEDS INDIVIDUALS-
`(I) IN GENERAL- Notwithstanding the preceding provisions of this paragraph, for plan year 2011 and subsequent plan years, in the case of a plan described in subclause (II), the Secretary may apply the payment rules under section 1894(d) (other than paragraph (3) of such section) rather than the payment rules that would otherwise apply under this part, but only to the extent necessary to reflect the costs of treating high concentrations of frail individuals.
`(II) PLAN DESCRIBED- A plan described in this subclause is a specialized MA plan for special needs individuals described in section 1859(b)(6)(B)(ii) that is fully integrated with capitated contracts with States for Medicaid benefits, including long-term care, and that have similar average levels of frailty (as determined by the Secretary) as the PACE program.'.
(c) Transition and Exception Regarding Restriction on Enrollment- Section 1859(f) of the Social Security Act (42 U.S.C. 1395w-28(f)) is amended by adding at the end the following new paragraph:
`(6) TRANSITION AND EXCEPTION REGARDING RESTRICTION ON ENROLLMENT-
`(A) IN GENERAL- Subject to subparagraph (C), the Secretary shall establish procedures for the transition of applicable individuals to--
`(i) a Medicare Advantage plan that is not a specialized MA plan for special needs individuals (as defined in subsection (b)(6)); or
`(ii) the original medicare fee-for-service program under parts A and B.
`(B) APPLICABLE INDIVIDUALS- For purposes of clause (i), the term `applicable individual' means an individual who--
`(i) is enrolled under a specialized MA plan for special needs individuals (as defined in subsection (b)(6)); and
`(ii) is not within the 1 or more of the classes of special needs individuals to which enrollment under the plan is restricted to.
`(C) EXCEPTION- The Secretary shall provide for an exception to the transition described in subparagraph (A) for a limited period of time for individuals enrolled under a specialized MA plan for special needs individuals described in subsection (b)(6)(B)(ii) who are no longer eligible for medical assistance under title XIX.
`(D) TIMELINE FOR INITIAL TRANSITION- The Secretary shall ensure that applicable individuals enrolled in a specialized MA plan for special needs individuals (as defined in subsection (b)(6)) prior to January 1, 2010, are transitioned to a plan or the program described in subparagraph (A) by not later than January 1, 2013.'.
(d) Temporary Extension of Authority To Operate but No Service Area Expansion for Dual Special Needs Plans That Do Not Meet Certain Requirements- Section 164(c)(2) of the Medicare Improvements for Patients and Providers Act of 2008 (Public Law 110-275) is amended by striking `December 31, 2010' and inserting `December 31, 2012'.
(e) Authority To Require Special Needs Plans Be NCQA Approved- Section 1859(f) of the Social Security Act (42 U.S.C. 1395w-28(f)), as amended by subsections (a) and (c), is amended--
(1) in paragraph (2), by adding at the end the following new subparagraph:
`(C) If applicable, the plan meets the requirement described in paragraph (7).';
(2) in paragraph (3), by adding at the end the following new subparagraph:
`(E) If applicable, the plan meets the requirement described in paragraph (7).';
(3) in paragraph (4), by adding at the end the following new subparagraph:
`(C) If applicable, the plan meets the requirement described in paragraph (7).'; and
(4) by adding at the end the following new paragraph:
`(7) AUTHORITY TO REQUIRE SPECIAL NEEDS PLANS BE NCQA APPROVED- For 2012 and subsequent years, the Secretary shall require that a Medicare Advantage organization offering a specialized MA plan for special needs individuals be approved by the National Committee for Quality Assurance (based on standards established by the Secretary).'.
(f) Risk Adjustment- Section 1853(a)(1)(C) of the Social Security Act (42 U.S.C. 1395i-23(a)(1)(C)) is amended by adding at the end the following new clause:
`(iii) IMPROVEMENTS TO RISK ADJUSTMENT FOR SPECIAL NEEDS INDIVIDUALS WITH CHRONIC HEALTH CONDITIONS-
`(I) IN GENERAL- For 2011 and subsequent years, for purposes of the adjustment under clause (i) with respect to individuals described in subclause (II), the Secretary shall use a risk score that reflects the known underlying risk profile and chronic health status of similar individuals. Such risk score shall be used instead of the default risk score for new enrollees in Medicare Advantage plans that are not specialized MA plans for special needs individuals (as defined in section 1859(b)(6)).
`(II) INDIVIDUALS DESCRIBED- An individual described in this subclause is a special needs individual described in subsection (b)(6)(B)(iii) who enrolls in a specialized MA plan for special needs individuals on or after January 1, 2011.
`(III) EVALUATION- For 2011 and periodically thereafter, the Secretary shall evaluate and revise the risk adjustment system under this subparagraph in order to, as accurately as possible, account for higher medical and care coordination costs associated with frailty, individuals with multiple, comorbid chronic conditions, and individuals with a diagnosis of mental illness, and also to account for costs that may be associated with higher concentrations of beneficiaries with those conditions.
`(IV) PUBLICATION OF EVALUATION AND REVISIONS- The Secretary shall publish, as part of an announcement under subsection (b), a description of any evaluation conducted under subclause (III) during the preceding year and any revisions made under such subclause as a result of such evaluation.'.
(g) Technical Correction- Section 1859(f)(5) of the Social Security Act (42 U.S.C. 1395w-28(f)(5)) is amended, in the matter preceding subparagraph (A), by striking `described in subsection (b)(6)(B)(i)'.
SEC. 3206. EXTENSION OF REASONABLE COST CONTRACTS.
Section 1876(h)(5)(C)(ii) of the Social Security Act (42 U.S.C. 1395mm(h)(5)(C)(ii)) is amended, in the matter preceding subclause (I), by striking `January 1, 2010' and inserting `January 1, 2013'.
SEC. 3207. TECHNICAL CORRECTION TO MA PRIVATE FEE-FOR-SERVICE PLANS.
For plan year 2011 and subsequent plan years, to the extent that the Secretary of Health and Human Services is applying the 2008 service area extension waiver policy (as modified in the April 11, 2008, Centers for Medicare & Medicaid Services' memorandum with the subject `2009 Employer Group Waiver-Modification of the 2008 Service Area Extension Waiver Granted to Certain MA Local Coordinated Care Plans') to Medicare Advantage coordinated care plans, the Secretary shall extend the application of such waiver policy to employers who contract directly with the Secretary as a Medicare Advantage private fee-for-service plan under section 1857(i)(2) of the Social Security Act (42 U.S.C. 1395w-27(i)(2)) and that had enrollment as of October 1, 2009.
SEC. 3208. MAKING SENIOR HOUSING FACILITY DEMONSTRATION PERMANENT.
(a) In General- Section 1859 of the Social Security Act (42 U.S.C. 1395w-28) is amended by adding at the end the following new subsection:
`(g) Special Rules for Senior Housing Facility Plans-
`(1) IN GENERAL- In the case of a Medicare Advantage senior housing facility plan described in paragraph (2), notwithstanding any other provision of this part to the contrary and in accordance with regulations of the Secretary, the service area of such plan may be limited to a senior housing facility in a geographic area.
`(2) MEDICARE ADVANTAGE SENIOR HOUSING FACILITY PLAN DESCRIBED- For purposes of this subsection, a Medicare Advantage senior housing facility plan is a Medicare Advantage plan that--
`(A) restricts enrollment of individuals under this part to individuals who reside in a continuing care retirement community (as defined in section 1852(l)(4)(B));
`(B) provides primary care services onsite and has a ratio of accessible physicians to beneficiaries that the Secretary determines is adequate;
`(C) provides transportation services for beneficiaries to specialty providers outside of the facility; and
`(D) has participated (as of December 31, 2009) in a demonstration project established by the Secretary under which such a plan was offered for not less than 1 year.'.
(b) Effective Date- The amendment made by this section shall take effect on January 1, 2010, and shall apply to plan years beginning on or after such date.
SEC. 3209. AUTHORITY TO DENY PLAN BIDS.
(a) In General- Section 1854(a)(5) of the Social Security Act (42 U.S.C. 1395w-24(a)(5)) is amended by adding at the end the following new subparagraph:
`(C) REJECTION OF BIDS-
`(i) IN GENERAL- Nothing in this section shall be construed as requiring the Secretary to accept any or every bid submitted by an MA organization under this subsection.
`(ii) AUTHORITY TO DENY BIDS THAT PROPOSE SIGNIFICANT INCREASES IN COST SHARING OR DECREASES IN BENEFITS- The Secretary may deny a bid submitted by an MA organization for an MA plan if it proposes significant increases in cost sharing or decreases in benefits offered under the plan.'.
(b) Application Under Part D- Section 1860D-11(d) of such Act (42 U.S.C. 1395w-111(d)) is amended by adding at the end the following new paragraph:
`(3) REJECTION OF BIDS- Paragraph (5)(C) of section 1854(a) shall apply with respect to bids submitted by a PDP sponsor under subsection (b) in the same manner as such paragraph applies to bids submitted by an MA organization under such section 1854(a).'.
(c) Effective Date- The amendments made by this section shall apply to bids submitted for contract years beginning on or after January 1, 2011.
SEC. 3210. DEVELOPMENT OF NEW STANDARDS FOR CERTAIN MEDIGAP PLANS.
(a) In General- Section 1882 of the Social Security Act (42 U.S.C. 1395ss) is amended by adding at the end the following new subsection:
`(y) Development of New Standards for Certain Medicare Supplemental Policies-
`(1) IN GENERAL- The Secretary shall request the National Association of Insurance Commissioners to review and revise the standards for benefit packages described in paragraph (2) under subsection (p)(1), to otherwise update standards to include requirements for nominal cost sharing to encourage the use of appropriate physicians' services under part B. Such revisions shall be based on evidence published in peer-reviewed journals or current examples used by integrated delivery systems and made consistent with the rules applicable under subsection (p)(1)(E) with the reference to the `1991 NAIC Model Regulation' deemed a reference to the NAIC Model Regulation as published in the Federal Register on December 4, 1998, and as subsequently updated by the National Association of Insurance Commissioners to reflect previous changes in law and the reference to `date of enactment of this subsection' deemed a reference to the date of enactment of the Patient Protection and Affordable Care Act. To the extent practicable, such revision shall provide for the implementation of revised standards for benefit packages as of January 1, 2015.
`(2) BENEFIT PACKAGES DESCRIBED- The benefit packages described in this paragraph are benefit packages classified as `C' and `F'.'.
(b) Conforming Amendment- Section 1882(o)(1) of the Social Security Act (42 U.S.C. 1395ss(o)(1)) is amended by striking `, and (w)' and inserting `(w), and (y)'.